Hartford Business Journal

www.HartfordBusiness.com December 22, 2014 • Hartford Business Journal 9 Economy E c o n o m i c F o r E c a s t ExpERTS CORnER U.S. macro outlook positive By Mark Zandi H ere's a summary of what Moody's Analyt- ics' chief economist Mark Zandi forecasts for the U.S. economy in 2015: • Growth should accelerate in 2015 as higher wages spur more spend- ing, construc- tion and investment. • The sharp fall in oil prices will slow ener- gy production but still be a net gain for the economy. • How fast the Federal Reserve raises interest rates, and how markets respond when they do, will be key to the coming year's economic story. • As more Millennials begin forming households, housing demand and con- struction will take off. • The aging population and a slower pace of techno- logical change could weigh on the economy's long-term potential. • Problems in Europe and China have the potential to hinder the U.S. expan- sion in 2015. In general, 2014 was a good year for the U.S. economy, and 2015 should be even better. The most encouraging development of the past year was the rapid decline in jobless- ness. At the current pace of job growth, the U.S. economy is fast approaching full employment. The next critical step in the economy's return to full health is a meaningful acceleration in wage growth, which appears imminent. Most surprising has been the recent slide in oil prices, which, if sustained, will pro- vide a significant boost to growth. The U.S. produces a lot more oil than it used to because of the shale revolu- tion, and falling prices will take a toll on future energy develop- ment, but the country is still a significant net consumer of oil. As consumers put less of what they earn into their gaso- line tanks holiday shopping season will receive a lift. Arguably the biggest disappoint- ment in 2014 was the sideways hous- ing market. The surge in mortgage rates in late 2013 and tight mortgage credit hurt home sales and construction. But mortgage rates have receded and the credit spigot has begun to open. Many Millennials who have delayed forming house- holds will begin to do so soon as the job market improves mak- ing housing a more significant source of growth. This highlights a key threat to the economy in the coming year; namely, the chance that the Federal Reserve will begin to raise interest rates. The Fed needs to engineer short- and long-term rates higher, consistent with the improving job market, in a way that keeps the housing recovery on track. Policy- makers have all the tools they need and have gained valuable experience in communicating with financial markets. Yet the process of normal- izing monetary policy may not be as graceful as we hope. The U.S. is also vulnerable to a softer global economy. With the euro zone and Japan flirting with recession, and Chi- na's growth steadily throttling back, the U.S. trade situation will erode. This will be made worse by the recent surge in the value of the dollar, which is sure to continue. If conditions don't get any worse overseas, the U.S. recovery should hold MAXIMIZE your CAREER and your Our Spectrum of Services www.etshr.com Executive Career Transition Help accelerate your job search and build customized resumes that resonate with your target audience Talent Management Consulting Create effective retention strategies that reduce the risk of losing key talent Executive Coaching Develop individualized action plans and follow-through Career Concierge Land a new job faster, help you explore personal growth opportunities and establish a unique "brand" in the marketplace Phone: 860-231-1857 Email: jmadigan@etshr.com Call or email ETS for an initial consultation West Hartford, CT TALENT Mark Zandi Continued on page 50

• Cover