A low annual GDP growth, changing demographics, and a tight labor market were all discussed on Tuesday, February 16, as First Federal Bank held their annual Economic Summit at the Lenawee Country Club. Business leaders from all over Lenawee County gathered to hear what guest speaker, Bob Morgan, had to say on the current status of the U.S. economy and the future of Lenawee County.
Morgan’s main idea of the night was The Gross Domestic Product (GDP) growth rate and how it has slowed in recent years. The GDP is a way to gauge the status of a country’s economy. The GDP is determined from the sum of three factors: Consumer Spending, Capital Spending, and Government Spending. Historically, the average GDP growth in the United States was 3.3%, but since the end of the Great Recession it has been at 2.1%. In 2015, the GDP was led by consumer spending at $11.2 trillion dollars. “It is clear that the rate of growth for the US economy is highly dependent on consumers and if consumers do not expand spending and product demand, the economy will not grow,” said Morgan. There are however underlying reasons for the slowdown in annual growth rate.
How age demographics will affect the Economy
Over the last 35 years there has been a noticeable change in the age demographics in the US. Historically the dominating age group has been 18-44 year olds, and the 1980 census showed they made up 41% of the population. The 2010 census registered a decline in the 18-44 group to 36% of the population. Meanwhile 45-64 year olds have increased to 26% of the population from 19% in 1980. Morgan finds this to be significant. “At a certain point in a person’s life they will become savers, providers of capital and will be less consumers or users of capital,” said Morgan. As a result many economists believe that the GDP will remain stunted for years to come.
A Changing Culture
A changing culture provides another reason for concern. The current generation’s lack of desire to purchase a home or car and the idea to put off marriage and a family is creating a profound effect on the consumer spending aspect of GDP growth. What Morgan was most concerned about however, was politics. With it being an election year and having two parties with drastically different tax policies Morgan wonders, “how a business today makes a decision to buy a new piece of equipment or expand production when there’s no way to know what your tax rate will be in 2017.” With this being said, Morgan is still optimistic on the future of the economy.
A Promising Outlook
At its peak, unemployment reached 10%, but today it sits at 4.9%. Still job openings are at a record level and employers are willing to raise wages to attract and retain the qualified employees. As a result of this, consumers have been willing to take on credit card debt and loans over the last few quarters. Yet the most promising statistic is that there is only a 3 month inventory of unsold homes when historically it has been 5-6 months. As a result people are building their own homes creating a demand for trade labor. With all of this, Morgan believes 2016 will be a year of growth for our nation.
Forward Thinking Programs
Lenawee Now’s Jim Van Doren and Tim Robinson also presented and touched on the shortage of qualified employees and bridging the upcoming talent gap. To address these concerns, Lenawee Now has started programs such as the Unified Talent System and created the Lenawee Now Jobs Board to bring employers together with potential workers. With these supported efforts, they will attract new business, support expansions of existing businesses, and enhance the talent to make sure the future of Lenawee County is safe.