A Holiday Bling Before the Economy Goes Back to Ho Ho Hum
By Zenaida Kotala // December 16, 2014
housing market continues to recover
CENTRAL FLORIDA, USA – Lower gasoline prices and holiday employment opportunities may translate into some economic bling this season, but then its back to the ho hum pace of the recovery in the new year.
“The 2014 holiday shopping season should be an improvement over last year’s disappointing season,” said Sean Snaith, a University of Central Florida economist and director of the Institute for Economic Competitiveness.
“Lower gasoline prices will provide a little extra spending cash this season and should make consumers just a little more jolly, but next year we’ll go right back to the slow pace of recovery.”
In his fourth quarter 2014 U.S. Economic Forecast, Snaith explains that a combination of factors will keep the economy from revving up.
New laws that have yet to be fully implemented, new regulations and the federal bank raising interest rates in 2015 are reasons why the air is “literally being choked out of the economy,” Snaith said.
The Affordable Care Act, which mandates health insurance for all Americans, the Dodd-Frank financial regulatory reform law that oversees banks, and a large number of smaller regulatory actions with significant economic impact will likely make accelerated economic growth unrealistic in 2015.
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But there are some positive outcomes to expect including:
• Real consumer spending is expected to grow an average of 2.6 percent during 2014-2017, while gradually accelerating over this period to 2.8 percent growth in 2017.
• Consumers’ balance sheets continue to heal thanks to the housing market rebound. This and the continued labor market recovery will both support consumption-spending growth, particularly if wage growth sticks around beyond November’s uptick.
• The housing market continues to recover.
• Mortgage credit availability will be critical to the continued recovery. The housing market should steadily improve through 2016 when rising interest rates take their toll and housing starts level off. During 2014-2017, housing starts are expected to rise from 999,137 in 2014 to 1,449,673 in 2017.
• Unemployment rates are expected to fall slightly to 5.7 percent in the next two quarters before drifting up to 5.8 percent the fourth quarter of 2017.
During the holidays many companies hire temporary workers, which helps with employment, but after the shopping season those workers go home. This adds to the underemployment problem.
Underemployment refers to the percent of workers who either can’t find full-time work or have given up the search for work. Currently the U-6 unemployment rate, which reflects underemployment stands at 11.4 percent and has been in double digits for 78 straight months.
“Bottom line: Enjoy the holidays, but one old acquaintance we can’t forget is this sluggish recovery and unfortunately it will be brought to mind soon after the new year,” Snaith said.
Snaith is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.
Snaith also is a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, CNNMoney.com’s survey of leading economists, the Associated Press Economy Survey, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, the Livingston Survey, Bloomberg U.S. Economic Indicator Survey, Reuters U.S. Economy Survey, and USA Today Economic Survey Panel.
The Institute for Economic Competitiveness strives to provide complete, accurate and timely national, state and regional forecasts and economic analyses. Through these analyses, the institute provides valuable resources to the public and private sectors for informed decision-making.