PHOENIX — Unfortunately there is a sobering assessment of the current state of the U.S. economy, remarked Bernard Baumohl, chief global economist for The Economic Outlook Group last week at the 30th Lodging Conference in Phoenix last week, citing a unique confluence of political and economic turmoil that has made forecasting increasingly difficult.
Addressing attendees, Baumohl laid out a picture of substantiated uncertainty, describing the situation as “one of the more bizarre moments in U.S. economic history [that] we’re dealing with. ... There is always so much unknown and it's causing a lot of confusion, chaos and a lot of a lot of uncertainty.”
Challenges and Resilience
Amid ongoing trade wars, government shutdowns and unprecedented unpredictability from the White House, the discussion emphasized both the challenges and resilience characterizing today’s economic landscape.
Over the past nine months, the U.S. has veered sharply from traditional economic norms, making it “virtually impossible to determine the force of the economy with any degree of confidence or accuracy beyond the next few months,” according to Baumohl. The Trump administration’s policy shifts, particularly a barrage of tariffs and contentious relations with the Federal Reserve, have introduced volatility and confusion into both domestic and global markets. The rise in living costs, a decline in hiring rates, sweeping changes to immigration and fractious relationships with U.S. allies were all highlighted as contributing factors to a growing sense of instability.
The effects of these policies are being felt not just in Washington, but also across American households. Despite headlines about stock markets reaching record highs and low unemployment rates, many consumers are treading carefully. While household net worth has risen alongside higher home values and market gains, survey data suggests families are becoming more selective about discretionary spending, choosing to dine out and travel but cutting back on larger purchases. This behavior indicates a nuanced approach to consumption, with Americans striving to maintain quality-of-life activities even as uncertainty looms.
One of Baumohl's focal points was the impact of tariffs, which have soared to their highest levels since the Great Depression. The sudden increase has directly impacted rising inflation, especially in sectors like furniture, consumer electronics and hardware supplies.
Projections
Despite these headwinds, the U.S. economy is projected to grow this year, bolstered by strong consumer spending and continuing investments in artificial intelligence and infrastructure to power future growth. Next year, tax refunds and expected interest rate cuts could further stimulate the economy, though rising unemployment remains a risk as businesses seek to protect margins.
But despite the negatives, Baumohl pointed out the U.S. stock market strength, historically tight credit spreads, relatively low unemployment rates and data showing Americans continuing to spend money on everything from eating out to travel to washing machines—factors that can benefit parts of the lodging sector.
Calling recessions more psychological than economic, Baumohl said the true breakdown comes when Americans have a complete loss of confidence in the vitality and the progress in the economy. “I think there's just a lot of confusion and uncertainty acting as a drag on economic growth,” he said.