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.