Economist weighs in on capital expenditures and market predictions

Written on May 11, 2016

By Sandy Spieker, CAE, marketing manager, CPE 

Nationwide Senior Economist Ben Ayers balanced the bad with the good during his presentation May 11 at OSCPA’s Business Excellence Symposium. While there are some causes for concern, they are outweighed by the positive indicators. He also offered recommendations for CPAs looking to drive business growth in their organizations. 

“If your organization is considering a capital expenditure, do it now,” Ayers said. “Long-term interest rates will only go up from here.” 

The Federal Reserve has demonstrated a cautious and accommodating approach to interest rates thus far, Ayers said. Inflation is holding steady, but job growth is up. He predicts modest increases in interest rates this year. The first will likely happen between June and September, followed by a second increase sometime in the fourth quarter. 

Job growth in Ohio is much stronger than the last recovery, though it is still below the U.S. average. 

“We’ve seen a lot of discouraged people coming back into the job market,” Ayers said. Even though that increases unemployment numbers, it is a positive sign. 

Overall, Ohio unemployment rates have fallen sharply and are near the U.S. rate. This has caused many companies to hold onto employees because it is tough finding qualified candidates when there aren’t as many people out there looking for new jobs. To help members find qualified staff, OSCPA has launched a brand new Career Center to help connect employers with ideal candidates. The new Career Center features customizable questionnaires that can be weighted to help employers more easily sift through the applicant pool to find the most qualified candidates.

OSCPA member Brendan Fitzgerald, owner of Sustin, Bartell Waldman & Fitzgerald Ltd., asked Ayers about the economic impact of an increase in the minimum wage. Ayers responded that it’s a mixed bag. Minimum wage workers who are able to keep their jobs will certainly benefit and likely spend more. Others will lose their jobs. More expensive labor also encourages companies to explore automation, which could lead to job losses. Ultimately though, Ayers predicts very little impact since minimum wage workers only represent 10% of the workforce. 

Job growth leads to increases and consumer spending and typically an increase in the GDP. However, the GDP in Ohio continues to lag behind the U.S. and is weaker on average than the previous expansion. Fortunately, core growth is strong. Ayers predicts expansion will be low this year, but that there should be a bounce up in 2017. We are nearing a record time of expansion. That means a contraction is likely soon, though Ayers expects any near-term recession to be slight. 

On the stock market front, Ayers predicts continued volatility, with both the upcoming Brexit vote and presidential election contributing to the instability. However, Ayers still predicts the market to ultimately continue its overall trend upward, which bodes well for corporate investments. 



 
 

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