What will Ohio’s economy look like in 2017? Governor Kasich warned last month that the state could go into recession in the new year.
Mark Partridge, a professor of economics at Ohio State University, focuses his work on regional economics and on economic volatility and new industries around the globe. He spoke with WOSU's Debbie Holmes about the potential impact of the Trump presidency on Ohio's economics and what he expects from changes in trade and manufacturing.
The below is an automated transcript. Please excuse minor typos and errors.
Debbie Holmes: So we've got the unemployment rate right now in Ohio at about 4.9 percent, just above the national rate, which stands at 4.6 percent. It sounds good, but there are some downsides to what's been happening in the state over the years, over 16 years. Ohio has lost nearly 443,000 private sector jobs.
Mark Partridge: Well the way you prefaced that, Debbie, you're correct that job growth in particular slowed in Ohio. It's typically below the national average, but now that gap is widening, and in particular what we're seeing is slowness in manufacturing. That's one of the things that's pulling down Midwestern economies in general, that in the last six months there's at least a pause if not an outright decline in manufacturing activity.
And that's being caused by a lot of things, particularly one, the slowdown in international trade in general, that it's been slowing down. Another reason though is that the dollar has been appreciating; it's been at a relatively high level. And when the dollar is strong, that means it's cheap to buy imports and expensive internationally for other countries to buy our products. And that appreciation is putting pressure.
The big question mark is what policies will we see out of President Trump? So for example, if President Trump goes forward with his large tax cuts and an infrastructure program, or if Congress agrees to that, then this is what the market consensus is, that the economy will pick up a little bit. That will, in terms of Ohio infrastructure building, is good for manufacturing and the economy can really take off.
The concern I have, though, is this is a lot. This is like the 1980s all over again. And if there's a large budget deficit, interest rates are starting to go up. That's what the market is saying, and that will cause more money flowing in the United States, causing the dollar to further appreciate, putting more pressure on manufacturers and also on farming as well.
Debbie Holmes: So far as those people that are looking, we know we had this election and a lot of people in Ohio supported Donald Trump. They were saying, "We want our manufacturing jobs back in our small Ohio towns." Is this going to happen, do you think?
Mark Partridge: Bringing back manufacturing jobs, it's just a challenge, it's going to be a challenge, because the real problem is man is losing to the machine in terms of how many jobs. It's a productivity merry-go-round that the whole world has to be on to be competitive. That means fewer workers. The next thing that's up in the air is, is President Trump going to be aggressive on international trade, in particular with China? And if so, let's say we raise tariffs on Chinese products, that's going to create problems for American companies as well because now the supply chains are so deep between U.S. and Chinese producers that putting any kind of limitations on those are actually going to hurt us. So on one hand was, it hurt manufacturing when China came in, but now they have adjusted it, you just can't unwind that so easily.
Debbie Holmes: Governor Kasich has mentioned there could be a recession in 2017. Where do you think that mindset comes from?
Mark Partridge: I think Governor Kasich is looking at tax revenues coming into the state government, and they've been declining for the last several months, which is which is a worrying sign. However, some of this could be - and he might already know - is that especially wealthy individuals can be moving income into 2017 not paying tax revenue in 2016, because they expect lower tax rates in 2017. So it's just shifting their own income forward, which might be bringing down the tax revenue.
So that's one cause. Another cause has been pointed out, the economy is slowing down. Another one is just simply political, is that he's trying to tamp down expectations, say, in the legislature, that this is not the time for a big tax cut or some sort of spending initiative.
