Another year of growth predicted at UD-Lyons economic forecast

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Remarks at the forecast by St. Louis Federal Reserve President James Bullard are closely followed on Wall Street.(Photo by Doug Rainey_

The U.S. economy should  see another year of growth, thanks in part to low oil prices and interest rates.

That was the view of presenters at the 10th Economic Forecast, sponsored by Lyons Companies and the University of Delaware.

Keynote speaker, James Bullard, president of the Federal Reserve Bank of St. Louis, said the U.S. economy is still seeing a growth that is still high by the standards of recent years.

Bullard says long-term  interest rates remain extremely low, due in large part, to lower rates  aimed at aiding  struggling European economies. That provided a  “tailwind for the U.S. economy,” with little downside, he says.

He also touched on what he described as “oil price shock,” due to a halving of crude oil prices. The positive impact of lower prices at the pump will more than offset cutbacks in oil producing areas in North Dakota and Texas.

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Bullard  sees unemployment dropping to 5 percent this year and dropping further in coming years. Delaware’s jobless rate has dropped to 5.4  percent. He adds that the labor market is improving rapidly, even when other factors are considered, such as the rate of participation in an environment where baby boomers are retiring.

Inflation rates remain low and forecasts over the longer term indicate little change, Bullard says. However, he cautions that predictions of longer term  rates  need to be set aside until more is known about the future course of oil prices.

He does see a need to raise the zero interest rate for Federal Reserve funds, but notes that the Federal Reserves Open Market Committee has stated that it will move slowly in raising rates.

For the second straight year, the event featured interactive technology with audience members given a portable receiver that allowed presenters to “take the temperature” regarding views of the audience regarding the economic outlook.

More than 80 percent of the 500 or so in attendance were from Delaware and the majority were upbeat about the economy. While the run-up in the stock market is expected to lead in a correction, many of attendance did not see a downturn of more than 20 percent.

Long-time Lyons Economic Forecast speaker, Michael Farr, a Washington, D.C. investment manager, author and television contributor, said the nation’s debt remains a problem, even though the brakes have been put on government spending.

Consumers, who represent about 70 percent of the economy, are still struggling with stagnant incomes. Income gains have been concentrated among those in the top 5 percent of income figures, he says.

Aiding the economy are low oil prices and low mortgage rates, Farr notes.

Farr says “we’re making progress, but (it’s) not fabulous.” He adds  that investors “should not bet against America,” while remaining cautious as overall confidence grows.

Jay Bryson, global economist for Wells Fargo, says the decline in oil prices is a mixed blessing for the U.S., with declining investments in the oil and gas industries offset by lower prices at the pump. The lower  prices aid lower income consumers who will spend the extra money, Bryson says.

He also sees the European economy improving, thanks in part to lower oil prices.

Donald Puglisi, a retired UD professor and business consultant, was given the James O’Neill Award for economic education as part of the event.

The event was held at Clayton Hall on the University of Delaware Newark campus.

The event drew reporters from the financial media, including Bloomberg, Reuters  and the Wall Street, Journal.  Remarks by Fed presidents are closely watched on financial markets. Based on Google News searches, Bullard’s comments resulted in more than two dozen stories on business news sites.

 

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