MARCH/APRIL 2018 13 FE ATURE continued on page 14 As unemployment declines, employers are having more difficulty finding a sufficient number of workers. While challenging for businesses, including commercial laundries, that trend bodes well for wage growth, and for a resultant increase in consumer income. “Most measures of wage rates are showing some acceleration and pay increases remain in the headlines,” said Scott Hoyt, senior director of consumer economics for Moody’s Analytics. Average hourly earnings are expected to grow by 3% in 2018, up from the 2.6% increase of 2017, which was little changed from the previous year. BUSINESS CONFIDENCE Confidence among consumers and businesses is yet another driver of growth. Here the news is good. “Consumer confidence remains high,” said Hoyt. “It jumped following the presidential election, and the tapering back down that many of us anticipated has not occurred.” Business people, for their part, seem confident as well, and willing to invest. Moody’s expects business investment to increase by 4.5% in 2018, up from an anticipated 4.07% figure for 2017. “Nonresidential investment has improved following the swoon caused by the collapse in oil prices,” said Koropeckyj. “Equipment outlays and intellectual property products are both growing strongly. And accelerated wage growth could spur firms to spend more on equipment and technologies that reduce the need for workers.” Added to this wave of optimism is the current business-friendly outlook in the nation’s capital. “A favorable business climate, particularly a relaxation in various regulations, could boost investment spending more than expected.” Adding fuel to this fire is an upswing in corporate profits, which are expected to rise by 4.5% in 2018, a good increase over the 4.07% figure expected when 2017 numbers are finally tallied. “Low costs and sturdy revenue growth have bolstered profits,” said Koropeckyj. While both conditions are expected to extend over the coming months, stronger profits in 2018 depend upon the delivery of lower corporate taxes. Businesses looking for expansion capital are in a favorable position. “Banks are eager to lend,” said Walter Simson, principal of Chatham, New Jersey-based Ventor Consulting. “And the borrower has a lot of power when it comes to pricing and conditions of the loan.” CLOUDS ON THE HORIZON As favorable as the current forecast is, uncertainties in Washington could spark problems. “We have built some corporate tax cuts into our forecast,” Hoyt said. “If they don’t happen, our forecast is too strong. And if personal tax cuts are instituted, our forecast is too weak. We also are assuming there is some increase in federal infrastructure spending.” The picture could darken further if President Donald Trump institutes protectionist measures promised during the campaign. “The president has an agenda which is somewhat protectionist, and I think we need the exact opposite,” continued from page 12 Have We Reached Full Employment? The employment picture is improving in the United States, to the extent that by the end of 2017 some 95.6% of willing workers had ob- tained jobs, according to figures from Moody’s Analytics, a research firm based in West Chester, PA. Does that mean the nation has reached a condition economists refer to as “full employment?” The question is important because wages generally start to increase across the board when the number of available workers be- comes scarce. And a general rise in wages usually translates into more spendable income, a healthier economy and more profitable businesses. Even so, a firm answer is elusive because several forces muddy the waters, according to Sophia Koropeckyj, managing director of in- dustry economics at Moody’s Analytics. First, baby boomers are retiring from the workforce. Because older workers tend to have a lower incidence of unemployment than younger ones, economists respond to this change in workforce demographics by lower- ing the employment rate they consider “full.” Second, there has also been a large decline in labor force participation by younger work- ers since the Great Recession. Many prime-age workers have dropped out as well. People not actively participating in the labor force are not considered in the unemployment rate calcula- tion. “But since there is a possibility of more entry of those on the sidelines as the expan- sion persists and since there are so many idle workers, we cannot say that we are truly at full employment now,” says Koropeckyj. Also, the share of unemployed workers out of work longer than half a year remains higher than it was before the recession. “As the ex- pansion persists more of these workers should find jobs,” says Koropeckyj. “If the absorption of these workers to reach the prerecession share is considered full employment, then we are not at full employment now.” Finally, economists differ on what they feel constitutes a “full-employment unemployment rate,” and have advanced figures that vary from 4.0 percent to 5.0 percent.