Business professor Roy Pearson began Tuesday’s Business Roundtable Luncheon by addressing area business leaders’ most consistent question: “Is it time to panic yet?”
Pearson led the luncheon of about 70 local government and small business leaders, sponsored by the city’s Economic Development Authority. The College of William and Mary chancellor professor of business emeritus delivered his annual economic forecast for the nation and state for the next two years.
Pearson’s short answer: “No.”
He went on to say, “The economy in the United States is on a much more sound spree than most forecasters are willing to admit.”
According to Pearson, 2018 was a stellar year for the American economy. It grew on average about 3.2 percent for the first three quarters of the year, according to the Bureau of Economic Analysis. Virginia saw an even greater job growth than that of the entire country.
Pearson attributed the fiscal upswing to four major pieces of federal legislation: the December 2017 Tax Cuts and Jobs Act, February’s Bipartisan Budget Act, March’s Consolidated Appropriations Act and the John S. McCain National Defense Authorization Act in August, which increased defense spending in the state.
The country and state will continue to see impacts from this legislation, Pearson said, while Hampton Roads will also benefit from the defense act.
In his forecast, Virginia’s gains in the next two years will be greater than those of the nation with strong job growth, especially in the retail sector, which will be a boon to the state.
Since 2013, most people in their prime work years in Virginia were moving out of state in search of jobs, according to Pearson, but this will reverse in the coming years. Virginia experienced a 1.9 percent annual employment increase in 2018.
“Those of you in the real estate business, you’ll be looking at more people moving into Virginia than what we’ve seen in the last few years,” Pearson said.
However, Virginia businesses, specifically the goods-producing sector, can expect more difficulty in finding skilled workers, he said.
“Not only are the unemployment rates very low … our employment is growing faster than what we can sustain in our economy,” Pearson said. “So what it means in the state of Virginia is you’re going to have to be advertising out of state.”
Despite these predicted fiscal gains for the state, by 2020 Pearson predicts a 6 percent decrease in the country’s gross domestic product growth rate, contingent on Congress passing another bipartisan budget act, which will again raise the discretionary spending caps for the 2020 fiscal year.
The prediction is in response to current Chinese tariffs on U.S imports and exports, which also are creating economic uncertainty.
The tariffs, which could increase by 25 percent March 1, may threaten Virginia’s agricultural sector in the long term.
“You’re not going to get a resolution of this issue anytime soon,” Pearson said. “I bet you they’ll be negotiating this into the next fiscal year.”
Despite an uplifting short-term economic prognosis, Pearson warned the ever-growing national debt, $21 trillion, could lead America into recession by 2023.
SaraRose Martin can be reached at firstname.lastname@example.org or on Twitter @SaraRoseMartin