The Perryman Group’s most recent long-term forecast for the U.S. economy calls for notable expansion. Things have improved significantly since the worst of the pandemic, but previous activity levels have not yet been reached. The upward trend should continue (though business cycles are inevitable).
Over the next few years, lingering effects of the pandemic and efforts to slow its spread will impact progress. For example, labor shortages are currently being exacerbated by COVID-19-related issues including fear of catching the virus, reluctance to comply with vaccine mandates, or related problems such as a lack of available child care. While some positions will be filled as COVID-19 effects diminish, long-term demographic trends are also a factor. The U.S. population is aging, and the retirement of the baby boom generation will leave a significant gap. Moreover, low birthrates will further reduce the pool of available workers over time. A variety of responses will be needed to deal with the situation, including technology investments and automation as well as sensible immigration policy.
Another challenge the economy is facing due to COVID-19 is ongoing supply chain problems. Although some progress is being made, as indicated by recent trade statistics, time will be required for full resolution.
Massive federal spending bills may also affect competitiveness and, hence, growth in the national economy. While there are clearly legitimate social problems which have long been neglected and underfunded and need to be addressed, the bill under consideration remains large and expensive, particularly in light of long-term trends in deficit financing and the necessary stimulus outlays during the pandemic. Moreover, funding strategies to purportedly (but not actually) pay for the programs would likely facilitate negative dynamic responses throughout the economy. Dealing with climate change is also essential but strategies must recognize and accommodate the reality of alternative energy capacity constraints and the need to reduce emissions from essential fossil fuels.
Even with these difficulties, the outlook for expansion in the decades to come is positive. The Perryman Group’s most recent long-term projections indicate that over the 2020 to 2045 period, real gross product will likely expand from an estimated $18.4 trillion to $38.1 trillion, a 2.95% compound annual rate of growth. Employment is forecast to rise by 1.67% per year on average over the period, leading to the creation of 73.3 million net new jobs and total employment of 216.3 million by 2045. While the effects of the pandemic and its aftermath will persist over the coming years, the worst of the economic downturn appears to have passed. Despite the daunting challenges which must be addressed, the U.S. economy is expected to continue to recover and see significant growth over an extended forecast horizon.
Economist Ray Perryman is president and CEO of the Perryman Group, an economic research group and analysis firm based in Waco.