Economist gives first optimistic outlook of his career
SALISBURY — An economist with Wells Fargo Securities said delivering his 2014 economic outlook to the Rowan County Chamber of Commerce on Thursday was a new experience.
Not because he had never spoken in public before.
“This is my first time giving a presentation when I feel optimistic about the U.S. economy,” said Michael Wolf, 30. “So this is a little weird.”
The economy is moving in the right direction, said Wolf, who joined Wells Fargo in April after a year with Moody’s Analytics. He predicted the national economy would grow by 2.8 percent in 2014, less than the desired 3 percent to 3.5 percent but more than the 2 percent growth in 2013.
With apologies to elected officials in the audience, Wolf said government is the biggest drag on the economy and will not start contributing until the end of 2015.
While state and national unemployment rates have decreased significantly, the change is due in part to people dropping out of the workforce, Wolf said. There are fewer people employed now than in 2007 in the U.S. and North Carolina, he said.
Wolf, who works in Charlotte, predicted the housing recovery will continue, with home prices and mortgage interest rates increasing at a slow pace.
Wolf noted the federal government’s “massive” budget deficit but said the larger problem is the lack of a plan to do anything about the debt.
“We really need at the federal level just a plan,” he said, whether that includes increasing revenue, cutting spending or both.
Wolf predicted that businesses, which are flush with cash, will hire more workers and buy new equipment in 2014, which could mean additional orders for Rowan County manufacturers. After businesses suffered huge losses during the recession, the average age of industrial equipment is now the oldest it has been since the early 1990s.
Business owners now list taxes and regulation as their top problems, rather than fears about sales, which signals recovery, Wolf said.
Consumer consumption will continue to grow at a modest 2.5-percent pace due to a relatively weak labor market, Wolf said. He noted the recovery has not been evenly distributed between the rich and the poor, and only people who earn more than $100,000 are reporting positive consumer confidence.
The decreasing unemployment rate — down to 6.7 percent in December — overstates the health of the labor market, Wolf said. While the economy has been creating about 180,000 jobs a month for the past two years, much of the perceived improvement in unemployment actually reflects people who have given up looking for a job, he said.
The labor force participation rate continues to fall, down to 62.8 percent in December, according to the U.S. Department of Labor.
“Every economist is baffled by it,” Wolf said. “No one thought the labor force participation rate would drop this far and our unemployment rate would be this low because of it.”
Underemployment continues to be a problem as well, he said. The number of people who would like to work full-time but can only find part-time jobs remained stubbornly high at 7.65 million in December.
In North Carolina, the workforce is 2 percent smaller than in 2007, but Wolf predicted the state would catch up to the nation’s 1 percent smaller workforce in the next six months.
Wolf recommended taking the monthly unemployment rate release with a grain of salt.
“It’s always a little dodgy,” he said.
The economy in North Carolina is expanding, and most industries in the state are doing well, Wolf said.
“There is a lot to be hopeful about in 2014,” he said.
Still, not everyone is experiencing the economic recovery.
David Post, who operates MedExpress Pharmacy and serves on the city’s Planning Board, pointed out that bankruptcies, both personal and corporate, are at almost historic highs.
More than 100 people attended the chamber’s monthly breakfast, held at Trinity Oaks.
Contact reporter Emily Ford at 704-797-4264.