In MCM’s ongoing effort to help you, dear reader, know things that will likely greatly affect your work world, here’s a quick review of economic predictions and implications thereof.
Moody Analytics is pretty optimistic about the future of hiring, employment, wage growth and the economy in general.
However that optimism is somewhat dampened by concerns overseas as key players in Europe and the BRICs are entering or going thru recession.
One key data point is the “quits rate”, which is simply the rate at which people are leaving jobs. This is tracking higher, indicating people are moving among employers – according to Moody’s Adam Kamins this presages higher wages as employers have to increase compensation to attract and keep good workers.
Housing starts are a very big part of the recovery, and part of the reason things haven’t gotten better faster. There’s a good bit of pent-up demand, driven in part by millennials living with their parents at historically high rates. Obviously, houses can’t be built without construction workers (at least until 3-D printing of buildings gets a lot more prevalent – which it will…). According to Kamins, we are about 40% below the level we should be for housing construction – which equates to perhaps a couple million workers.
Expect this to be most heavily felt in the west and south, where construction permits have moved up nicely over the last few quarters. Not surprisingly, the west has led in job creation for several years, with the south catching up over the last year.
Internationally, China’s economy is slowing – which isn’t surprising as it has been growing at a breakneck pace for several years. Interestingly, Kamins said (I’m somewhat paraphrasing here) “Fortunately, the Chinese government has pretty tight control over the economy.” With other countries’ economies in a bit of trouble, the dollar is strengthening leading to problems with trade – our stuff is really expensive, while their’s is cheap. In turn this could hurt domestic manufacturing as demand for US goods drops off.
The dollar’s strength hurts tourism too; it’s really cheap to travel abroad for us but the US is a pretty pricey destination for Europeans and Asians these days.