U.S. economic growth will defy expectations again in 2019 thanks to a business investment boom and President Donald Trump’s trade strategy, White House economic advisor Kevin Hassett said Wednesday.
The chairman of the Council of Economic Advisers expressed optimism that even a slowing housing market won’t hamper the overall picture. GDP has risen an average 3.3 percent through the first three quarters of 2018 and is expected to gain 3 percent in the fourth quarter.
“We’re definitely going to be at 3 or above 3 for next year as well,” Hassett told CNBC’s Steve Liesman during a “Squawk Alley” interview.
Most economist disagree, expecting growth to moderate to a 2 to 2.5 percent range in 2019. The Federal Reserve is projecting 2.5 percent.
The White House is pinning its hopes in part on business investment growth spurred by the late 2017 tax cuts that reduced the corporate rate from 35 percent to 21 percent. Nonresidential fixed investment jumped 11.5 percent to start the year but tailed off to 2.5 percent in the third quarter, its slowest pace since the fourth quarter of 2016, according to Bureau of Economic Analysis data.
Hassett conceded that the “boom” in business investment “kind of leveled off a bit,” but he expects it to resume as companies bring back profits stashed overseas.
He also touted gains in worker pay, though he mistakenly said real wages are growing above 1 percent year over year. The latest Labor Department numbers released Wednesday show that gain to be 0.8 percent. Average hourly earnings not adjusted for inflation rose 3.1 percent in November, tied for the best increase during the recovery.
Those November jobs numbers showed payroll growth of 155,000, below expectations but still solid in a tightening jobs market. Hassett pointed out that 73.5 percent of those getting jobs had been out of the labor force previously.
“People are coming back into the labor market,” he said.
Even the slowing housing market isn’t cause for concern, Hassett added, because it alleviates concerns over financial bubbles.
“If you’re wondering about the sustainability of the boom, the fact that we don’t have this out of control housing sector with runaway price increases should actually give you comfort that we don’t have to worry about our financial institutions having another housing bust, because housing is really underperforming,” he said.
Asked about Trump’s trade strategy, Hassett said he agrees with the president’s stance and expects that also to yield positive economic results.
“I do support his trade policy, because he’s trying to push tariff and nontariff barriers lower all around the world,” he said. “Uncertainty over our progress is something that’s clearly having an impact on markets. That’s why I think it’s important that we move forward quickly, for example, with the China deal that’s actually running on a clock now.”
Progress with China, he said, would be “very, very positive news.”