A survey conducted among economists by the Federal Reserve Bank of Philadelphia on economic growth in the United States released on Friday revealed that predictions have been revised upward for the labor market—which means good news for the economy and for housing recovery.
The Philadelphia Fed surveyed 39 economic forecasters, and though their predictions regarding GDP and overall economic growth were little changed from the same survey conducted three months earlier, the forecasts for job gains and labor markets were much improved.
"It's got to be positive for housing, because all your consumer numbers are going in the same direction," said John Silvia, managing director and chief economist with Wells Fargo, who was one of the 39 panelists to participate in the survey. "With more jobs, higher wages, and income growth, you always see an increase in consumer confidence."
The panelists predicted an annual growth rate for the GDP of 2.7 this quarter, 3.0 for the next quarter, and 3.2 percent for 2015 on an annual-average over annual-average basis (0.2 percentage points higher than the previous estimate). Real GDP is expected to grow at an annualized rate of 2.9 percent in 2016 and 2.7 percent in both 2017 and 2018.
The projections for the national unemployment rate for this year and the next two years were below those reported last survey—the panelists predicted this year it will be an annual average of 5.4 percent and will tick downward for the next three years. It is predicted to be below 5.0 percent (4.9 percent) in 2017.
The original estimates for job gains for the next four quarters were revised upward from the survey of three months earlier, however. The panelists said they expected jobs to grow at a rate of 269,300 jobs per month this quarter. Though job gains are predicted to be somewhat less for the next three quarters, they are still forecasted to be above 200,000 per month. Forecasters predict an average monthly job gain of 252,500 for this year and 213,600 for 2016.
"If you're going to get 200,000 jobs per month, you're probably going to get 2.5 to 3 percent GDP," Silvia said. "That's pretty much trend economic growth."
The predictions for the declining unemployment rate for the next three years in the Philadelphia Fed survey came despite a recent announcement from the U.S. Bureau of Labor Statistics (BLS) that the national unemployment rate actually increased slightly from December to January (5.6 percent to 5.7 percent) despite a solid job gain of 257,000 for January. In reaction to that report, Fannie Mae chief economist Doug Duncan said he believed that "stronger hiring and firming income growth will be the primary catalysts for a faster pace of housing recovery in 2015."
Analysts believe that the economy has recovered enough for the Federal Reserve to begin raising interest rates—but they do not believe it will happen overnight. Fed officials have stated they are not in a hurry to raise the rates.
"They won't be very aggressive," Silvia said. "They might raise the rates 50 basis points this year and 50 to 75 points next year."