The U.S. Chamber of Commerce, the nation's largest business trade group, forecast a relatively modest 2 to 2.5 percent increase in 2017 U.S. Gross Domestic Product (GDP), levels that President and CEO Thomas J. Donohue said aren't strong enough to spur solid gains in business formation and job creation.
In his annual "State of American Business" address delivered yesterday, Donohue said the year's projected growth rate is "nothing to celebrate," claiming it won't spark a surge in small business start-ups, which he said, "have fallen to a disturbingly low level." Nor will it put millions of unemployed back to work, or motivate those who've left the workforce to return, he said. By contrast, 3 percent GDP growth would be a massively welcome tonic to the economy because it would amount to a 50 percent rise from levels where it has essentially been stuck for years, he added.
Despite the sobering comments, Donohue said the Chamber remains optimistic about the economic outlook because of a healthy housing market, stable energy prices, improved consumer and business confidence, and the prospects for faster growth under the incoming Trump administration.
"Even in the eighth year of an aging recovery, there are no visible signs of another recession," he said.
Donohue said the Chamber, which has about 3 million members, expects U.S. inflation in 2017 to run a bit hotter than the Federal Reserve's target rate of 2 percent, which would mean at least two, and perhaps three, hikes in the federal funds rate, the rate charged by banks for overnight borrowing.
In his remarks, Donohue warned against any move to erect trade barriers in the form of higher tariffs or other measures, saying it will further hurt U.S. exporters that will already see their competitiveness in world markets diminish should interest rate hikes boost the value of the U.S. dollar. He also took a broadside at President-elect Trump's plans to scrap the Trans-Pacific Partnership (TPP), a 12-nation compact designed to reduce nontariff barriers and eliminate thousands of tariffs, and to either renegotiate or end the North American Free Trade Agreement (NAFTA) between the U.S., Canada, and Mexico. Trump has long viewed NAFTA as a U.S. job-killer, and has the same opinion about TPP.
Donohue said policymakers must determine "how we can achieve the economic and geopolitical objectives of the TPP," which supporters said will expand opportunities for U.S. businesses to sell into a global market of 480 million people in other TPP signatory nations. Inaction on the part of the United States "creates an opportunity for other countries to gain benefits for themselves at the expense of American workers, American businesses, and American influence," he said.
Donohue reminded the Trump administration that "our trade with Canada and Mexico supports 14 million American jobs — and much of that trade depends on NAFTA." Donohue acknowledged, however, that the treaty is 23 years old, and at this point could be modernized and strengthened to reflect present-day conditions.