U.S. economy is facing a number of headwinds in 2014, including
tax burdens, structural unemployment and overregulation,
although a strong manufacturing sector coupled with certain
strong end markets is underscoring modest growth, according to
Calling 2014 a year of
"cautious optimism," Daniel C. North, chief economist at
Baltimore-based Euler Hermes, told participants at the Metals
Service Center Institutes Carbon Conference in Phoenix
that global growth is predicted to be around 3.1 percent this
year vs. 2.3 percent in 2013.
"Most of that is from
emerging markets like China and India," he said. "The eurozone
has just come out of a recession and were expecting
growth of around 1 percent there. In the U.S. (market), we
expect to see more anemic and modest growth in 2014, which will
be better than 2013."
North, who predicted
that the U.S. market will grow at around 3 percent in 2104, up
from 1.8 percent in 2013, said that the debt crisis and
unemployment are two top issues plaguing the economy, while
uncertainty in the regulatory environmentincluding costs
that may be incurred by the Affordable Care Act and the
Dodd-Frank Wall Street Reform and Consumer Protection
Actmay hurt industry.
situation ... is still worrisome," he said. "Weve lost a
lot of jobs since the recession, but gained some since. Six
years later, were still 1 million jobs short. As far as
recovery goes for employment, its still pretty dramatic."
In addition, in many industries there is a "skills mismatch" in
education and training.
But not everything in
the economy is bad news. North said that one bright spot is
manufacturing thanks to competitive labor and energy costs.
jobs left these shores, the jobs that held have been very
productive while wage growth has been zero," he said. "Highly
productive American workers combined with zero wage growth
means that we have among the lowest labor costs in the
The wage differential
between a Chinese worker and a U.S. worker was around $17 per
hour in 2006 but is expected to be around $7 per hour next
year, North said. "Were three times more productive than
Chinese workers. And (the wage gap) is not going to be enough
anymore to keep people going to China. Companies wont see
it as enough to forgo the good things you get when staying
home, like quality, lower transportation costs, lower inventory
costs, time to market and keeping technology. This is a very
costs provided by natural gas also is helping U.S. industrial
companies, he said.
And with those
advantages, the U.S. market is looking up, North said.
"Confidence is rising, even though its rising very
slowly, and manufacturing growth looks good."