ATLANTA — Things may not be as bad as they seem, at least not yet.
The headlines warn of U.S. tariffs sending the stock markets roiling and consumers clamping their wallets shut as the odds of recession tick higher.
But Mike Skordeles, head of U.S. economics at Truist Advisory Services, said during a presentation at the Hunter Hotel Investment Conference there are a number of factors that are still contributing to a healthy American economy. Chief among them are wage growth is keeping up with inflation, and a pullback in consumer spending hasn't happened yet, from his perspective.
Truist projects 1.9% U.S. gross domestic product growth in 2025, which is below the GDP growth from 2021 (+6.1%), 2022 (+2.5%), 2023 (+2.9%) and 2024 (+2.8%). Average annual GDP growth in the U.S. between 2010 and 2019 was 2.4%, Skordeles said.
"But 1.9% [GDP growth] is not a bad number. Yes, it's a little weaker than it was the prior couple of years," he said. "But I think it's important to keep in mind, especially to all those people talking about how strong Europe is. Europe hasn't had a 1% quarter — quarter, not a year — quarter, in over three years. In Germany, which is a 'strong part of Europe,' ... they've been in and out of recession for the last two years now. So again, we're doing pretty good."
In mid-March, the U.S. Federal Reserve's Federal Open Market Committee voted to hold the federal funds rate at 4.25% to 4.5%. Skordeles predicted the earliest the Fed might cut interest rates could be in June.
"Whether we're talking about developed country central banks or emerging market central banks, they're all cutting," he said. "Just like inflation rising in '21 and '22, ... the moderation that we've seen since then isn't just a U.S. phenomenon. So continuing to see that global central banks have been lowering rates, we're going to jump on that bandwagon, I think, as we move through the remainder of the year."
Zeek Coleman, vice president of the Americas at Tourism Economics, said U.S. travel demand flatlined in 2024 despite a record 903 million TSA screenings during the year. But while it might seem like the travel and hospitality industries are thriving, there are some concerns.
"We had almost a billion passengers come through TSA last year, hotel demand was at 99% of 2019, but that's a little misleading, too," Coleman said, adding that short-term rental demand and the cruise industry contributed the lion's share to total lodging demand in 2024.
Conversely, the health of the cruise industry is a major indicator that median consumers are feeling pretty confident to spend on leisure travel, even if that's not correlating to U.S. hotel demand, Skordeles said.
"The bottom two ports, Port Everglades, which is Fort Lauderdale, and Port Miami, had an 18% increase in the number of cruise passengers from '23 to '24 — 18%," he said. "And, oh, by the way, '23 was an all-time high. ... The top 1%, the top 10%, they don't go on cruises; they have a yacht."
U.S. hotel demand was flat to down most of 2024 due to bifurcation, as the higher-end segments appeared healthy but economy and midscale hotels reported performance decreases, Coleman said. Higher-income households make up about 60% of U.S. hotel spend, so that bifurcation divide is still skewed favorably to affluent travelers who are more likely to book hotel rooms at the higher end.
"These are all strong things that if I have money, if I feel confident about my retirement, I feel confident about my future, I'm going to spend and especially on travel. And there's a lot of data that we have, sentiment-wise, at least prior to all this, that says that people prioritize it above everything," Coleman said.
Meanwhile, international travel demand to the U.S. could be poised to take another hit with the rhetoric coming out of Washington. Coleman pointed to how President Donald Trump's first travel ban in 2017 eroded consumer sentiment and demand from certain regions to the U.S.
"The travel ban around that same time only impacted demand by like 0.7% directly from those countries, but adjacent countries, I think it fell about like 18 points, or something crazy," Coleman said. "So it was a sentiment thing. People felt like, 'Hey, you don't want us here. And so even though I'm not banned, I'm not coming.'"
On the bright side, U.S. unemployment levels have hovered around historical averages. Layoffs in the federal government are unlikely to have a significant impact in the total U.S. unemployment picture, Coleman added.
"Unemployment remains low, that's good. It's about as low as it was dating back to the '70s," Coleman said, adding that federal jobs comprise about 2% of the total U.S. workforce.
It's also too soon to tell what impact the Trump administration's tariff policies will have on the U.S. economy and persistent inflation, Coleman said.
"This latest inflation data does not even show or reflect the effect of tariffs. ... We have yet to see what's going to happen once that that actually hits in April," Coleman said. "The Fed is going to hold rates higher for longer. And so obviously, when you know when inflation is a potential risk, they're not going to loosen their monetary policy."
The rollout of U.S. tariffs has been perhaps a bit out of order with what the markets expected to happen under Trump, Skordeles said.
"There's a sequencing issue that we have, I think, especially within markets. People expected tax cuts, deregulation and tariffs in that order, and hasn't come in that order, so that's upsetting things right off the bat," he said.
In the end, there's unlikely to be one factor that deals a significant blow to the U.S. economy and sends the whole thing crashing, Skordeles said.
"Our economy is incredibly dynamic, and I think that that's something that we as Americans constantly beat ourselves up with, that we're not good enough. We have issues, don't get me wrong, ... political dysfunction and divisiveness, those are real issues, among many others," Skordeles said. "But we don't have a population problem with or without immigration. By the way, roughly 1% population growth on a year-in, year-out basis. Europe doesn't have that. Japan doesn't have that."