A recession in 2025 seems doubtful as the U.S. economy should make a “soft landing” next year, an economic expert told members of the Greater Lehigh Valley Chamber of Commerce at its annual Manufacturing Forum on Thursday morning.
Alex Hino, an investment strategist at Wilmington Trust, said growth likely will slow down in the closing months of 2024 and into the new year.
“Growth in the U.S. has been very strong for the last couple of years,” Hino said, “and we see this slowdown as less of a growth scare, something that could tip the economy into recession, and more normalization back to standard levels of growth for the economy.”
Hino gave the keynote address to the forum, held in a ballroom at the Delta Hotel by Marriott in Upper Macungie Township. Several Lehigh Valley companies were on hand to offer services, and experts made presentations on items including cybersecurity, reputation management and tax advice.
Inflation will continue its downward trajectory, Hino said, as it’s currently around 2.5% after being at 9% a couple of years ago. The Federal Reserve’s actions on interest rates will play a role.
On Monday, Federal Reserve Chair Jerome Powell indicated that more interest rate cuts are in the pipeline, but they would occur at a measured pace to support a still-healthy economy.
“We think that will continue in the fourth quarter and into 2025 as the Fed continues to cooperate,” Hino said. “We also think that the slowdown in inflation has been pretty indicative about how the Fed has talked recently, the recent rhetoric, as well as their moves at the September meeting, cutting interest rates by 50 basis points.”
One trend that has Hino worried is the rise in credit debt, which recently passed pre-COVID levels.
“It’s started to level off just a little bit there,” he said, “but we think that this could be a potential canary in the coal mine scenario, as consumers are facing additional stress from a slower economy and less hiring, as well in the job market.”
One thing that is on the rise is unemployment, which is up nationally to 4.2% and is expected to go up to as much as 4.6% before flattening in 2025. Those numbers don’t necessarily mean that companies are laying off workers.
Instead, the number of workers has increased.
“The increase in the unemployment rate is not being driven by firms shedding workers, which would be concerning and potentially negative of a recessionary condition,” Hino said. “It is actually due to new entrants into the labor force, and certainly you want these new entrants in the labor force to be able to find work.
“The unemployment rate is something that we’ll be watching, something the Fed is certainly watching as well, but at the current level, we don’t think that it would be an overall level of economic stress right now.”
The Lehigh Valley’s unemployment rate was at 3.6% in August, according to Gina Kormanik, director of community planning for the Lehigh Valley Workforce Board. Out of the 13,000 unemployed in the Valley, about 5,000 are collecting unemployment compensation.
She added that there are about 14,000 posted job openings from companies in the Lehigh Valley, which outnumber the number of unemployed.
Wages are rising in the Valley, up 6% over the year.
“Employers are seeing a softening of the job market,” Kormanik said. “There’s some cautious hiring happening right now.”
Morning Call reporter Evan Jones can be reached at [email protected].
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