Will the fiscal fog clear? PLNU Chief Economist Dr. Lynn Reaser joined State of California Controller John Chiang on Nov. 15 at PLNU’s Economic Outlook 2013 to discuss. This timely forum discussed the election’s impact on jobs, housing, recovery, recession, and sequestration. Both Reaser and Chiang provided Invaluable insights through analysis of the local, state, national and global economies in the year ahead, with a special focus on technology, military, and tourism.
Each year, this forum is put on by PLNU’s Fermanian Business & Economic Institute (FBEI) and this year was held at the Liberty Station Conference Center in Point Loma.
Reaser, who was recently named chief economist for the Controller’s Council of Economic Advisors and also recently received the distinction of “most accurate economist” for 2011 by the National Association of Business Economics (NABE), discussed the 2013 outlook for the global, national, and local economies and financial markets. The Honorable John Chiang provided unique insights into the effect of the elections on California’s economy. At this time of heightened anxiety, and as crucial political and financial decisions are being made, Reaser concluded the event with meaningful strategies for business and personal planning and investing for the year ahead.
View the photos and an executive summary of the event below. Also, visit Reaser’s blog at fbei.wordpress.com, where she ruminates on all things economic.
- Americans have made their political choices for the next four years, which will have ripple effects across the globe, throughout the U.S., in California, and in San Diego. How policymakers act on the votes they have received will shape the outlook for the year ahead and beyond.
- Expect the global economy to show better growth in 2013 than in 2012 with a gain in real gross domestic product (GDP) of 3.7% versus 3.3%. Although tensions will persist, Europe’s leaders remain committed to keeping the Eurozone intact. China is adjusting its economy to more tempered gains but will remain a prime driver of global growth.
- Look for U.S. real GDP to grow at an annual rate averaging about 2.7% over the four quarters of 2013 with the support of consumer spending, business investment, and homebuilding. This will be a full percentage point above the growth of 2012 but still short of what would be considered a vigorous performance.
- Congress is expected to act to avoid the automatic spending cuts dictated by the Budget Control Act of 2011 and to also extend most of the tax cuts scheduled to expire at the end of 2012. Public pressure could well lead to agreements in Washington during the coming year to both reduce the path of future deficits and to implement sorely needed tax reform.
- Some improvements in business confidence should lead to more hiring in 2013, with the addition of over 1.9 million jobs. Joblessness will still be a problem, although the unemployment rate is likely to decrease to around 7.5% by the end of the year.
- While excess capacity in the economy will keep a lid of inflation, the drought of 2012 is likely to push food prices higher and the overall consumer price index up by about 2.5% in 2013. Wages will not quite keep up, rising about 2.0%.
- The Federal REserve will remain focused on spurring faster economic growth and lower unemployment. It is likely to continue to keep short-term interest rates close to zero and maintain its Quantitative Easing program through 2013. A pickup in economic activity is projected to push long-term rates up by year-end.
- California’s economy continues to see job gains in construction, finance, professional and business services, trade, health care, and leisure and hospitality. Look for the state to add about 275,000 jobs in 2013, following the estimated 260,000 new positions created in 2012. The year ahead will demand that the state address its structural deficit, reform its tax system, and improve its business climate.
- While sequestration could severely threaten San Diego’s defense industry and research centers, the avoidance of sharp spending cuts should allow the region to continue its expansion. A revival in housing together with the power of San Diego’s key economic drivers—the military, technology, and tourism—should yield a gain of about 29,000 jobs during 2013.