Economist Robert Morgan spoke about his expectations of the economy in 2025 during an event Thursday in Lima.
Cade Higgins | The Lima News
LIMA — Economist Robert J. Morgan is optimistic the economy won’t enter a recession in at least the next two years, but he said he is worried about the magnitude of the federal debt.
During his presentation at Old Barn Restaurant & Grill, 3075 W. Elm St, Morgan spoke about the state of the current economy, unemployment, federal debt and housing during a session Thursday sponsored by Citizens National Bank.
2025 forecast
Morgan predicts economic growth will decline in the fourth quarter of 2024 and the first quarter of 2025. He believes the economy will continue to grow in 2025, avoiding a recession. Morgan assumes the Federal Reserve will continue to ease monetary policy, wars will not restrict trade, unemployment rates will stay below 5%, consumer confidence will remain steady and residential construction activity will improve as mortgage rates decline.
Current economy
Consumers account for nearly 68 percent of the nation’s gross domestic product.
“To have a recession, you have to see consumers stop spending or spend less,” he said.
Government spending, which comprises about 17% of the GDP, has contributed heavily to consumer spending over the last 18 months primarily from stimulus programs, causing inflation.
To address inflation, the Federal Reserve increased interest rates. Inflation has decreased, but according to Morgan, “it is still present.”
If raising incomes can suffice for raised prices in a reasonable timeframe, Morgan isn’t as worried about inflation.
“It takes time,” he said about raising incomes to catch up with inflated prices.
Unemployment
The U.S. unemployment rate for Sept. 2024 was 4.1 percent. According to Morgan, anything under 5 percent is a positive. To keep unemployment down, 125,000 to 130,000 jobs have to be created each month, and the U.S. has averaged almost 180,000 per month over the last few years.
As of September 2024, the JOLTS index reported 7.5 million unfilled job openings, marking the lowest total since February 2021.
“The JOLTS index is volatile because not every company fills out the monthly survey, but the low number is still worrying,” he said.
The low amount of unfilled openings could lead to lower consumer spending.
Federal debt
The current federal debt is approximately $36 trillion, representing a 387 percent increase since 2004 and a 100 percent increase since 2014.
“This is something we cannot live with,” he said.
The main ways to reduce federal debt are to raise taxes, cut spending, or use a combination of both, which Morgan is not confident about.
Housing
There aren’t enough homes to meet the demand, Morgan said.
“One of the dumbest things you can do is give money to people for a down payment on a house,” he said. “There are not enough homes on the market, and this will only raise prices.”
Reach Cade Higgins at 567-242-0351
