Story by Meredith Wilson
Audio by Bethel Habte
A panel of economic experts exceeded an already optimistic outlook for 2015 with their predictions on gross domestic product, unemployment and the Dow during the Executives’ Club of Chicago’s Annual Economic Outlook Luncheon on Wednesday.
Diane Swonk, chief economist and senior managing director of Mesirow Financial Services expects U.S. GDP to grow by 3 percent, unemployment to be under 5 percent and the Dow to close at 18,499.
David Kelly, managing director and chief global strategist of JP Morgan Funds, places GDP at 3.1 percent, unemployment at 4.9 percent and the Dow at 19,000 by the end of the coming year.
Bob Froelich, director of American Realty Capital and chairman and CEO of the Kane County Cougars, sent a wave of surprise through the audience with his 2015 forecast: GDP will grow by 4.2 percent, unemployment will sink to 4.8 percent and the Dow will close the year at 20,015.
In their annual forecast, the Conference Board predicted moderate growth of 2.6 percent in the United States, while Goldman Sachs set growth at 3.1 percent. The Bureau of Labor Statistics recorded a 1 percent drop in unemployment in 2014 and Kiplinger predicts it will continue to fall to 5.3 percent. The day of the luncheon, the Dow closed at 17,427.
Swonk sees a “tailwind of jobs” behind the American economy.
“Unemployment will be below 5 percent. If it’s higher, it’s only because more people will be participating,” Swonk said.
Kelly sees the gains in employment as dependent on the United States enacting policy changes, particularly of immigration law.
“We always say give us your tired and your hungry. I like the tired and hungry, but I also like the young and the energetic and the bright and the driven. Why don’t we let them in?” Kelly asked to a round of applause.
America is on the brink of wage growth, according to Kelly. The American workforce is becoming less convinced of their replaceability, Kelly explained, and so more employees will have the confidence to ask their bosses for more money.
“It will finally be a recovery of the masses,” Kelly said.
Bob Fealy, who attended the luncheon after recently retiring as president as Duchossois Group, Inc., was equally confident in the American economy.
“The U.S. markets are just the place to be,” Fealy said.
When panel moderator Terry Savage, a financial columnist, polled the audience, about 60 percent believed that the Dow would close the year above 18,500.
Worker confidence can be partially attributed to falling oil prices, Kelly said. Cheaper oil puts more money in people’s pockets, and that’s a “positive” thing.
Swonk also sees the drop in oil prices as a boon to average Americans.
“Falling oil prices will provide a $150 billion to $300 billion, but closer to 300, boost to the economy,” Swonk said.
“I can’t think of anything, anything that has happened since the recession that has been a bigger net positive for working families than falling oil prices,” she said.
A few attendees, including Kevin Hart, an account executive at Wheels Inc., were not as optimistic.
“Everyone knows the shift is around the corner,” Hart said. “You can’t have fake stimulation for this long without some kind of slow pull down.”
According to Froehlich, four things are going to impact the market in 2015: inflation, the end of the housing crisis, mass baby boomer retirement, and robotics.
“The robots are going to be very important in 2015,” Froehlich said, “What happened with computers in 1980 is going to happen with robots in 2015.”
Echoing KPMG chief economist Constance Hunter when she called the U.S. economy “the best house in a bad neighborhood,” panelist noted that an unforeseeable rend of violence abroad could derail the growth they predict in the coming year.
“Tremors abroad can cause tidal waves at home,” Swonk said.