Baltimore economist Anirban Basu said he is optimistic about the economy in 2018, but suggested a breaking point may be coming in the years ahead.
Maryland has added jobs at a rate that outpaced all but six states, businesses are growing, and consumer confidence is high.
“Time is on our side,” Basu said, “at least in the near term.”
The Sage Policy Group CEO pointed to possible real estate and stock market bubbles, lagging wages and rising business costs associated with employee benefits and health care as factors that could slow growth in 2020 and beyond.
As consumer confidence rises, people are spending more and saving less, pushing the consumer savings rate to a 10-year low of 2.9 percent.
Basu spoke at the Maryland Bankers Association’s First Friday, an annual event that offers the state’s banking community a financial and economic outlook on the year ahead.
Economists from PNC Financial Services Group, JPMorgan Chase & Co. and Wilmington Trust Co. who participated in a panel discussion following Basu’s address said they saw significant room for business growth in 2018, especially with a booming global economy.
“There’s tremendous opportunity if this story continues,” said James E. Glassman, a managing director at JPMorgan and head economist for Chase Commercial Banking. “The more we can help others get on their feet and achieve the standard of living we have, the more we help ourselves.”
While geopolitical uncertainty always has potential to shake economic confidence, Rhea Thomas, an economist with Wilmington Trust Co., said she did not think it would be enough to slow down global growth.
“In terms of geopolitical tensions, they are a concern in the background,” Thomas said. “But markets have tended to shrug off geopolitical uncertainties unless there is a true threat.”
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In Maryland, businesses added 60,700 jobs year-over-year as of November, the most recent statistics available from the Bureau of Labor Statistics.
Maryland’s job growth of 2.2 percent outpaced the national rate of 1.4, and ranked the state sixth for job growth, Basu said. Only Utah, Nevada, Texas, Florida and Idaho created jobs at a faster rate.
“This economy that has been picking up momentum in 2017 is going to pick up even more momentum in 2018,” Basu said.
Surging consumer and business confidence is expected to get a boost in 2018 by federal tax reform legislation, which took effect in 2018.
Most notably for businesses, the law cut the corporate tax rate from 35 percent to 21 percent.
As a result, capital businesses expenses could grow, as businesses move forward with plans they may have had on hold.
“I think business investment grows in 2018,” said William Adams, a senior international economist with PNC Financial Services Group. “With faster GDP growth and demand, that makes sense.”