The President of the Federal Reserve Bank of Philadelphia sees steady economic recovery continuing in 2014.
Charles Plosser spoke Tuesday at the annual economic forecast presented by the University of Delaware and the Lyons Companies, an insurance broker based in the Wilmington area. The briefing was held at Clayton Hall on the UD Newark campus.
Plossser’s remarks are closely watched on the national stage, given the current volatility of financial markets worried that the Federal Reserve will further tighten monetary policy.
Plosser is a member of the Federal Reserve’s powerful Open Policy Committee, which sets monetary policy. Membership on the committee rotates among Federal Reserve presidents.
The text of his speech was released by the Philadelphia Fed and financial reporters were on hand to cover any remarks outside the speech.
Also closely watched at about the same time was Plosser’s boss, and new Federal Reserve Chairman Janet Yellen, who was testifying before a House committee, whose Republican majority has deep misgivings about Fed policies.
On Yellen’s first day on the job, the stock market dropped more than 350 points. On Tuesday, the Dow Jones index rose more than 350 points ahead of her remarks.
Plosser made it clear he personally wants to see a tightening of monetary policy “sooner rather than later,” as the unemployment rates drop.
Plosser said the economy is “on firmer footing” than in previous years, with growth picking up steam in the second half of year. He expects the rate of annual growth of 3 percent. That will move the nation’s unemployment rate to around 6.2 percent from 6.5 percent. Delaware posted a 6.2 percent jobless figure in Delaware.
He said signs point to an increase in manufacturing activity in the Philadelphia Fed’s region, which includes Delaware and portions of Pennsylvania and New Jersey. Plosser said he is hopeful the pace of investment spending will pick up.
The Philadelphia Fed chief said a tough winter is making it more difficult to assess the performance of the economy, adding that recent reports on slower job growth should be “taken with the grain of salt.” He also noted that employment numbers are subject to significant revisions.
Plosser also touched on the issue of lower participation rates in the workforce. That figure has been an issue of concern in Delaware. He said a leading driver of the lower participation rate is the retirement of “baby boomers” who are unlikely to return to the workforce. He is less concerned about discouraged workers returning and driving up the jobless rate.
Turning to the issue of the Federal Reserve buying assets, Plosser said it is his personal opinion that the purchases should end “sooner rather than later.”
“The foot is still on the accelerator,” Plosser said. Plosser later joined in a panel discussion and question and answer period.
Plosser stayed away from the topic of the stock market, which has seen a decline in 2014 after a strong 2013.
Asked about economic forecasting, Plosser said too much attention may be paid to missing” a forecast by a few tenths of a percentage point.
He said most people cannot feel the difference between a 3 percent growth rate and a 2.6 percent figure. Still a shortfall of a few tenths of a percentage Point. growth rates can send financial markets tumbling. Plosser has been accurate in his estimates of economic growth in previous years, fellow panelists at the event noted.
The Philadelphia Fed has been more active in Delaware, with staff touring the state last year and holding an information session on their observations and feedback from Delawareans.
Offering a different perspective was long-time economic forecast speaker, Michael K. Farr, president of Farr, Miller & Washington, LLC and a contributor to cable network CNBC.
Farr remains concerned about the concentration of wealth among the top one percent of the population. Income is not growing elsewhere and Farr is worried about increased borrowing who might not be able to afford the loans and a lower rate of savings.
The forecast featured a high-technology touch, with a Meridia electronic audience response that measured demographics and provided instant responses. More than three-quarters of those attending were from Delaware, according to the responses.
Of those polled, 63 percent were confident about prospects for their business.
A high percentage of those in attendance were working for financial services companies, based on Merida responses.
