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Better times ahead for economy?

By Mark Hamrick ·
Monday, December 30, 2013
Posted: 12 pm ET

If the U.S. economy were a racehorse, it closed the 2013 race strongly. The outlook improved as the year moved along, providing reasons for optimism in 2014.

We can check off a number of positives from recent weeks:

1. The stock market rallied to record highs.

2. Hiring accelerated and the unemployment rate fell to 7 percent.

3. Growth in the fall quarter was revised up to more than 4 percent.

4. Congress agreed on a budget to avoid partial government shutdowns in the year ahead.

Are there prospects for further improvement?  Yes, says Doug Handler, chief U.S. economist at IHS Global Insight. By the end of the coming year, he says the unemployment rate will likely be in the "low sixes." The November jobless rate declined to 7 percent.

As for interest rates, Handler says, "I think they will be rising." That will "affect mortgage rates to some extent and other consumer borrowing, as well." Still, he says, "compared with the improvement in the economic fundamentals, we see that increase in rates, really, we expect to be a non-factor." In other words, if the rest of the economy is doing well, a small rise in rates shouldn't be a big deal. For example, if the average for 30-year fixed-rate mortgages were to rise to 5.5 percent, Handler says "that will keep the housing sector growing, but certainly not at the current rate."

What about the risks?  Handler reminds us that Congress will need to raise the debt ceiling early in the year. He says the nation's trading partners must have improvement in their economies if the U.S. is to do well, noting Canada, Mexico and China, in particular. "We think that will happen. But that is not 100 percent certain, as well," says Handler.

What do you expect for the U.S. economy in the coming year? What worries you most?

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Economy to roar in 2014?

Better U.S. growth is expected in the year ahead. But what does that mean for jobs and interest rates?


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