Investors greeted Friday’s underwhelming U.S. jobs report with a collective shrug, which indicates a widespread belief that America’s economy remains in good shape overall.
True, the net growth of nonfarm payroll jobs in December came in below expectations, but that doesn’t seem to have changed underlying perceptions of U.S. economic strength.
“I don’t think it’s that big of a deal,” the chief investment strategist for State Street Global Advisors, Michael Arone, told CNBC. “I certainly don’t think this has any impact in terms of what the Fed will do in the future. The economy continues to be on solid footing.”
It may be on solid footing right now, but what are the potential problems that could derail America’s economic expansion sometime in the future? Brookings Institution scholar David Wessel recently ticked off a short list of things that could go wrong:
The Fed could be spooked by inflation and lift interest rates more rapidly than anticipated, slowing the economy and unsettling financial markets. We might see a confidence-shattering drop in stock price — or see a big bank get into trouble and learn that all the seat belts and air bags we added to the financial system were inadequate. Something could go awry overseas — in China, perhaps. Trump’s tough talk on trade could disrupt global supply chains or frighten away business investment.
And there are clouds on the long-term horizon. The growth of productivity — the amount of stuff we produce for each hour of work — is distressing low. That’ll slow the improvement in wages and living standards. We continue to run up the federal debt. That’s not an immediate problem, but at some point it will become one; a faster growing economy will help, but won’t suffice. The inequality gap between the very best off Americans and the rest of us continues to widen. And the opioid crisis is killing people: More people died of drug overdoses in the U.S. in 2016 than died in the entire Vietnam War.
That statistic about the opioid crisis is truly remarkable — and, of course, horrifying. We should never forget that, amid a period of relatively solid economic growth, large swathes of America continue to grapple with the worst drug-overdose epidemic in our history, which is a big reason that U.S. life expectancy declined in both 2015 and 2016.