PNC Chief Economist Predicts Strong 2015
With 2014 ending on a financial high note, PNC Financial Services Chief Economist Stuart Hoffman expects to see a strong 2015.
Hoffman predicts that by the end of 2015 there will be 2.75 million new jobs in the United States, unemployment will dip to 5.2 percent and wages will climb 2.5 percent.
“We think the drop in oil process is a big win for the U.S. economy,” Hoffman said. “And we think that is a real big win for consumers.”
That same oil price dip could mean a slowdown in the natural gas industry in the Pittsburgh region, but “Fortunately we have a pretty good high-tech sector and finances, we think construction will be doing better in southwestern Pennsylvania,” said Hoffman, who also predicts gains in financial services and business services.
The energy sector is responsible for about 5 percent of the Pittsburgh region’s jobs.
“We are not a healed job market yet, we have further to go and it may take a couple of years, but the progress is undeniable,” said Hoffman, who notes most of the job gains are in sectors that pay living wages.
The Pittsburgh region is predicted by Hoffman to see 1.25 to 1.5 percent job growth in 2015, with unemployment rates falling to 5 to 5.5 percent with 10-12,000 new jobs being created.
Hoffman is also predicting a Gross Domestic Product growth of 3.25 percent in 2015. That compares to an estimated 2.5 percent GDP growth in 2014.
Pittsburgh-based PNC thinks the stock market will stay strong in the coming year. However Hoffman warns there could be a 10 percent correction or dip in the major market indices but it will not last.
“I would say unless there is a fundamental negative change in the economy any corrections that come our way in 2015 might not come and go as quickly [as the 2014 correction] but likewise don’t panic and if you have a little bit of extra cash maybe put it to work in the broad diversified market,” Hoffman suggested.
Economists are closely watching what might happen to interest rates. Hoffman is predicting an uptick in rates in mid 2015, which would be the first time the Federal Reserve has raised rates since late 2006.
“It will be very slow,” Hoffman said. “It will kind of take off like a balloon rather than a rocket.”
Short-term interests rates are predicted to increase .5 to 1 percent. Longer-term rates will increase as well, with 30-year mortgages hitting 4.25 or 4.5 percent. Hoffman thinks rates will trend upward for the next three or four years.
Hoffman believes home sales regionally will be up in 2015 and so will the sale prices. That will play into something PNC calls the Household Economic Stress Index. It combines unemployment, inflation and home prices to measure how financially secure families are in a given region. The lower the number the less stress the average household is facing.
The number is ending 2014 at a very low rate, and Hoffman said it might start to creep up a bit but will still indicate that most households in the area are doing well financially.
PNC also surveys small business owners in the area to find out what they are predicting for their own companies. The most recent survey shows they are “fairly positive” about the economy.
“They are planning an hiring more people … they were planning on paying more wages and doing more investing,” Hoffman said.
Nineteen percent of those surveyed in the Pittsburgh region say they will make new hires, 30 percent plan to increase pay and 78 percent are generally optimistic about their own company’s future.
A new survey will be sent out in early 2015.