by Calculated Risk on 12/23/2019 02:10:00 PM

Here is a review of the Ten Economic Questions for 2019

Below are my ten questions for 2020 I'll follow up with some thoughts on each of these questions.

The purpose of these questions is to provide a framework to think about how the U.S. economy will perform in 2020 and - when there are surprises - to adjust my thinking.

1) Economic growth: Economic growth was probably just over 2% in 2019, down from 2.9% in 2018. The FOMC is expecting more of the same with growth around 1.9% next year. Some analysts are expecting growth to pick up a little in the coming year as the trade war eases and global growth increases.  How much will the economy grow in 2020?

2) Employment: Through November 2019, the economy added 1,969,000 jobs, or 179,000 per month. This was down from 2018. Will job creation in 2020 be as strong as in 2019? Will job creation pick up in 2020? Or will job creation slow further in 2020?

3) Unemployment Rate: The unemployment rate was at 3.5% in November, down 0.2 percentage points year-over-year. Currently the FOMC is forecasting the unemployment rate will be in the 3.5% to 3.7% range in Q4 2020.  What will the unemployment rate be in December 2020?

4) Participation Rate: In November 2020, the overall participation rate was at 63.2%, up slightly year-over-year from 62.9% in November 2019.   The BLS is projecting the overall participation rate will decline to 61.2% by 2028.  Will the overall participation rate start declining in 2020, or will it move more sideways (or slightly up) in 2020?

5) Real Wage Growth: Wage growth was disappointing in 2019 (up 3.1% year-over-year as of November).  How much will wages increase in 2020?

6) Inflation: By some measures, inflation rate has increased and is now slightly above the Fed's 2% target. However core PCE was only up 1.6% YoY through November. Will the core inflation rate rise in 2020? Will too much inflation be a concern in 2020?

7) Monetary Policy:  The Fed cut rates three times in 2019.  Currently the Fed is forecasting a long pause in 2020 (no change to policy).   Will the Fed cut or raise rates in 2020, and if so, by how much?

8) Residential Investment: Residential investment (RI) picked up in the second half of 2019, and new home sales were up about 10% in 2019 compared to 2018.  Note: RI is mostly investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales.  How much will RI increase in 2020?  How about housing starts and new home sales in 2020?

9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, CoreLogic) - will be up around 3.5% in 2019, down from close to 5% YoY in November 2018.  What will happen with house prices in 2020?

10) Housing Inventory: Housing inventory decreased in 2019 after increasing in 2018.  Will inventory increase or decrease in 2020?

There are other important questions, such as oil prices, but these are the ones I'm focused on right now. I'll write on each of these questions over the next couple of weeks.

• Question #1 for 2020: How much will the economy grow in 2020?
• Question #2 for 2020: Will job creation in 2020 be as strong as in 2019?
• Question #3 for 2020: What will the unemployment rate be in December 2020?
• Question #4 for 2020: Will the overall participation rate start declining in 2020, or will it move more sideways (or slightly up) in 2020?
• Question #5 for 2020: How much will wages increase in 2020?
• Question #6 for 2020: Will the core inflation rate rise in 2020? Will too much inflation be a concern in 2020?
• Question #7 for 2020: Will the Fed cut or raise rates in 2020, and if so, by how much?
• Question #8 for 2020: How much will RI increase in 2020? How about housing starts and new home sales in 2020?
• Question #9 for 2020: What will happen with house prices in 2020?
• Question #10 for 2020: Will housing inventory increase or decrease in 2020?