Economic forecasters have learned in the past few years that there’s never been a better time to hedge their bets.
David Altig, a Federal Reserve Bank of Atlanta officer and regular headliner at the annual Economic Outlook Conference put on by the University of Alabama, has been nothing if not modest over the years regarding his past forecasts. That’s in part, he concedes, because they’ve sometimes missed the mark.
“It’s (generally) a good thing people don’t remember what I say at the start of every year, but we were right this time, ” Altig says of 2014’s forecast, in which he called for 3 percent growth and got roughly that — after a disastrous, weather-ravaged first quarter was followed by better than 4 percent growth later on in the year.
That “growth trajectory, ” Altig said, is what forecasters have been looking for since the understated recovery began in mid-2009. Nevertheless, he’s calling for 3.2 percent growth this year in nationwide Real Gross Domestic Product, while his colleagues at the University of Alabama’s Center for Business and Economic Research predict 2.3 percent growth in the state GNP, up from about 2 percent in 2014.
Fuel prices were the big surprise for 2014, and the Fed’s statistical research concludes that energy-price declines are a near-term drag for the economy but a longer-term boon, Altig told the conference, held in Montgomery. Oil companies face lower profits and potential layoffs, but consumer spending tied to lower gas prices could rise over $100 billion and impact GDP growth by up to 0.4 percent.
How long will gas prices stay down? “Nobody knows, ” he concedes.
Meanwhile, look for interest rates to inch northward of zero come summer. The Fed’s forecast assumptions for 2015 include a federal funds rate of 1 percent by the end of this year and 3.75 percent by 2017.
Other nuggets from this year’s conference, held Jan. 15:
- Look for 5.2 percent unemployment by the end of the year, the so-called “normal” rate. But don’t celebrate, because nobody believes that analytic. Among the reasons: If you work one hour in a week, you’re classified as “employed.” If you stop looking for work for four weeks, you drop off the government’s unemployed roster.
- Pity your poor state legislators, says Ira W. Harvey, a University of Alabama administrator who spoke mainly about state revenues and why they probably won’t be getting better soon. Alabama’s Constitution of 1901 ties legislators’ hands for the most part on raising rates, and the earmarking doesn’t help.
- Harvey theorizes there’s little appetite for tax reform in this year’s Legislature, despite analysis from the Center for Business and Economic Research that shows the state would be better off now if it had passed tax reform in 2003, when it was last on the state ballot.
Text by Dave Helms