Philadelphia Fed’s Harker: Economy perking along as labor market remains tight
February 13, 2020
This year’s economy will offer more jobs than qualified people to fill them and increased consumer confidence—with bolstered spending to match.
That’s the consensus this week from a blue-ribbon panel presenting the 2020 Economic Forecast at the University of Delaware’s STAR Campus.
Patrick Harker, CEO of the Philadelphia Federal Reserve Bank and former UD president, predicted the economic expansion would continue with a growth rate of about 2 percent and that a growing number of consumers will refinance their homes.
Harker’s remarks were closely watched, since he now is a voting member of the Open Market Committee of the Federal Reserve Board, the body that sets interest rates. All Fed governors participate in discussions leading up to decisions on interest rates.
“With no change in mortgage rates, about 60 percent of borrowers will probably refinance this year, and over the next two years, we would expect an estimated $11.2 billion in added consumption from this refi activity,” Harker said. “On an individual level, an average homeowner would have about $2,000 to spend in extra consumption within the first year after refinancing — a nice lift to almost any budget.”
Harker also noted it’s taking longer for employers to fill jobs in the greater Philly market, which currently ranks 47th out of 50 top markets in hiring speed. He attributes that to higher education requirements than the national norm and encouraged employers to rethink job descriptions to alleviate the tight market and provide greater opportunity to workers who want to move up in the world.
Politics also loomed large in the economic picture. With apologies to native son, former Vice President Joe Biden, a leader at a Washington, D.C. think tank predicted Democrats would come to the national convention without a clear candidate, leaving Sen. Bernie Sanders of Vermont and former New York Mayor Michael Bloomberg to duke it out for the nomination.
Dan Mahaffee, director of policy at the Center for the Study of the Presidency and Congress, forecast the Electoral College will give Trump an edge in November.
“President Trump will be re-elected with two Democratic houses of Congress,” he said.
Mahaffee also predicted the deadly coronavirus sweeping through China would disrupt international supply chains. Other wildcards: troubled relationships between the United States and Iran and North Korea.
That said, a strong dollar will give Americans a boost in trade and travel, said Michael Farr, CEO of the investment firm Farr, Miller & Washington and a frequent contributor to CNBC.
“The dollar is stronger and energy prices are lower,” he said. “Go to Paris, go to Europe. It’s all cheaper.”
He noted that tax breaks are fueling company buybacks of stock and advocated a prudent, informed approach to investing.
“Now more than ever you have to look at balance sheets,” he said. “If your hair is grey like mine, you probably don’t want to buy Tesla.”
The event also reflected prosperity on the home front. When Farr asked members of the audience who is hiring, dozens of hands went up. Kate Lyons, CEO of the Lyons Companies, an event sponsor, said the fourth quarter of 2019 was the best-ever for the Wilmington-based insurance brokerage in profitability and new business.
Other observations from the event include:
- Support for what Harker called “a sensible immigration policy” to provide the workers needed to propel the expanding economy.
- A uniform family leave policy that would encourage working couples to have more children who would ultimately enter the workforce and contribute to the economy and Social Security.
- Revising Social Security requirements to more fairly reflect the life expectancy of Americans, which currently is 81 for women and 76 for men. “How about Social Security at 70?” Farr asked.
- Robert Glen, six-term Delaware state bank commissioner, received the James B. O’Neill Award in Economic Education.
In addition to Lyons, the event was sponsored by the Center for Economic Education & Entrepreneurship and Lerner Business & Economics at UD.
Photo courtesy of the University of Delaware/Kathleen Atkinson