WASHINGTON, DC—“The US economy is currently as strong as it has ever been in this recovery,” writes Kevin Thorpe, chief economist with Cassidy Turley, citing an accelerating economy and the first signs of wage growth. “With the harsh winter behind us, many indicators are revving up again and following the accelerating pattern we observed in the latter half of 2013.”
Thorpe’s report, which projects economic metrics for the next five quarters, projects real GDP growth of at least 3% per quarter through mid-2015, along with quarterly growth in office-using employment exceeding Q1′s total of 145,000 jobs added nationwide. It also projects the Institute for Supply Management‘s Manufacturing Index to exceed 54.0 during those quarters.
That assessment squares with ISM’s own long-term view. In a survey also released on Tuesday, ISM said 68% of respondents from its panel of manufacturing supply management executives predicted their revenues would be 9.1% greater in 2014 compared to last year, 9% expected a 9.6% and 23% anticipated no change. “This yields an overall average expectation of 5.3% percent revenue growth among manufacturers in 2014, which is a notable increase” of 0.9 percentage points in expectations compared to this past December, according to ISM.
Further, Thorpe reports, “The March data revealed huge rebounds in vehicle sales, retail sales, manufacturing output and employment gains, and consensus forecasts show that healthy growth is expected to continue for the rest of 2014, with annual GDP growth still expected to reach 3%.” The forecast reflects economic conditions through the end of the first quarter and therefore does not include April’s stronger-than-expected Bureau of Labor Statistics report of 288,000 jobs added to the domestic economy during the month.
In the non-manufacturing sector, the ISM forecast is slightly less positive, although positive nonetheless. “Fifty-one percent of non-manufacturing purchasing and supply executives expect their 2014 revenues to be greater by 6.7%” than they achieved last year, according to the Temope, AZ-based association. “Overall, respondents currently expect a 2.7% net increase in overall revenues, which is less than the 3.6% increase that was forecast in December 2013,” ISM states.
“Non-manufacturing will continue to grow for the balance of 2014,” says Anthony Nieves, chair of the non-manufacturing committee at ISM. He adds that non-manufacturing companies “continue to operate very efficiently as reflected by the high percentage of capacity utilization.”
Despite the volatility in energy and fuel costs, “supply managers have indicated that overall costs have not been substantially impacted,” Nieves conitnues. He acknowledges that the relatively flat rate of growth for overall employment is a potential impediment; “however, with 17 out of 18 industries forecasting increased revenues, the non-manufacturing sector will continue on the path of steady economic growth.”
Although the unemployment rate remained elevated at 6.7% in March—it declined to 6.3% in April—Thorpe notes that “at this stage in the cycle that high number is more of a function of a skills-to-jobs mismatch than anything else.” Citing BLS statistics, Thorpe writes that there are currently 4.2 million job openings in the economy, “a figure near pre-crisis levels.”
Assuming that the unemployed were able to qualify for all of those jobs, “then the unemployment rate would be around 4%,” writes Thorpe. “Even with that nuance, income growth is already gaining momentum in certain markets where the unemployment rate has fallen below 5%.”