Navigating Economic Uncertainties: Insights from Glenn Hubbard

Optimistic GDP Growth Projection

Glenn Hubbard, a former chairman of the U.S. Council of Economic Advisers, recently projected a 2 percent U.S. GDP growth for the next year, slightly more optimistic than the 1.8 percent consensus estimate of professional economic forecasters. Despite the slowing pace of real GDP growth from 3.1 percent in the first quarter of 2019 to 1.9 percent in the third quarter, Hubbard sees few signs of the expansion fading. According to the Federal Reserve Bank of St. Louis, the current growth rate is consistent with the economy's potential growth rate, which most economists estimate at between 1.75 percent and 2 percent.

Productivity and Labor Force Participation Challenges

Hubbard highlighted the challenges of achieving President Trump's 3 percent growth target, emphasizing the need for 2 percent-plus productivity growth. However, recent data from the Organization for Economic Cooperation and Development (OECD) shows a sharp decline in productivity growth in recent decades. Additionally, low labor force participation, which has been a persistent issue since the end of the recession, poses significant obstacles. The Congressional Budget Office (CBO) reports that low labor force participation is associated with lower GDP and tax revenues, as well as larger federal outlays due to increased enrollment in federal benefit programs.

Elections and Economic Policies

On the topic of the 2020 U.S. elections, Hubbard suggested that the President should have a good chance of re-election if the focus remains on economic variables. However, he cautioned against being 'overly conventional' in analysis, referencing the unexpected outcome of the 2016 race. Hubbard also noted the potential impact of a far-Left Democratic President on business policies, which is a significant concern for many business leaders.

In conclusion, while the current economic expansion shows resilience, it faces significant challenges related to productivity and labor force participation. The upcoming elections could also bring significant policy changes that impact the economy. For readers, it is crucial to stay informed about these economic indicators and policy shifts to better navigate potential uncertainties.