(Host) What does the new year hold for your pocketbook? Commentator Tim McQuiston reflects on Vermont’s economic outlook.
(McQuiston) The Vermont economy will have a good year in 2004. The US economy will be even better. But don’t take my word for it. That was the message at last week’s Vermont Economic Outlook Conference. The annual conference was hosted by economists Art Woolf and Richard Heaps of the Vermont Economy Newsletter. Also speaking was, Mark Zandi, the chief economist at Economy.com. He offered his perspective on the national economy.
Let’s start there. Zandi said tax cuts, low interest rates, pent up demand, productivity growth and increasing profits have led to a mini-boom in the national economy. The job numbers aren’t there
yet, but they should rise slowly during the year as employers gain confidence. The economy won’t come roaring back, but it will come back nicely.
Back here in the Green Mountains, Richard Heaps predicted 2004 will also be a growth year, though not at the same vigorous rate as the US economy. There are two reasons to expect an expanding local economy. One is that Vermont will feed off the growth in the US economy. Second, 2003 was actually worse than first thought, so 2004 will look better by comparison.
Already, good results are starting to show up. For instance, income tax withholding payments in Vermont are running 7.1 percent ahead of last year. Corporate taxes are back. And the stock market is reviving our 401Ks.
While the state unemployment rate has inched up to 4 percent, we’re really at about full employment. Job growth should be 1.1 percent in 2004. That’s fabulous, really, because we lost jobs in 2003.
Median family income will start to rise at a time when Governor Douglas is talking about tax cuts. Together they’ll put more money in our pockets. Even school spending should start to drop as local government employment (we’re talking teachers) begins to fall in line with fewer and fewer school-aged children.
That aging population will lead to more health care jobs. Business services and construction should continue to do well, while manufacturing will still suffer somewhat. Meanwhile, the state of Vermont is in good fiscal shape, especially compared to many other states.
However, there is a dark side, as Mark Zandi put it, to all this good news. For instance, the federal deficit is out of control at almost 500 billion dollars a year. But just like the 1980s, the deficit will have a delayed effect on the economy, and won’t be a political issue until the presidential election in 2008.
Besides an over-bearing federal deficit, other problems include an over-done housing market, fierce global competition, and consumer debt.
But the bottom line is that 2004 should be a good year nationally and in Vermont. And the economists expect that to extend right into 2005.
This is Timothy McQuiston.
Timothy McQuiston is editor of Vermont Business Magazine.