Economists have a reputation for being disagreeable. By this, I mean the public perception is that economists rarely agree among themselves about the economy. Some have quipped that an individual economist even has trouble agreeing with himself.
President Truman once reportedly asked his staff to find a one-handed economist. He was frustrated with his economic advisers telling him, “On the one hand, this may happen; but on the other hand, that may happen.”
Recently I had a chance to test the level of agreement among economists. I was part of a panel of four economists – from universities and the private sector – who addressed 900 attendees at this year’s N.C. Chamber Economic Forecast Conference.
The panel moderator peppered us with questions about economic trends, economic forecasts and economic public policy. And guess what – there was an amazing degree of agreement. In fact, one of the most repeated phrases was “I agree with John’s (or Mark or Harry or Mike’s) statement.” Also, there was no yelling, screaming and name-calling, as often occurs in debates about key public issues.
So what did we agree about? First, each of us thought 2017 would be a year of economic growth. We saw no imminent recession looming. Of course, we differed on the precise number for the rate of growth. Some thought the expected Trump administration policies would accelerate growth in 2017, while others believed the policies would have either no effects or the effects would be slow to arrive. Still, our differences in the precise number for economic growth were relatively minor.
Second, we all see higher interest rates in 2017. With the economy expanding, the Federal Reserve will raise its key short-term interest rate two or three times during the year, but with each jump being a modest 0.25 percentage points. Long-term interest rates, which have already risen significantly since the election, will continue to be between one-half to one percentage point higher in 2017 than in 2016.
We also had consensus on the big economic problems facing the country, including slow improvements in labor productivity, relatively weak business investment, economic growth that does not include all income levels and all geographic areas and the challenges presented by technology’s increased capability to displace human workers.
The panelists did have one key disagreement, and that was about the economic impact of the stronger international value of the U.S. dollar. Traditionally a stronger U.S. dollar makes U.S. exports more expensive while making imports to our country cheaper. One panelist in particular worried this could widen the U.S. trade deficit and chip away at economic growth.
But other panelists countered this worry in two ways. They stated a stronger U.S. dollar would attract foreign investment to our nation, which, in turn, would increase domestic spending and jobs and ultimately spur productivity. Also, many U.S. manufacturers obtain supplies from foreign countries, so the lower costs of these inputs would help them remain competitive when they sell in foreign countries.
What did the panel say about North Carolina? We agreed our state has had two good years in a row, with economic growth surpassing national growth, and we expect the same in 2017. But the large majority of this growth and improvement has occurred in the state’s metro regions – especially around Charlotte and the Triangle. However, with labor markets tightening in the metropolitan counties, the expectation is for a better spread of job growth to rural areas this year.
I and my economic colleagues also agreed education and skill acquisition are the keys to future economic prosperity for more people in North Carolina. We argued for continued efforts to strengthen K-12 education and expand opportunities for students at the high school level to be exposed to vocational and technical occupations. More apprenticeships and collaborative programs with businesses in designing curriculum would also be helpful.
Last, the panel was asked about the economic impact of HB2. Without addressing the relative pluses and minuses of the legislation, we did agree the law has hindered economic recruitment. The private sector panelist who travels the country said the legislation is a constant topic of discussion in other states and has often put North Carolina at a disadvantage in competing with those states for new businesses.
Does this broad level of consensus among a handful of economists mean everything we forecast for 2017 will come true? Of course not – agreement is one thing; accuracy is another. We could be agreeing and still be wrong.
So, like President Truman, you might like to have economists give consistent advice, but you could still decide to seek other opinions.
Walden is a professor and Extension economist in the Department of Agricultural and Resource Economics at N.C. State University. He teaches and writes on personal finance, economic outlook and public policy.