U.S. manufacturing growth has slowed this year as the strength of the U.S. dollar has made it harder to compete and energy sector demand has decreased. With its manufacturing-heavy economy, Milwaukee has felt the impact, said Bill Adams, vice president and senior international economist at The PNC Financial Services Group.
While the strong dollar has helped the services sector, it has hurt the manufacturing sector, Adams told those gathered at a 2016 Global Economic Outlook event hosted by the company at the University Club of Milwaukee Tuesday.
“We’re seeing slightly slower growth in this market because of the weight of manufacturing in the regional economy,” he said. “As goes manufacturing, there goes the upper Midwest.”
Adams also provided national and global economic insight.
National job growth moderated in 2015, but remains fast enough to lower the unemployment rate, Adams said. Weekly unemployment claims are at their lowest since the early 1970s.
“The U.S. jobs market is getting back to a more normal state,” he said.
As the labor market tightens, it has fueled accelerated wage growth. Higher wages, combined with low interest rates and low housing prices, have driven growth in the housing market.
While the U.S. economy has recovered nicely, other global economies are not doing as well, and some have implemented aggressive quantitative easing programs, which is one reason the U.S. Federal Reserve has continued to hold interest rates near zero, Adams said. But that could change soon.
“It doesn’t make sense to have the short-term interest rates at 0 if the unemployment rate is under 5 percent, which it could be soon,” he said.
Adams predicted three rate hikes in 2016, bringing rates to about 1 percent by the end of next year.
The recent terrorist attacks in Paris and the Syrian refugee crisis could impact the U.S. economy, but indications so far have been that it won’t be drastic, he said.
“Obviously, it’s a humanitarian tragedy, and it could change the U.S.’ military strategy,” Adams said, but in one indicator, oil prices have remained low. “It looks like the economic impact, at least here in the U.S., would be limited.”