Whether one looks at the country as a whole or at the Cape Fear region, the economic picture for 2014 will likely be a close copy of that for 2013.
That was the consensus of the two economists featured at an economic forecast Thursday morning. The annual event, held at the Wilmington Convention Center, was presented by the Wilmington Chamber of Commerce, McGladrey and Wilmington Business Development.
Richard Kaglic, senior regional economist for the Federal Reserve Bank of Richmond, said there are reasons for optimism as well as caution as the nation enters this new year. The Charlotte-based economist said he feels optimistic about the equity markets, which have taken changes in federal monetary policy in stride and have boosted household wealth for many people.
Weighing on the “caution” side is the fact that wages and personal income levels are not growing robustly, Kaglic said. And while the country – and North Carolina – continues to produce goods, sales of those goods slowed in the latter part of 2013.
“Seventy percent of the economy is stuck at a 2 percent growth rate,” he said.
Kaglic also commented on mixed signals from the housing market, which saw sales of existing homes decline in the second half of 2013, although sales of new homes are up slightly.
On the consumer as well as the commercial realms, government squabbles and uncertainties are having a negative impact, he said. Consumer confidence is down, and businesses are sitting on cash, wary of making capital investments.
“They are muddling along because of uncertainty about government tax and regulatory policies,” he said.
Doubts about those policies are also making companies reluctant to hire more workers – at least full-time, benefits-eligible employees. That factor is keeping employment growth low, although it’s steady, Kaglic said. He and William (Woody) Hall, senior economist at the Swain Center for Business and Economic Services at the University of North Carolina Wilmington, expressed concern about the number of people dropping out of the labor market.
“That is one reason why the unemployment rate is dropping faster than anticipated,” Kaglic said, explaining that it’s normal during a recession for some people who can’t find a job to remove themselves from the market temporarily.
“This time, those people are not flowing back into the job market as it recovers,” he said.
Hall emphasized that employment growth in the Wilmington area has been weak, with some people finding only part-time employment or accepting jobs at a lower pay level.
“Employment growth has been broad based, but there have not been increases in construction and public administration employment,” he said. “In 2007, 30 percent of area employment was connected to real estate development; one in five people had a job in construction. Now it’s about one in 11.”
Among the bright spots in the Cape Fear area economy, Hall pointed to the complete recovery of retail sales, a healthy level of tourism and related spending, resulting in a rebound in the Room Occupancy Tax, increasing container tonnage coming through the Port of Wilmington, and the fact that home foreclosures are down.
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