Economists Provide 2025 Forecast at Aspire’s Economic Outlook Breakfast
Aspire Johnson County held its annual Economic Outlook Breakfast on the morning of November 7th at the Sycamore at Mallow Run in Bargersville. Economist Dr. Phil Powell and his colleagues from the Kelley School of Business presented data from their 2025 economic forecast or “Futurecast” for Johnson County and Indiana in the current geopolitical and financial climate.
Panelist Dr. Brian Vander Schee, Clinical Associate Professor of Marketing, began by covering the national and international economic trends for 2024 and leading into 2025. Then Dr. Russell Rhoades, Clinical Associate Professor of Financial Management, followed with his analysis of the financial and monetary system with consideration for what the Federal Reserve (America’s central bank) intends to do with interest rates in the coming months.
Dr. Vander Schee predicted global output to grow at 3.2% next year and the U.S. GDP to grow as well. He also sees the unemployment rate possibly growing, however he expects the rate to stay below 5%. He also informed the audience of business and community leaders that he expects inflationary pressures to continue to ease, with core inflation nearing 2.3% in 2025.
Dr. Vander Schee also had a positive view of employment growth, expecting it to remain near a 1% rate over the next 18 months. Dr. Vander Schee added that in the international sphere, advanced economies like that of the United States are expected to grow at 1.8% in 2025, while emerging/developing economies could grow at 4.2% in the next year.
Despite overall positive growth trends, Dr. Vander Schee reminded everyone that the escalation of wars and conflicts in places like Ukraine and the Middle East could unsettle commodity markets and disrupt trade which can bring their own kind of inflationary pressures and uncertainty.
Dr. Rhoades started with good news from stock markets which had performed better than expected in 2023 and 2024. Despite high valuations, outperforming historical averages did not seem to be in the cards. Dr. Rhoades braced the audience for possible stock market underperformance and negative returns in 2025.
On the question of the Federal Reserve, Dr. Rhoades believed that the Fed Funds target rate will settle in around 3.5% by the end of 2025, which he sees as coinciding with the lowest expected level of what he refers to as the Fed’s “cutting cycle” or period when the Fed is carefully lowering interest rates without trying to spike inflation.
Dr. Rhoades says their economic model expects the Fed Funds rate to end up at about 3% during this period. Dr. Rhoades reiterated his caution for the stock market’s performance if an economic slowdown (more than a mild recession) occurs next year or if inflationary pressures are not properly handled.
Dr. Powell, who is the Executive Director of the Indiana Business Research Center and Associate Clinical Professor of Business Economics and Public Policy at Kelley, has spoken for several years at Aspire’s Economic Outlook events and has been consistently impressed with Johnson County’s economic policymakers and innovative business community.
“Where Johnson County is growing at over 3%, the rest of the state is struggling to see a growth rate of just half a percentage point. Whatever policies are being made by local leaders, whatever you are doing to make Johnson County an attractive place, keep doing it. Keep making those investments that are what puts Johnson County on the map.”
Dr. Powell is referring to both Johnson County’s growing workforce and productivity.
“We’re seeing growth in the competitive service industry, manufacturing and sectors that serve your residents here. So, Johnson County is becoming better diversified, and Johnson County is becoming more globally competitive. We’re seeing growth in all the right sectors,” he said.
Dr. Powell saw that Johnson County has focused on business sectors that are more technological and provide higher end services. “We expect the Johnson County economy to grow about 3.5%,” said Dr. Powell.
Dr. Powell said Johnson County is due for a decrease in unemployment but reminded business owners that the key to this is in providing the best possible workplace and pay for employees, which he tells CEOs that he has spoken to in the past that it is not very expensive and will yield results.
“The county is attracting workers,” Dr. Powell added. “We have a state (Indiana) that is looking at a very flat population growth rate, but Johnson County is not. You guys have seen a 3.2% boost in the labor force in one year.”
Dr. Powell sees impressive productivity growth in general from the widespread adoption of artificial intelligence technology across nearly every industry.
“Our U.S. economy has a history of these two, three or four-year periods of really solid, sustainable growth,” said Dr. Powell.
“We are expecting to enter that period. Looking at the productivity data, we have had four quarters of really high productivity growth at about 2% when we usually have 1%. This is the front edge of the productivity age of artificial intelligence. It is working its way into everything that we do. Its making companies more productive than they thought that they would be.”
Dr. Powell saw the productivity growth of AI as a resonance of the economic growth of the mid 1990s when computer and internet technology transformed workplaces and businesses around the world.
Dr. Powell recommended that business owners and investors look to technology as the key to capturing what he referred to as the “post-Covid growth”.
Dr. Powell also addressed the concerns following the recent presidential election, though he saw the numbers speak for themselves regardless of who is in elected office.
“Government can help sometimes, and it can aggravate, but statistically the party that is in the White House, and the party that is in the Congress and Senate, it doesn’t really matter that much. It’s the hard-working American business sector that drives what we are.”