WAMC News
6:55 pm
Tue April 29, 2014

Hugh Johnson's Outlook For 2014 And 2015; Forecast Update

A new analysis measures the health of the economy: the report offers an optimistic outlook for the next two years.

Hugh Johnson Advisors has released a forecast update, an outlook for 2014 and 2015, a barometer of financial and labor market trends and an indicator of economic health.  Financial analyst Hugh Johnson sees the national economy expanding, picking up momentum, and growing stronger now through 2015.   "I would expect the economy to continue to expand in 2014. To put a number on it, 2-point-6 per cent. The consensus might be a little bit stronger than that. And for 2015, 3 per cent."

Johnson's forecast for the national economy implies that employment picture will brighten.   "The unemployment rate is currently 6-point-7 percent. It should continue to improve in my judgment towards 6 per cent in 2014 and even below 6 per cent down towards 5-point-5 per cent in 2015. So employment conditions should continue to get better. It's a fairly optimistic forecast. Not wildly optimistic, but at least a positive outlook or forecast for the U.S. economy and employment conditions within that economy."

The HJA forecast implies that nonfarm payrolls will increase 195,000 per month in 2014 and 226,000 per month in 2015.  Dan Moran with NextAct of Colonie believes there are a couple of factors that must be taken into account.   "One, the unemployment rate is getting to be a number that we really can't look at anymore, because the factors behind it make it difficult to gauge - is unemployment actually going down - given that there are fewer people in the labor force, and that's happening consistently. “

Moran says the number to really look at is "new jobs" on a month-to-month basis.   "The forecast of 195,000 to 226,000 per month through 2014-15 seems rather aggressive. If it's true, that would help us recover jobs we lost in the recession. Now are we gonna recover them quick? Likely not. Economists are saying it could be 2023 before we see these jobs all come back."

Moran agrees that overall, the jobs picture is better than it was last year.  Johnson says putting an accurate snapshot together is no easy task.    "You take all the numbers into consideration. Are labor market conditions good or bad? And you'd have to say, 'Well, they're improving, but they're not particularly good or encouraging.' In other words, it's still relatively difficult for individuals to find jobs. That doesn't show up entirely in the unemployment rate. The size of the labor force is declining. Which is troubling, quite frankly."

Excerpt from the HJA Report:

The HJA forecast implies statistically that consumer spending will expand 2.4% in 2014 and 2.6% in 2015. The consensus forecast is that consumer spending will expand 2.6% in 2014 and 2.9% in 2015.

The HJA forecast for the national economy implies that employment will expand 1.7% in 2014 and 2.0% in 2015. This forecast implies that nonfarm payrolls will increase 195,000 per month in 2014 and 226,000 per month in 2015.

The forecast for the national economy implies that the unemployment rate will average 6.2% (Q4 2014) and 5.4% in (Q4 2015). We anticipate that the labor force will grow .7% (2014-2015) and nonfarm payroll employment will grow 1.7% (2014-2015).[2] The average annualized growth rate of the labor force has been 1.1% and the average annualized growth rate of nonfarm payroll employment has been 1.5%. Since additions to employment are likely to be greater than additions to the labor force, the unemployment rate “should” decline.

The consensus forecast is that the unemployment rate will average 6.2% (Q4 2014) and 5.8% in (Q4 2015).

HJA is forecasting that the consumer price index will rise 2.1% in 2014 (Q4/Q4), and 2.3% in 2015 (Q4/Q4). The consensus forecast is that the consumer prices will rise 1.9% in (Q4/Q4) and 2.0% in 2015.

HJA anticipates that the Federal Reserve will begin to raise short-term interest rates in Q3 2015. As a result, we anticipate that short-term interest rates as measured by the yield on a 2-year U.S. Treasury note should average .34% in Q4 2014 and .55% in Q4 2015. The current level is .43%.


[2] Bureau of Labor Statistics; Household Survey.

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