White House Council of Economic Advisers Chairman Kevin Hassett today said that the U.S. economy appears to be “on track to have a 3% year” in terms of economic growth. In remarks at the American Bankers Association Washington Summit, Hassett noted that a tight labor market and rising wages are likely to drive consumption and increased confidence.
“The wage data we’re looking at [suggests]that people are getting a nominal 5% wage increase this year,” Hassett said. “With that wage growth underpinning income growth, I think the level of confidence you should have . . . is really high.” He added that the incoming data suggests that the chances of a recession this year are “close to zero,” but that “we have less clarity about next year.”
Hassett also offered his thoughts on the effect of the new tax reform law, noting that the cost of capital fell by 9% since the law was enacted, while capital spending went up by the same percentage, which contributed to the strong economic growth seen over the past year. “It’s clear that the tax cuts are working,” he said. Meanwhile, the banking sector continues to show strong performance, which Hassett attributed to “old-fashioned, prudent, successful lending and profitmaking without taking excessive risk.”