Recently I heard Bill Sherrill speak regarding his economic forecast for 2013 and the economic drivers impacting that forecast. For those of you who don’t know Bill, he is the Founder of the Wolff Center for Entrepreneurship and twice appointed Governor of the U.S. Federal Reserve Board.
In his presentation, Mr. Sherrill presented the best explanations I have heard of the key economic drivers of the economy. According to him there are four key drivers of the economy.
Economic Drivers to Watch
The first is Fiscal Policy. Fiscal Policy is the federal government’s spending and taxation. According to Mr. Sherrill the trend to watch in 2013 is the impact of the Sequester. He predicts that the full impact of the sequester won’t be felt until the second half of 2013.
The second driver is Monetary Policy. Monetary Policy is the Federal Reserve Board. He expect the Federal Reserve Board to keep interest rates low until nationwide unemployment reaches less than 6.5%. That should not occur until mid-2013.
The third driver is the Financial Sector. That driver is primarily Wall Street and Wall Street is on a tear because of low interest rates.
Finally, the fourth driver is Main Street. Main Street is all about jobs. The trend to watch is the change in the number of jobs. It takes 100,000 new jobs each month to just keep up with the population growth; 300,000 new jobs per month would indicate a recovery in the economy and 500,000 new jobs per month would indicate a strong recovery.
Though Mr. Sherrill did not say how the economy would end up for the rest of 2013, he did tell us the four drivers to watch:
- Fiscal Policy – impact of the sequester
- Monetary Policy – unemployment rate
- Financial Sector – stock market
- Main Street – monthly job growth