BY PAUL L. DOWEN
From an economic standpoint, 2014, although
not stellar, was definitely a better
year than some of its predecessors. I am
optimistic about the year that lies ahead.
Increased employment and lower energy
costs create an increase in consumer
spending, which drives business and will
in turn increase business spending.
There are soft signals from the Fed that
interest rates may increase slightly also
suggesting a renewed level of confidence
in our economy. While there are many
wild cards in the mix, we are poised for
continued modest growth in 2015.
The recent economic climate has
changed the way many companies do
business. Survival mode forged stronger
companies with more effective management
and controls. Our clients are concentrating
on their core profit centers
and have shed less productive (profitable)
activities. Their focus has shifted
to leaner operations with an eye on
continual improvement. As the economy
grows, business will expand to meet
growing demand, and they will benefit by
increased efficiencies adopted to survive.
The labor market will improve for job
seekers, lowering the unemployment
rate. Employers will not only need to
compete to hire top talent but could
struggle to retain existing employees.
Competition will help drive wage and
benefit increases. Increased levels of
employment and higher wages will result
in higher discretionary income, helping
spur the economy.
Falling crude prices have had many
favorable impacts on our economy. Lower
prices at the pump leave more money for
discretionary purchases which increase
consumer demand. Businesses realize
savings in transportation costs, petroleum
based materials, and overall utility
savings, freeing up capital for investment.
In addition, falling gas prices should help
keep inflation low.
However, prolonged falling prices for
crude could ultimately have a negative
impact on the stock market, as well as
the economy as a whole . I expect our
economy to benefit from lower pump
prices well into 2015, but expect to see
some market correction before year-end
as producers reduce supply when it is no
longer profitable.
The Fed has been subtly indicating by
omitting “considerable time” language
that they will increase interest rates
in the coming year. This increase will
be contingent on continued economic
improvement and the degree of inflation.
For borrowers this increase will
ultimately increase interest expense.
For businesses considering long term
borrowing, the potential increase should
be factored into the planning process.
Increased interest rates are also expected
to fuel foreign investment in the United
States. While the increase will be gradual,
we should anticipate higher interest rates
in the future.
Local issues that will have a direct
impact on our local economy include expansion
of casino gambling, Start-Up NY
tax-free business development zones, and
the New York state hydraulic fracturing
ban. Both the casino and fracking issues
have been contentious, but with the decisions
comes resolution and the ability to
move forward.
The approval of three multi-million
dollar casino projects in New York state
will generate construction jobs in the
area and increased demand for materials
in the coming year. Ultimately the projects
will create permanent hospitality
career opportunities as well as supporting
business opportunities in the surrounding
regions. The casinos will increase tax
and licensing revenues which will help
revitalize the struggling communities
chosen.
Agree or disagree, the ban on hydraulic
fracturing (“fracking”) in New York state
carries economic consequences for this
region. States with fracking have benefited
from both jobs and revenue. New
York’s desire to create more environmentally
conservative growth is admirable,
but will likely not result in any immediate
favorable impact in 2015.
SUNY Adirondack was approved as
tax-free zone through Start-Up NY. This
designation was established to attract
qualified businesses to upstate New York.
While SUNY Adirondack is one of many
approved zones within the state, the
zero tax concept will offer a competitive
advantage over other states in enticing
businesses to relocate to our region.
The impact of the recent national
elections is still a wild card. At this time
last year, I was hopeful that 2013’s last
minute budget deal signaled a beginning
of compromise and good governing. Unfortunately
that wasn’t the case in 2014.
I am again hopeful that our elected
officials will get back to the business of
governing. The upcoming term will prove
interesting for the nation as the new
majority will need to figure out not only
how to compromise with the minority and
the President, but how to build consensus
with it’s own divided constituency to
achieve results.
I am optimistic for 2015, slightly more
optimistic than last year, although I
haven’t yet reached a level which could
be described as excited. All the signs suggest
that 2015 will continue the positive
trends we experienced last year. As the
economy strengthens, the positive effects
will help perpetuate the momentum.