JPMorgan’s top global strategist, David Kelly, is pouring cold water on the White House’s optimistic prediction of 3% US economic growth. He says the administration’s forecast just isn’t realistic.
Why the Skepticism?
Kelly, in a recent CNBC interview, pointed to several key factors hindering the achievement of such high growth. He argues that boosting productivity to the level needed to hit 3% is simply not feasible. The shrinking workforce, largely due to the aging Baby Boomer generation, is a major roadblock. With fewer people entering the workforce, economic growth is naturally limited. He notes that even with positive net immigration, hitting 3% is unlikely.
A More Realistic Outlook
While Kelly doesn’t believe 3% growth is achievable, he doesn’t see the economy stagnating either. He explains that historical US economic growth has hovered around 2%, with productivity accounting for 1.5% and workforce growth contributing the remaining 0.5%. With a declining workforce, he believes that 1.5% growth is a more realistic expectation. Anything significantly higher seems unlikely given the current economic landscape.
The Context
The White House’s 3% growth projection is tied to President Trump’s recent spending bill, which includes tax breaks currently under consideration in Congress. Kelly’s comments suggest that the bill’s projected economic impact might be overstated.
