By Jim Wong, CPA | January 24, 2017

Each week, our blog aims to provide you with valuable information to help you be successful in your career. Whether we discuss new revenue recognition updates, the millennial generation in the workplace or the state of the labor market, we want to share with you important information that matters most to your career.

As the first month of 2017 comes to a close, I think it’s an opportune time to examine the rest of this year and the years ahead to see what’s exactly in store for the economy, the accounting, finance and information technology professions, and ultimately, the labor market itself.

I thought it was only fitting to have someone immersed in those verticals to share their thoughts on the subjects and was fortunate enough to have an insightful conversation with Tom Kinder, Managing Partner of Plante Moran’s Chicago Office. Plante Moran is the 14th largest public accounting firm in the United States.

Since 1988, Tom has embraced an entrepreneur’s viewpoint to the audit, accounting and business consulting services within the construction, hospitality, manufacturing, distribution and foodservice industries. Tom’s unique insight comes from growing up in his family’s construction business as well as his lifelong athletic endeavors. His philosophy is to work hard, work smart and never stop improving. It’s no surprise that he uses that experience to foster engagement and production at Plante Moran.

Tom has been interviewed by local television networks on business-related topics and earned a bachelor’s of science in accounting from Indiana University and an MBA from DePaul University.

We are happy Tom agreed to give us some insight into what we thinks about the impending future of the economy in our interview below.

JW: How would you characterize the current state of the economy and why? 
TK: The current state of the economy is generally solid. We’ve been in a so-called “Goldilocks” economy, where economic growth and inflation are neither too hot nor too cold. Despite the fact that we are currently experiencing the fourth longest expansion of the post-WWII era, cumulative growth remains well below past expansions – suggesting the current cycle may still have room to run.

JW: Are there specific client industries that are faring better than others? Are there parts of the U.S. that are performing better/worse than others?
TK: The employment market remains an area of health for the economy and a tail wind for consumers, who have historically been the primary drivers of economic growth. Healthier consumer balance sheets and exceptionally low interest rates have also benefited the housing sector, which continues to recover from the burst of the housing bubble in 2008. On the other hand, low productivity growth and weak business investment have been negative outliers in what otherwise appears to be a healthy economy. Those factors, along with the sharp decline in energy prices and the strengthening of the dollar in recent years, have been negatives for corporate profitability, particularly in the energy and materials sectors.

JW: From your perspective, how do you see the economy taking shape in the next 2 to five years? 
TK: June 2016 marked the seven-year anniversary of the current expansion. When you consider the length of an average post-World War II expansion is roughly five years, there is a reasonable possibility that a recession will occur during the new president’s first term. However, expansions don’t have an expiration date, and turning points in the economic cycle are notoriously difficult to predict. One potential wild card may be the magnitude of infrastructure spending that is enacted in 2017 and beyond (something that currently appears to have bipartisan appeal). A fiscal spending package could boost the economy, all else equal and support near-term growth.

It’s also worth noting that if a recession were to occur in the next few years, absent the unlikely repeat of a global financial crisis or other major global policy shift, it’s more likely to take the form of other, more modest recessions such as the ones in 2001 and 1990/1991 rather than 2008/2009. The reversal in the buildup of excesses that have typically been a catalyst for previous recessions does not appear present today – reducing the potential downside for the economy, all else being equal.

JW: Any final thoughts?
TK: At this point, the current expansion appears to have support as wage growth edges higher, consumption remains relatively stable, and employment conditions remain positive. Meanwhile, Federal Reserve continues its balancing act, weighing the need to create some cushion (to be able to lower rates when the next recession arrives), but not hike prematurely and choke off growth. Given the dovish tilt of the 2017 voting members of the FOMC, it’s seems likely they’ll err to the latter and maintain a deliberately slow and steady pace which should continue to be supportive of growth.

To learn more about Tom Kinder or Plante Moran, click here.

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