MONEY

Looking Beyond the Economic Horizon

by MoneyTips.com

James Cash Penney, who founded JC Penney in 1902, observed years later that, “Growth is never by mere chance; it is the result of forces working together.” This holds as true for the broader US economy as it does for individual companies. For it is the combination of market forces, government policies and macroeconomic trends that shapes our long-term economic outlook and near-term prospects for growth.

As we peer beyond the horizon to boldly — or foolishly— predict economic developments in 2014, let’s stay mindful of this synergistic process. For only by assessing the interplay of multiple factors can we hope to divine the future.

Here, then, are the key forces and trends MoneyTips predicts will combine to make 2014 a very positive year for the US economy:

  • Turning the GDP Growth Corner (at Last!) – The so-called “Great Recession” of late 2007 through mid-2009 was the longest and most severe economic downturn since the Great Depression. But its pernicious impact on our economy lasted far longer — until mid-2013 — as real GDP growth during this six-year period averaged an anemic 1.27%. Fortunately, we now appear to have achieved sustainable growth . In Q3 of 2013 real GDP grew 4.1%, and final Q4 numbers should approach that. According to Mark Zandi, Chief Economist at Moody’s, “We’ve turned the corner. GDP growth in the second half of the year is 4%.” Several factors are driving this improvement, including substantially increased spending by consumers and businesses.So the US economy is entering 2014 with a full head of steam. As Richard Moody of Regions Finance Corp. put it, the US economy entered the fourth quarter with “…more momentum than had been anticipated. And we expect that momentum to build further in 2014.” MoneyTips agrees wholeheartedly. So we’re forecasting real GDP growth at a robust 3.2% rate for the new year.
  • Sustained Job Growth – Over the last five months of 2013, the US economy added an average of nearly 200,000 jobs per month , cutting the unemployment rate to 6.7%, its lowest rate in over five years. Job quality is also rising, as manufacturing and construction job growth reached their highest levels in 18 months. While job growth will likely prove erratic in some months due to weather and other seasonal factors, MoneyTips forecasts a sustained improvement in the overall jobs market, with more than 2 million new jobs to be created in 2014, and the jobless rate dropping to 6.5%.

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