Over 140 attendees gathered at Maggiano’s banquet hall on Thursday, January 9, 2014 to hear the annual and historically well attended financial forecast. In years past it has been a dismal, gloomy and some might even say depressing march out of that lunch. Past forecasts called for continued dips (or plummets) for the job market and the only growth has been associated with unemployment. The traditional expectation for this luncheon, while always foolishly hopeful that somehow the Titanic would miss the iceberg, was on target: the market stinks and it is going to take some time to rebuild.
However, the January 2013 forecast as recounted by Bill Strauss, a senior economist and economic advisor in the economic research department at the Federal Reserve Bank of Chicago, was not only positive, it was accurate. It is nice to hear that these Federal Reserve guys know what they are talking about. Last year, Bill said that we should expect growth to improve, employment to expand, unemployment to go down and manufacturing to increase at a trend rate of growth. For those of you not understanding “trend rate of growth” (don’t feel bad, I too was one of those), basically: growth is occurring at a historically expected rate (per investopedia.com, that is anywhere between 2%-5% for the United States of America).
In past crashes, cuts or recessions, the country felt that we bounced back faster than we are now. Our bounce-back from the Great 2008 Recession is occurring at the same rate as it historically has. What is different this time around is the intensity of that growth. In the ‘81/’82 and ’74/’75 recessions, the intensity of the growth was in the 5% range for the overall market of the country. In the post 2008 recession, we are maintaining at a solid 2%-2.5% growth. As the Tortoise said to the Hare: "slow and steady wins the race".
Looking forward to 2014, as a nation, we should expect similar growth in the employment and manufacturing markets, unemployment is expected to reduce (down to 6.5%) and the slack in the labor market will start to reduce. We can explain the slack in the labor market simply as: between December 2007 and December 2010 we added over 7.4 million jobs! At the same time we added 8.7 million workers to the workforce (simple math tells me that there were still less jobs available than willing workers).
Please know that I am not a financial analyst, I am not even a Finance major. I am your “everyday man”. I took my one obligatory Econ class in college, showed up wide eyed and bushy-tailed for the 1st class, immediately took a nap during that 1st 50 minute session, showed up for the midterm and the final and confirmed my preconceived notion that this would be my only finance class. Therefore I took comfort in Rick Mattoon’s sole joke for the day, “People become Economists because they are not handsome enough or have enough of a personality to be an Actuary or Accountant.” I appreciate Rick, a senior economist for the Federal Reserve Bank of Chicago focusing on the Midwest region, and giving us that tidbit of humor. Most of all, I appreciate his insight into next year's January 2015 luncheon: the State of Illinois will have their own Fiscal Cliff in 2015…stay tuned it’s going to be a bumpy ride!