Question: What economic indicator will you monitor most closely in 2018?
Phil Blair, Manpower
Unemployment: With 3.3 percent unemployment, I don’t think it can get any better with the economy going strong and a great retail season. We should expect it to grow in January and February as retail lays off but the year to year comparisons will stay good.
Kelly Cunningham, San Diego Institute for Economic Research
GDP change: San Diego’s gross domestic product significantly slowed the past three years to only 0.2 percent to 0.4 percent growth per year, dangerously close to recession. Job and income gains also lagged. The downsizing of federal expenditures for active-duty military operations and defense contracting was largely the reason for the softening. The Trump administration projects greater military and defense based spending, which should bolster local job and income growth, and revitalize San Diego’s overall economic growth in 2018.
David Ely, San Diego State University
Capital investment spending: The Tax Cuts and Jobs Act lowers business taxes. If the savings are used to increase capital investment spending, long-term economic growth will be boosted. However, with significant corporate cash holdings and low interest rates, the environment for investing is already favorable. So, it is unclear how much the tax changes will stimulate business investment. Rather than expanding investments, the savings could be used to increase dividends or for share buybacks.
Gina Champion-Cain, American National Investments
Alan Gin, University of San Diego
Housing prices: The issue of housing affordability, both in terms of buying a home or renting a place, has reached the crisis point. The high prices are affecting the local economy by making it difficult for businesses to attract workers or having to pay them so much that labor costs are higher than in other areas. It is also a cause of the homelessness problem in San Diego, along with high poverty rate when the cost of living is factored in.
James Hamilton, UC San Diego
Real GDP growth: That’s the best single summary statistic of the overall economy, and will be the key indicator of where the economy is headed this year. I think we’ll see a higher value than we have over the last five years as a result of an anticipated fiscal stimulus, jobs gains, and ongoing rebound in housing.
Gary London, London Group of Realty Advisors
Stocks: I have a sense that we will see a correction in 2018. Stocks will reflect the drama that will be associated with political uncertainty and perhaps the results of the new tax bill. I think that throughout 2018 and certainly by next fall there will be a lot of drama!
Norm Miller, University of San Diego
Homeownership rates: I always watch interest rates (10-year bonds) closely and they matter more than anything else in terms of real estate prices. Next, I watch job figures and real wage increases, inflation and the strength of the dollar. But I am curious about the new household deduction of $24,000 which will, along with student debt, demographic trends, and tight underwriting, negatively impact our propensity to buy homes and put continued pressure on rental rates.
Jamie Moraga, IntelliSolutions
Consumer Confidence Index: Consumer spending accounts for nearly 70 percent of the U.S. economy and this monthly report is a good indicator of consumer opinion on the current state of the economy and future expectations. This will be especially interesting to watch as we see results from the recently passed tax plan.
Austin Neudecker, Rev
Inflation: With the administration’s elimination of regulations across several industries and the new tax plan’s changes favoring large corporations, I expect the stock market to continue its upward trajectory. In this process of further consolidation of power and less consumer advocacy, I expect prices (particularly on non-essentials) to increase. Inflation could negate other economic gains and disproportionately affects poor communities.
Bob Rauch, R.A. Rauch & Associates
Purchasing Management Index: The Institute of Supply Management (ISM) provides monthly data that shows trends in U.S. manufacturing. Their Dec. 1, 2017, report shows that new orders, production and employment are continuing to grow, inventories are contracting and supplier deliveries are slowing. Economic activity in the manufacturing sector expanded in November, and the overall economy grew for the 102nd consecutive month. These are key indicators of economic growth for 2018. This benchmark data has been most accurate for me.
Lynn Reaser, Point Loma Nazarene University
Business capital spending: This will show whether companies are using the tax cut to invest in their own businesses or just using the benefits for stock buybacks, dividends, acquisitions, or cash hoarding. It will determine whether the tax cut will boost supply and the economy’s capacity or just add to demand. It also could be critical to finally boosting productivity and real wages.
John Sarkisian, SKLZ
Inflation rate: Given the overall strength of the economy, we might start seeing a spike in the rate of inflation which might signal to the Federal Reserve a need to accelerate rate increases. At some point higher rates of borrowing will begin to affect overall economic activity. Unfortunately, the largest debtor we know is the federal government. How will higher rates affect Uncle Sam?
Chris Van Gorder, Scripps Health
Inflation: The recently passed tax bill will further stimulate an already strong economy, most likely to a point where we’ll see meaningful pressure on wages and additional increases in the cost of supplies and services. Like for most health-care providers, it will be difficult for Scripps Health to pass through these increased expenses to our patients, so we will need to be even more diligent in managing down our costs.
