Wharton Gladden Holds Annual Market & Economic Forecast
(GREENSBORO, NC) February 7, 2014 – While recent government policy changes have stabilized the economy and the housing market shows slow growth, the Fed will most likely raise interest rates soon, said Mark Vitner, Wells Fargo managing director and senior economist, at a recent presentation.
With the economy still growing at a slower rate than before the 2008 recession, trends in housing markets, job opportunities and GDP growth may represent a “new normal,” Vitner said. But long-term interest rates hovering near zero may not last much longer, he said.
His remarks came to a sold-out audience at the 6th annual Economic and Market Forecast Luncheon, part of a lunch lecture series presented by boutique investment banking firm Wharton Gladden & Company, which was hosted at the Piedmont Club on Jan. 31. Wharton Gladden presents the series of business and market-related talks to clients, partners and friends each month.
“The economy seems to be improving on more fronts than at any time in the recession,” Vitner said at the start of his presentation. “There is still uncertainty, but less uncertainty than there was even a month ago.” Vitner cited the recent budget agreement in Congress as a factor in reducing economic uncertainty, saying that the deal made another federal government shutdown unlikely.
However, the nation’s economy still hasn’t returned to its pre-recession rate of growth. Before the recession began, the GDP averaged a 3.3 percent growth per quarter, but has only averaged 2.2 percent per quarter since, Vitner said.
Moreover, long-term trends indicate that another recession could be on the horizon. “2014, 2015 and 2016 will probably be the best years of the decade” in terms of GDP growth, Vitner said. However, since World War II the average lag between recessions is 59 months, putting the next slowdown in April 2015. But, Vitner pointed out that the last three cycles have been longer, averaging seven and a half years between recessions. “Sometime between 2016 and 2019, we’ll see the next recession,” he said.
Vitner analyzed a shift in the housing market from homeowners to renters, Vitner said, with large numbers of young workers reluctant to take on mortgages on top of student loans while also needing to stay mobile to pursue the best jobs.
“There’s no question that housing is improving, but it’s slow,” Vitner said. “If you look at the number of renters vs. homeowners since the recession, all the growth is in renters. To have stable growth we have to have more homeowners.”
Wharton Gladden Managing Director Algenon Cash also addressed the housing market in his introductory remarks, noting that the Raleigh area currently has 25,000 multi-family units planned. “They won’t all get built, but it gives us an indication of how hot that market is,” Cash said.
Vitner also discussed trends in employment, particularly those that impact North Carolina. For instance, two of the fastest-growing industries are technology and energy. But North Carolina has little involvement in the energy industry, and its technology jobs are focused on computer production, which is the industry’s weakest sector, Vitner said. Meanwhile, the health care field added fewer jobs in 2013 than in 2012 and faced more layoffs in the last two months than any other sector, Vitner said.
Employers are more willing to hire, but are still cautious. “More are hiring workers, more are buying equipment, more are looking to sell their business,” Vitner said. Workforce development is key because “most of the jobs coming back require a completely different skill set than the ones that left,” he continued.
Vitner also cautioned attendees to closely follow overseas trends. China’s economic growth is slowing, while Europe as a whole is showing stable, though slow, growth. “Europe’s recession shaved about a percentage point off of our growth,” he said. If Europe holds steady, “it will be the first time that all the developed economies showed growth at the same time.”
Cash agreed, urging the business leaders at the lunch to watch emerging markets. “Our markets are connected. If they catch a cold, we’ll be sneezing over here, too,” he said.
Bob Sands, the vice president and SBA loan officer at CBC National Bank, attended the lunch to hear Vitner’s insights and network with other business leaders. “It was very informative,” he said. “I always like to see what people are saying about the economy.”
Lou Baldwin of Baldwin Properties has attended the annual forecast each year. “The economic forecast is always very interesting and on the mark,” Baldwin said. “Both Algenon’s and Mark’s comments help folks who attend understand the current economic conditions. I think more than anything what we heard today validated the business community’s feelings. Algenon and Mark back up those feelings with data, and it helps us understand what’s going on.”
About Wharton Gladden & Company:
Wharton Gladden & Company is a uniquely designed boutique investment banking firm that specializes in providing strategic advisory services, underwriting, capital placement and private equity for a diversified client base that includes corporations, real estate developers, financial institutions, investors, municipalities and high net worth individuals.