SIDNEY — Nearly 300 community members came together Tuesday to hear about the outlook of the economy.
At the 29th annual Economic Outlook Luncheon presented by Mutual Federal Savings Bank in partnership with the Sidney-Shelby County Chamber of Commerce and the Sidney-Shelby County YMCA, presenter Dr. Mark Schweitzer, senior vice president of external outreach and regional analytics at the Federal Reserve Bank of Cleveland, spoke about the recovery in the economy since the recession, employment, inflation and interest rates, and gross domestic product (GDP).
“Normal GDP growth is pretty volatile. It goes up it goes down. There’s a fair amount of volatility. When we average that out we’ve been getting about two percent growth. That’s solid, but it’s not as high as we would have had early in our lives,” Schweitzer said.
He posed the question, how confident should I be about the future of this GDP growth? Then he explained some of the things that go into GDP growth; the share of activity in the economy. He talked about government spending, residential investment, consumption, business investment, net exports, and inventories.
Of those, he said, the one’s that have dampened this GDP growth are net exports and inventories.
“Locally, light vehicle sales are very important. These sales are a positive in the outlook for the economy,” Schweitzer said. “It ticked down in March, but it looks like the April numbers will be coming up again. But even at 16.4 million, that’s not a bad number of vehicles to be selling.”
He said reorganization of the auto industry has done well. “Autos are clearly a key positive for our economy and are going to be very large in this region.”
He discussed the slow improvement of the residential sector, and how households have a low debt burden which should be a positive factor for the economic outlook.
Schweitzer touched briefly on international trade and oil and gas, saying when the oil price began to fall and natural gas also fell with it, then we saw a huge reduction of oil and gas activity within the country, which has been one of the main limitations GDP has been pulled down in these recent quarters.
“Now that we have pulled ourselves out of the recession, we’re sort of in a general recovery mode,” he said. “We never know what’s going to happen. There could always be shocks, on both the positives and negative side that can help boost or lower your GDP growth.”
Schweitzer then switched gears to talk about unemployment rate. He said we’ve seen steady steady declines in the unemployment rate. The employment growth regionally is following the nation pattern for the most part.
The employment growth is mainly seen in the metro areas, Columbus, Cincinnati and Cleveland, but Shelby County has seen some growth.
“Shelby County has done very well and now has an unemployment rate that is below five percent. But I think you want to put that in perspective,” Schweitzer said. “What I want to focus on in progress from the recession. In the recession, most counties had unemployment rates that were above eight percent. … Shelby County would have been one of the relatively high unemployment rate counties during the recession.”
At this point we’ve seen tremendous progress where unemployment rates are concerned, he said. It’s far below the 2007 levels, and in the area it is at or below those levels.
“In ways we’ve seen a much tighter labor market, we’ve absorbed a tremendous amount of labor from the unemployment rolls, we still have not seen it showing up as higher wages for workers,” Schweitzer said.
“It’s foreseen that the tighter labor market is going to cause the unemployment rate to get flatter. It’ll still probably decline a bit in the coming years, but it’s not going to go very much lower from where it is today,” he said.
Inflation is currently low. It’s been less than one percent year over year. It spent time being very close to zero, he said. “We all know that’s basically about gasoline prices, but I always like to remind audiences that when you look at the data, those prices are very volatile.”
The decline in energy costs is pulling down the inflation.
“Inflation, as we would expect, is going to pick up this year, because I don’t expect to see oil prices to have the sort of pressure it has over the past couple of years,” Schweitzer said.
Interest rates are expected to end the year just below one percent. This rate is just as important as all other rates in the economy, he said, because it determines the rates everyone gets to borrow at. This low rate is very supportive of growth in the economy.
“We’re looking at an economy where interest rates won’t restrain us on borrowing,” Schweitzer said. “I do see the growth outlook as more of the same steady growth, but you know there is definitely some unevenness about where that growth is occurring.”
