Enjoying gas prices? How about the cash still in your pocket after each fill-up?
Analysts looking at the year ahead see that leftover stash as an elixir for 2015. Faster growth in jobs and the economy already were in their forecasts. Cheap gas will mean even more spending on other goods and services.
That combination has made economists optimistic enough to say the New Year finally offers the promise of more pay raises, a welcome break from the wage stagnation that has been a stubborn legacy of the Great Recession.
“Talent is going to come at a premium,” said Dan Heckman, investment consultant in US Bank’s wealth management offices in Prairie Village. “Wages will be reflecting that as we move through 2015.”
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In short, our long sluggish recovery, which Americans finally began to feel in 2014, is set to reach consumers in a bigger way this year.
Forecasts for growth have pushed toward 3 percent and higher, breaking free from the 2 percent pace that has dashed hopes since the recovery began more than five years ago.
Bank of the West chief economist Scott Anderson says his healthy 2015 outlook runs not only on cheap gas but also on higher consumer confidence, stronger job growth, better pay, lower debts and greater household wealth.
“The U.S. consumer is in a better place financially and emotionally than we have seen in a long time,” he wrote in December.
A sure sign of better times may come in June. That’s when many economists say the Federal Reserve will find enough confidence to raise interest rates. It would be the first official interest rate increase during Barack Obama’s presidency.
So 2015 forecasts are good, but economists still stop short of offering great expectations. Many new jobs are temporary or part time. Many of the long-term unemployed still are sidelined by a skills mismatch with help-wanted ads.
Investors, who’ve watched the stock market post records repeatedly in 2014, face predictions of a more volatile and ultimately less fulfilling ride in 2015.
There is one thing that could hold us back this year, namely the rest of the world. Outside America, times remain tough. Europe and Asia are looking to us to fuel growth.
“If that doesn’t play out, there’s not much left for the global economy to fall back on in the year ahead,” chief economist Douglas Porter at BMO Capital Markets Economics said in his 2015 forecast titled “Made in the USA?”
Economists expect that Americans’ financial fortunes in the New Year will get a boost from pay raises that should become more common in a long-awaited trickle down from soaring corporate profits.
Wages scored a promising 0.4 percent uptick in November. Similar growth is expected for December.
That indicates most workers will get pay bumps, welcome news after no real wage growth from 2010 to 2013.
According to a CareerBuilder survey published today, 82 percent of employers plan to give raises this year to existing employees. Sixty-four percent intend to offer higher starting pay to new employees.
At the same time, organized labor will push harder to negate two-tier pay scales that pay new employees less than those covered by previous union contracts.
Entry-level and low-wage workers in many states, including Missouri, are getting modest wage bumps in 2015 because of inflation adjustments built into state minimum wage laws. The higher minimums are expected to also prompt raises for better-paid workers to keep them incrementally ahead.
Also, more than 2.7 million federal workers get a wage bump through a 1 percent increase ordered by Obama.
Some pay bumps will come from employers’ efforts to hang onto employees as rivals try to lure them away. According to TAG Employer Services, 54 percent of employers believe that employee recruitment and retention is their most pressing challenge for 2015.
Overall, job growth is expected to continue. Thirty-six percent of U.S. employers plan to add full-time payroll employees — the highest share since 2006 and 12 percentage points higher than in 2014 — according to the CareerBuilder survey.
“The U.S. job market is turning a corner,” said Matt Ferguson, chief executive of the online job-posting site. “Caution gives way to confidence.”
It’s true for employees, too, according to Gallup. In December, 36 percent of Americans said it was a good time to find a “quality” job, the highest percentage since the recession began in December 2007.
But confidence isn’t full blown. Forty-six percent of employers plan to hire temporary or contract workers compared with the 36 percent who intend to hire full-time employees. The strategy gives them greater flexibility to staff up or down.
The bright spot for temps is that they may be first in line for permanent openings. A ramp-up in temp hiring — which hit an all-time high in December — historically forecasts full-time job growth.
The Kansas City area lagged the national hiring upswing in 2014, growing just 0.6 percent compared with national growth of 2 percent. But “we’re moving in the right direction,” said Frank Lenk, chief economist at the Mid America Regional Council.
Economists also note that pay gains for most workers this year will do little to reduce the wealth gap between middle-income and upper-income Americans that expanded during the recovery to its widest on record.
Wage protests, particularly aimed at the fast-food industry, are expected to continue in 2015.
To economist David Rosenberg, cheap oil has lifted an enormous weight off the recovery. But for clients of Gluskin Sheff + Associates Inc., he recently listed other drags: tight credit, paying down debts, new regulations, state and local government cutbacks, federal tax increases.
“I would contend that, along with other impediments,” he wrote, “it was $100-plus per barrel oil prices that were holding back overall economic growth for the past five years.”
Crude had topped $100 as recently as July but has tumbled to $53 a barrel.
Of course, the drop hurts oil producers. Persistently lower prices would moderate the boom in U.S. production. Heckman, at US Bank, notes that will cost us some high-paying oil field jobs, and it will be hard to find similar paychecks in the rest of the economy.
And the catch for consumers — there’s always a catch — is the question of how long the windfall lasts. Sadly, Robert Johnson, writing a less upbeat economic forecast for Morningstar Inc., concluded that “gasoline prices are likely to be considerably higher a year from now.”
The brighter prospects for the economy also are likely to generate a new course at the Federal Reserve. It could end its zero interest rate policy that began in December 2008.
Fed chairwoman Janet Yellen has allowed that April could see the first interest rate bump since June 2006. Forecasters tend to favor June, though September gets some nods, too.
The Fed has promised to be patient and heed signals from the economy. Inflation — which would push the Fed to move more quickly — remains low and will be held down by falling oil prices.
“It’s not like we’re on automatic pilot for the exits here,” said Ethan Harris, co-head of economic research at Bank of America Merrill Lynch Global Research.
Steven Ricchiuto, economist at MSUSA, called a premature rate increase the main risk for the economy and financial markets. He said the Fed should stand pat throughout 2015.
The recovery isn’t as strong as many believe, he said.
“If you raise short-term interest rates, that could blow up in your face,” he said.
The Fed’s actions promise to make Wall Street jittery in a year that forecasters already expect to bring more volatility to investors’ portfolios, which have enjoyed market indexes at record highs.
Doug Ramsey, chief investment officer at Leuthold Group, notes that the Standard & Poor’s 500 index has tripled since March 2009. And he reminds us that the tech bubble was the last time it had tripled in a five-year run.
This isn’t 1999 again, he said, but the market may decide it has gotten pricey and make stocks cheaper.
“It’s a critical time,” Ramsey said. “It could break either way.”