THE ECONOMY: WHAT TO EXPECT IN 2014
updated 11/19/13 09:32 AM
CA, NV and the Nation
What lies ahead for California and Nevada credit unions and the economy in 2014?
Although no one can say for sure, California and Nevada Credit Union Leagues Vice President and Chief Economist Dwight Johnston points to a mixed-but-encouraging picture of how the new year may progress.
He notes how the U.S. economy dodged several bullets in 2013 and managed to rack up another "okay" year—not "good" or "great."
Can California, Nevada, and the nation move beyond "okay" to something better? It depends.
"The federal budget deal—which was not a deal, but a delay—likely means the very end of 2013 and beginning of 2014 will be weaker than if a true deal to avoid any future shutdowns or defaults had been achieved," Johnston said.
However, once the haze clears over Washington, the U.S. economy will rebound and perhaps make up for lost time, he said. There are still some worrisome signs of weakness coming from China and Europe that could foretell a weaker global economy, which would drag on the United States. "But there are no direct threats of this right now."
Even though Nevada's job recovery hasn't been strong, the largest single sector of employment, hospitality and leisure, is not far below pre-recession levels.
Also, the second largest sector, business and professional, is closing in on pre-recession levels.
"The gaping hole in the employment picture in Nevada remains in construction," Johnston said. "That sector represented more than 11 percent of all non-farm payroll jobs at the economy’s peak in 2006 and has dwindled to 4.4 percent of total employment."
What's encouraging is, there are anecdotal reports suggesting a modest recovery in construction is growing more likely, he said.
The outlook for jobs in California is "especially bright" from several perspectives, Johnston said.
More than half the jobs recovered since the turnaround in California came from two sectors: trade and transportation, and business and professional. Those two sectors have performed "very well."
Since those sectors depend greatly on international trade and global growth, "imagine the numbers we could see if the global economy steps up a notch in 2014," Johnston added.
He said that just as important is the fact that these two sectors are the two highest-paying major employment areas as identified by the Bureau of Labor Statistics.
"The construction sector is an area that I believe is on the verge of a more significant recovery," Johnston said. "Fortunately, this sector also ranks high on the income chart." He added that any improvement in the national and global economies beyond "okay" will be felt even more strongly in California due to the state’s sensitivity relative to the bigger picture.
"If the national economy is ready to move to the next level, the California job market is in a perfect position to outperform the rest of the United States," Johnston said.