On this episode of Carolina Newsmakers, Dr. Mike Walden, William Neal Reynolds Distinguished Professor Emeritus of Economics at North Carolina State University, shares his insights on the current economic landscape and provides predictions for 2025. With his wealth of experience, Dr. Walden analyzes inflation, interest rates, the federal budget, and technological advancements like artificial intelligence, offering listeners a comprehensive look at what lies ahead for the economy.
Dr. Walden begins by reflecting on 2024, describing it as a stable year with modest unemployment, job growth, and an expanding economy. Inflation, while still a concern, has moderated significantly compared to its 2022 peak of 9.1%. Current rates hover around 2.7%, but Walden acknowledges that real wages have not yet fully caught up with the rising cost of living. While progress has been made, he explains that many households are still struggling to regain their pre-pandemic financial footing.
Looking ahead to 2025, Dr. Walden expects interest rates to decline gradually, with mortgage rates potentially dropping to the low 5% range. He credits the Federal Reserve’s cautious approach to inflation for the improved economic conditions but warns that federal debt remains a looming issue. With annual deficits exceeding $2 trillion, the federal government’s borrowing contributes to upward pressure on interest rates. Dr. Walden stresses the importance of addressing this challenge, though he remains skeptical about the likelihood of significant policy changes in the near term.
Dr. Walden also examines the potential impact of President Trump’s economic agenda, including proposed tax cuts, tariffs, and the creation of a new Department of Government Efficiency. He predicts that additional tariffs could drive up costs for American consumers and businesses, making them counterproductive in the fight against inflation. However, he suggests that these proposals might serve more as bargaining tools in trade negotiations than actual policy shifts.
A major topic of discussion is artificial intelligence (AI), which Dr. Walden describes as a transformative technology that will shape the economy over the next decade. He explains how AI can analyze vast amounts of data quickly and accurately, revolutionizing industries such as healthcare, education, and finance. While AI offers significant benefits, it also poses challenges for the labor market, particularly for high-skill jobs like accountants, investment advisors, and salespeople. Dr. Walden advocates for updating North Carolina’s educational programs to prepare workers for the jobs of the future, emphasizing the need for lifelong learning and retraining opportunities.
In addition to AI, Dr. Walden touches on other technological and economic trends, including cryptocurrency and the stock market. He likens cryptocurrency to gold as an alternative investment, noting its volatility and limited practical applications. As for the stock market, he highlights its unpredictability, suggesting that index funds are a safer choice for most investors.
The episode concludes with Dr. Walden’s perspective on the global economy, particularly China’s economic struggles. He outlines how China’s shift from a free-market approach to a command economy under Xi Jinping has created significant challenges, potentially opening the door to greater collaboration between the U.S. and China. Closer to home, he predicts that gas prices will continue to decline in 2025, provided domestic energy production increases.
As always, Dr. Walden’s analysis combines deep economic knowledge with practical insights, offering a valuable resource for anyone interested in understanding the forces shaping North Carolina’s and the nation’s economy.
