It’s been a long time coming, says Eric Rosengren, president and CEO of the Federal Reserve Bank of Boston, but he’s now “reasonably upbeat” about the U.S. economy and its prospects for 2014.
Speaking at the 2014 Economic Summit & Outlook this week in Hartford, Rosengren said he expects the U.S. economy to grow at about a 3% rate in 2014, a nice step up from the average 2% growth in 2013.
The program was sponsored by Webster Bank and presented by CBIA and the MetroHartford Alliance.
Driving the uptick is greater consumer confidence, a housing market that’s picking up, and the waning impact of fiscal austerity measures such as the sequester, said Rosengren.
Other reasons for his optimistic outlook:
- Jobs are now being added at a clip of about 200,000 a month [with December’s notable exception being announced after the conference]
- Wall Street gains are making people feel “a little wealthier”
And if the economy does manage about a 3% growth rate in 2014, Rosengren added, the nation’s unemployment rate should continue to decline while wages and salaries rise.
Labor Market Concerns
While it’s good that the nation’s unemployment rate is now down to 7.3%, said Rosengren, it doesn’t reflect the thousands of people who have left the job market.
Those who exited the labor market are now not only despairing of finding jobs, their prospects for re-employment also are diminishing because their skills are atrophying.
Other troubling employment factors include the facts that job growth in the prime years of ages 25-54 has been flat over the past several years, and the “quit rate”—people actually leaving one job to take another—has been low.
“People are still very reluctant to switch jobs,” said Rosengren. “There’s still a significant slack in the labor market.”
All of which helps explain why the Federal Reserve Bank, for now, will slowly taper its monetary accommodation policy. The bank just announced that it would reduce its purchasing of long-term securities from $85 billion to $75 billion to spur investments and job creation.
The recovery “still has a long way to go,” he explained. "I wouldn't want to take any dramatic steps at this stage because I don't think the economy warrants it."
From the Fed’s perspective, the U.S. unemployment rate is too high and the inflation rate too low. The bank would like to see a return to a “full employment” unemployment rate of 5.5% and an inflation rate of about 2%.
Still, Rosengren sees a better 2014 in which the positives should outweigh the negatives and the U.S economy should rebound more strongly.
Also speaking at the conference were John Lundgren, chairman and CEO of Stanley Black & Decker, and Dr. Nicholas Perna, economic advisor to Webster Bank. Participating in a panel discussion on advanced manufacturing were Dr. Jeffrey Seeman, vice president for research at UCONN; Chris DiPentima, president, Pegasus Manufacturing Inc.; Elliot Ginsberg, president and CEO, Connecticut Center for Advanced Technology Inc., Jason Howey, president, OKAY Industries Inc., and Scott Pleau, vice president of operations, medical devices, Covidien.
For more information, contact CBIA’s Pete Gioia at 860.244.1945 or email@example.com.