BETHLEHEM, Pa. — One of the nation's most respected economic prognosticators told hundreds of Lehigh Valley business leaders Wednesday to expect the Federal Reserve to try to further slow the economy down before easing up on interest rates this year.
Jay Bryson, chief economist for Wells Fargo’s Corporate and Investment Bank, painted a generally positive picture as the keynote speaker at the Greater Lehigh Valley Chamber of Commerce's Economic Outlook 2024 event.
While businesses are grappling with a tight labor market that's kept wages elevated, the economy overall is generally healthy, he said. Unemployment is near a record low, businesses are still hiring and people are making more than they're spending. While inflation remains above the Fed's 2% target, it's not too far off at about 3.5%, he said.
Barring any out-of-the-blue disasters, Bryson predicted more of the same.
"I think 2024 will be an OK year. I don’t think it will be a banner year, but I don’t think it will be awful," he said.
For over a year, the Fed has been trying to achieve what economists call a "soft landing" — lowering inflation without tanking the economy. By and large, Bryson said, they've succeeded.
'Not out of the woods'
The Fed hasn't hiked interest rates in four months, allowing the economy to slowly lose steam while avoiding a recession. Bryson anticipated things will slow down enough by May where the Fed will lower interest rates. If growth remains strong, the Fed will continue its holding pattern on interest rates, he said.
"We're not out of the woods just quite yet. We've got a few tricky months here we've probably got to get through before we can really breathe a sigh of relief," Bryson said.
If anything, he said, there's a chance the Fed waits a little too long before easing up. Bryson estimated there's a 40% chance the economy enters a recession as policy makers don't want to risk easing up on inflation too soon. During his 2023 address to the chamber, he reminded the audience that high inflation in the 1980s was caused by the Fed jumping the gun on interest rates in the 1970s. They won't make the same mistake twice.
"The Fed is dead serious when they say they want to get inflation down to 2 percent," Bryson said Wednesday.
The labor market
But Bryson had reason to hope that won't occur in 2024. While the exact circumstances differ from case to case, every recession starts when employers are forced to cut workers, Bryson said. The lost income in turns forces consumers to cut spending, which hurts those same businesses, he said.
But national surveys show small business owners are still looking to hire despite the tight market and the high wages it creates. And after working so hard to attract and retain talent, most bosses loathe to lay people off, he said.
"We have 11 colleges in the Lehigh Valley, including two fabulous community colleges. Use them. Hire them. "Nancy Dischinat, Lehigh Valley Workforce Development Board
That message meshed with a presentation by Nancy Dischinat, executive director of the Lehigh Valley Workforce Development Board. Too often, executives come to her whining about the difficulty of finding the right employees, she said.
Unemployment has been under 4% for over two years — the longest stretch of low unemployment in 50 years, Dischinat said. While that's great news for workers, it's forced hiring businesses to wade in the shallow end of the candidate pool, she said.
Local talent
In order to thrive in this environment, businesses need to hone in on what skills are needed in their open positions and whether the candidates can fill those roles, Dischinat said. She hectored the managers in the audience to either shift their hiring process to look for non-traditional candidates with the right skills or coach up their current employees.
"We have 11 colleges in the Lehigh Valley, including two fabulous community colleges," Dischinat said. "Use them. Hire them. Show your workers you want them to increase their skills and are willing to work with them."
About 700 people attended the chamber event, which was held at the ArtsQuest Center at SteelStacks.
