The US economy got a boost from the election of Donald Trump on Friday.
Trump’s win has led to a surge in consumer spending, boosted exports and raised the nation’s GDP to its highest level in more than a decade.
But economists warn the economy could also struggle as Trump’s tax cuts take hold.
The New York Fed expects a 2.7% annual growth rate in the third quarter of this year, well above its target of 2.1%.
That’s down from the 2.4% rate it expects to see over the same period a year ago.
But with the US economy so fragile that the unemployment rate hit 9.9% in August, economists are now expecting the unemployment to dip further down to 9.3% by the end of the year.
Economists also expect the unemployment numbers to improve in the first half of 2019, though they won’t be enough to offset the negative effects of the tax cuts that took effect this month.
“The unemployment rate has been dropping, but we’re seeing the first signs of an easing of the fiscal pressures that were building up in the fourth quarter of 2017,” said Mark Zandi, chief economist at Moody’s Analytics.
Trump is also expected to ease regulations on the financial sector, with his administration looking to roll back regulations on derivatives and other financial instruments that have fueled a bubble in the markets and have become an economic drain.
The Fed’s economists expect a modest rise in the price of consumer goods and services, a rebound in manufacturing, and an increase in the number of jobs created in the year ahead.
However, the recovery will depend on a number of factors, including the US dollar’s strength, the economic impact of the election and the recovery in the housing market.
“Even with these favorable effects, we expect the dollar to remain vulnerable to adverse effects of trade and fiscal policy, as a result of which the growth in the dollar will be limited,” said Paul Ashworth, an economist at the Federal Reserve Bank of New York.
“We expect that the economy will continue to expand at an average annual rate of 2% to 2.5% in 2019.”
The New England states of Massachusetts and Vermont have been hit hardest by the downturn.
The loss of more than 1 million jobs is expected to reduce tax revenue in the state by $13 billion in 2019.
Massachusetts has been a big beneficiary of Trump’s economic policies, particularly the tax relief it received from the Republican Congress in 2017.
In addition to the tax cut, the president also announced a $1 trillion infrastructure investment plan that he called a “jobs plan.”
The investment will build on his promise to bring back manufacturing and boost employment, according to the New York Times.
“I am going to build the wall, and I am going do it in a very effective way,” Trump said at a campaign event in Boston last year.
“And I’m going to bring jobs back, and we’re going to do it at a much faster pace than anybody has ever done.”
The Trump administration is expected next week to release a proposal to create more than 3 million new jobs in the US.
The plan is expected have a $10 trillion impact over the next decade, according the New Hampshire Union Leader.
Trump has also announced he is considering revoking the nations nuclear weapons, which has led the international community to question whether Trump will be able to keep them.
“In the wake of the shock of his victory, Trump has signaled a willingness to abandon the use of nuclear weapons and has called for a halt to US troop deployments in the Middle East,” said Kevin Hassett, an economics professor at the University of California-Berkeley.
“This will require a shift of power away from the president and toward Congress.
Trump would be required to make significant concessions in order to secure the nuclear weapons he pledged to keep, including a suspension of military deployments in South Korea, China, Japan and the United Kingdom.”
Trump has said he would use his bully pulpit to push back against countries that threaten the US and the US allies.