‘Have a little faith,’ in economy, Tulane business professor says

The U.S. economy is thriving, despite the perception of many Americans that it’s on the wrong track, according to Peter Ricchiuti, a nationally renowned speaker and the William Burkenroad Clinical professor at Tulane University’s A.B. Freeman School of Business.

Speaking today to the Baton Rouge Rotary Club, the ever ebullient Ricchiuti delivered his assessment of the U.S. economy in a presentation peppered with humor and insight.

“We are adding 200,000 new jobs each month, consumer confidence is at an 11-year high, bank loans are steadily rising … and unemployment is at an eight-year low,” Ricchiuti said. “Capitalism works. It has cycles, but it works. Have a little faith.”

One reason consumers may not feel as confident as they should is because economic growth over the past seven years has been rather sluggish—steady, at 2.5%, but slow. Part of the problem is that while stock prices have tripled in that time and corporate earnings have skyrocketed, corporations are stockpiling cash, using it for mergers and acquisitions and cash buybacks.

“U.S corporations are hoarding cash,” Ricchiuti said. “They’re not reinvesting back into the economy, so you’re not seeing that kind of organic growth.”

Because of the flurry of mergers and acquisitions over the past seven years, the U.S. economy has lost 50% of its publicly traded companies, he said.

Louisiana’s economy is in a unique position because of the low price of oil and natural gas. Ricchiuti predicts prices will remain low for the foreseeable future and acknowledged the toll lower prices are taking on oil producing areas in southwest Louisiana.

By the same token, low natural gas prices are enabling the state’s petrochemical corridor near Baton Rouge to thrive.

“The feedstock of all these plants is natural gas,” he said. “That’s why all these chemical plants are expanding.”

Looking to the future, Ricchiuti predicts inflation will increase and that the Federal Reserve will raise interest rates. But that doesn’t worry him. He says he’s more concerned about misplaced enthusiasm for the long-term bond market, restrictions on immigration and threat to free trade.

“We’ve developed middle class economies all over the world that have an insatiable appetite for American goods,” he said. “A trade war would be disastrous.”

—Stephanie Riegel

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