2014 Jobs Outlook Upbeat, Says Chase's Anthony Chan
NEW YORK ( TheStreet) -- Chase Chief Economist Anthony Chan tells TheStreet, Inc .
The U.S. unemployment rate recently dropped to 7%, a decline that many argue is skewed to a weaker labor force participation rate. But Chan, who also serves as a managing director JPMorgan Chase, pulls up metrics derived from capital equipment expenditures and the participation rate that underscore the flaw in this line of thinking. The hard numbers, Chan argues, not only illustrate that labor weakness is concentrated in one particular group under temporary labor slack conditions, but that job opportunities could accelerate in the U.S. in the coming year.
The improving economic conditions, Chan says, is in no small part due to the $85 billion a month Federal Reserve bond-buying program. The stimulus has enabled the U.S. economy to gradually regain most of the 8.7 million jobs lost during the financial crisis. In his most recent winter report delving into the 2014 U.S. economic crystal ball, Chan says that signs of an improving U.S. economy are lifting consumer sentiment and stock market values despite the temporary setback from the closure of the federal government.
Chan commented that housing and consumer spending are two areas that have benefited the most from government stimulus. By extension, these two sectors have been important contributors to real gross domestic product growth so far this year.
Heading in 2014, Chan is expecting a calm on the fiscal front, hopeful that next year won't see a repeat of the fiscal drama out of Washington punctuated by the October government shutdown.
With that in mind, Chan told TheStreet over the phone that even as the economy keeps strengthening, the Federal Reserve under Janet Yellen would approach the subject of tapering with balance, flexibility and sensitivity. That should prevent any residual shocks to the market when the action does take place.
Chan points out that signs of that flexible approach in fact are already emerging as outgoing Fed Chair Ben Bernanke hands over the reins to Yellen. Although the jobless rate declined last month to the 7% guidepost Bernanke highlighted as the mark of the conclusion of the central bank's asset purchasing program, the wind-back hasn't even begun yet, highlighting the flexibility with which the Fed can maneuver on its tapering timeline, Chan remarked.
It's an extremely tough balancing act. But given Yellen's easy monetary stance coupled with a deep sensitivity to inflationary risks, and combined with the integral role she has played in shaping the Fed's directive towards transparent communications, the soon-to-be central bank chair should be an expert in carrying out the delicate act of managing market expectations.