The Chief Economist for PNC Financial sees no reason to alter a forecast for modest growth in the Delaware economy.
Stuart Hoffman told those attending an annual economic and investment update breakfast sponsored by PNC that the recent downturn in the stock market should not affect the overall outlook for the state.
Hoffman was joined at the breakfast at the Wilmington Country Club on Tuesday morning by E. William Stone, chief investment analyst for PNC, which has a sizable banking and wealth management presence in Delaware.
PNC released the forecast on the Delaware economy last month. It is one of nearly three dozen issued for various regions in the PNC footprint, which now includes much of the eastern half of the U.S. Click here for a story on the Delaware forecast, which includes Kent and New Castle County.
PNC economist Kurt Rankin. also offered the following analysis of the Sussex County economy. The area was not included in the August forecast.
“Sussex County’s job market is stable, but still has work to do toward re-establishing its long-term equilibrium. The size of the local labor force is 2.4 percent above its pre-recession peak. This compares with a national figure of 1.3 percent versus pre-recession conditions. Job creation in Sussex County will have to remain strong through 2016 in order to fully rebalance local labor market conditions. An unemployment rate below 4% is not unheard of, but Sussex County’s unemployment rate has remained near 5 percent since late 2014.”
Hoffman, who is widely quoted on media outlets like cable network CNBC, said his forecasts outlined at last year’s breakfast “mostly played out.”
The big exception was the decision by the Federal Reserve to not raise interest rates, Hoffman noted. The PNC economist called the move a mistake, but added that he “did not have a vote.”
Reasons for the decision to not start he sees as a four-year process of gradually raising interest rates to historic levels are unclear. Hoffman speculated that concern with emerging economies, such as China and the possibility of a government shutdown, could have been factors.
The Fed could begin to increase rates in December, Hoffman said. The PNC economist said he remains more bullish than the Federal Reserve, which has dialed back its forecasts on economic growth.
Hoffman emphasized that Delaware was a little late in catching up to the national economy in terms of job growth but did finally regain the jobs lost in the recession of 2009.
Hoffman said workers in Delaware and other areas could be “on the verge” of seeing bigger paychecks as some employers report difficulty in filling positions.
The state’s unemployment rate of 4.9 percent in August mirrors that national figure. That alignment should continue into 2015, with the rate perhaps dropping a couple of percentage points as job growth continues at a rate of 2 percent.
The nationwide 5 percent jobless figure does not reflect continued underemployment from people working part-time jobs or those who have dropped out of the workforce for various reasons, Hoffman said. He added that talk of the jobless rate actually being 10 percent is not backed up by statistics showing continued growth in jobs here and elsewhere.
In regard to the downturn on Wall Street, Hoffman said the market is essentially unchanged from a year ago, although we did see the long-expected 10 percent correct this month.
Hoffman quickly added that PNC does not believe this is a sign of a coming bear market and did not rule out the market recouping those losses.
The reason for the optimism is continued spending by American consumers and a decline in gasoline prices The drop in prices quickly hit energy stocks.
However, Hoffman noted that it takes longer for the effects of lower fuel prices to make their way into areas such as transportation costs.
Bright spots in the economy include real estate (residential and commercial) as well as construction. Manufacturing activity in Delaware and elsewhere is expected to remain sluggish, due in part to a strong dollar and weaker overseas economies.
Stone said PNC did get out in front of investors in providing a heads up on the possibility of market correction.
He advised against making rash selling decisions that could lock in losses.
At the same time, Stone suggested taking a close look at investments to see if “rebalancing” is needed. The long-running bull market may have led some investors to not take a close enough look at their holdings, he concluded.
The breakfast featured a question and answer period that did not seem to indicate that PNC friends and customers were overly concerned about the market. It was noted at the event that it was likely to be another rough day on Wall Street.
