When Pittsburgh-based PNC Financial Services’ top economist looks forward to 2014, he is doing it with cautious optimism.
“We think we can sustain (good economic growth) for at least one more year and maybe for several beyond that,” said PNC Chief Economist Stuart Hoffman.
Hoffman thinks the economy will see GDP growth inching up and unemployment inching down. By the end of 2014 Hoffman is predicting GDP growth of 2.5 percent and an unemployment rate of about 6.5 percent.
On the local employment front, new jobs in construction will lead the way.
“Housing is going to do well, we have some other construction projects going on including … the PNC new headquarters building and a number of other buildings downtown and in the suburbs,” Hoffman said.
Growth is also expected to be strong in the energy, financial services, businesses services, technology and healthcare sectors with 10,000-12,000 jobs being added to the local economy.
Some of those jobs will be closer to minimum wage, but not all of them, according to Hoffman.
“Many of the other jobs we are talking about in energy and technology and finance, in business services, I think they are good family jobs,” Hoffman said.
On the national front, Hoffman thinks the stock market will do well and will end the year up but it might not get there in a straight line.
“Inevitably we will have a 5 or 10 percent correction for stocks,” said Hoffman. “We are so overdue, and that will scare the heck out of everybody and the really bearish economists and analysts will be all over the place saying, ‘I told you so, I told you so, watch out below,” but we don’t think that a stock decline will last.”
With quantitative easing on the wane Hoffmann predicts bond and interest rates to move, but not in a radical way. He predicts that 30-year mortgages could move from the current 4.25 rates to as much as 5 percent by the end of the year.
Low inflation and nearly steady gas prices will also help the national economy to stay on track, and while the actions of the federal government took center stage in the economic debate last year, it will not do so in 2014.
“There won’t be a government shut down again, there won’t be a tax hike as of the first of the year and I know we are not going to let the government default when we reach the debt ceiling … although Obamacare no doubt will cost and could be a bit of a drag in 2014,” Hoffman said.
Another wild card, according to Hoffman, could be the debate over a hike in the minimum wage. The last time the wage was increased was in 2009. Hoffman said even if it was just adjusted for inflation it would be set at $7.75. The president has set $10.10 as his target rate. A growing number of Pennsylvania lawmakers are also pushing for an increase but as of now there is no consensus as to what the new rate should be.
In February and March, PNC will conduct a survey of local business owners, and Hoffman said he thinks they will have a bit more of a positive outlook and attitude among small business owners with the expectation of more hiring.