By now, we’ve all heard the news — the US economy is projected to grow 2.7 percent in 2018, with small business owners across the country touting this year as the best time in decades to expand. But what does it all mean for the average business? And what does this growth mean in the long term? Between interpreting the 2017 tax overhaul changes and keeping up with wage growth, it might be hard to get a sense of how it will impact your business, your colleagues and employees.
Between ongoing recovery from the 2008 financial crisis and a president who ran on a platform of creating jobs and spurring economic growth, you’re sure to see this topic covered by media outlets again and again. Here are a few things to keep in mind as you follow the economic growth trajectory in 2018 —
Jobs. Low unemployment rates are a huge indicator of a healthy economy, and our current unemployment rate is the lowest since 2000 at 4.1 percent. But did you know economists define five different types of unemployment? The 4.1 percent is known as the “natural” unemployment rate and takes into account people who are unemployed but actively seeking employment – i.e. “between jobs”, and those who are “structurally unemployed” — in other words, they’ve been unemployed for so long that their skills are outdated, and they will have trouble finding work, even now that the economy is rebounding.
According to some, this figure doesn’t show the full picture, and “real unemployment” statistics shouldn’t be ignored in the unemployment conversation. This includes three categories of workers not typically included in the rate that is most commonly referenced by economists and the media — 1) Those who haven’t looked for work within the past month but have looked within the last year, 2) Discouraged workers who have given up looking for work entirely and 3) Part-time workers who would prefer full-time work.
What does this mean for you? Though unemployment rates have reached notable lows, there are still many out there seeking employment who are not reflected in this figure. This may be good news if you were concerned about maintaining or growing your current staffing levels.
Wage growth. 2018 also brought a 2.9 percent increase in average hourly wages from the year before, marking the largest increase since 2009. According to some, this increase coupled with low unemployment rates, will result in 2018 being “a year of rising wages and the tightest labor market in over a generation.”
What does this mean for you? Though there are many still out there seeking employment, some of them have outdated skills — and, with nearly six million jobs available across the country as of early-February, finding prime talent could prove tricky. Many employers are having to offer higher pay to attract and retain the best and the brightest. Many economic indicators can be conflicting, and it’s up to each individual business owner to figure out how the data impacts their business.
Tax cuts. The tax code saw its largest overhaul in three decades at the end of 2017, which is predicted to cut income and corporate taxes by $1.5 trillion over the next 10 years. These cuts are expected to significantly contribute to economic growth in 2018 and into 2019 — especially since the cuts led to bigger paychecks beginning last month. However, some argue this will be short lived and predict growth will taper off by 2020, particularly as the budget deficit increases. Also playing into this prediction: few economists expect expansion to continue at a 3 percent pace in the coming months, given the wave of baby boomers expected to retire and exit the workforce in the near future. As a general rule of thumb, retirees don’t contribute as much to the economy as workers do.
What does this mean for you? According to The Balance, 2018 will be a prosperous year and is “an excellent time to reduce debt, build up your savings and increase your wealth.”
Big business and corporate spending. With the tax code overhaul came a significant reduction in tax on businesses — moving the corporate income tax rate from 35 percent to 21, which is predicted to spur business investment and growth. When surveyed, the country’s largest companies said they’d use the savings for everything from making investments and paying down debt to hiring more employees.
What does this mean for you? It might be too soon to tell. While some major companies have promised to hire employees and raise wages, others noted expansion on the horizon, and the long-term implications of this are unknown. However, many theorize that tax cuts for big business trickles down to benefit everyone, including small businesses.
These are just a few items to familiarize yourself with as you follow economic growth in 2018. Additional factors, including everything from interest rates to oil and gas prices, play a role in the economy’s health, too. The economy is complex, and the economic outlook changes often. But, given the indicators for this year, I’d second The Balance article referenced above — now could be a great time to focus on personal and professional prosperity.
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