Back to the future - 2018's economy is set to be the best in well over a decade:
Bottom Line: We've been through a lot economically over the past decade. The Great Recession (which officially started ten years ago this week), the slowest economic growth following a recession in American history (1.8%) for eight years. The longest period of time without at least 3% growth (12 years)...sub 3% wage growth ten years. You get the idea.
I've documented that the last full year for average US economic growth (3%) was 2005 and for average wage growth was 2007. Not only is 2018 shaping up to be the year that the US economy checks off all of those boxes, Goldman Sach's thinks that the economy could surprise on the upside - even against current, rising expectations. It makes sense. Who saw 3% plus growth happening so soon this year prior to major reforms on healthcare and taxes? Who saw any chance of sustaining it after the hurricanes that negatively impacted about a fifth of our economy?
I've mentioned that this fall was the best time to make your case for a raise to your employer because the surprisingly good economy has brought record profits with it that should translate to the best raises in over a decade next year. With consumer spending accounting for about 70% of the US economy that should translate into even more economic momentum when it starts to take place. That's where the next leg in economic growth can and to needs to come from if we're going to have a great 2018. Wage growth is pacing about 2.4% growth this year and we've been managing 3% growth. Companies reinvesting and increasing spending has made up the difference but that's not sustainable over the long run. It has to come from you and that means that companies need to deliver for the benefit of their employees and ultimately the overall economy. Cheers to 2018 & he's to hoping that Congress follows through on their job. Tax reform is part of the 2018 economic puzzle. Goldman thinks there's currently an 80% chance of it happening.