America Is Back: 4 Economic Predictions for 2015

By Damian Davila on 10 February 2015 0 comments

With 2014 already in the books, everybody is dusting off their crystal balls and predicting what the 2015 U.S. economy will look like.

And the predictions are looking awesome. Here are four that explain why 2015 may be a great year for the U.S.

1. U.S. Minimum Wage Will Be Higher

Americans are overdue for a better hourly rate. At the federal level, the last minimum wage increase was back in July 2009. However, before 2007 the minimum wage had been stuck at $5.15 per hour for 10 years.

Though the labor market has experienced significant recovery in recent years (the unemployment rate is now a much-improved 5.9%), many people are still stuck in low-paying jobs, and demanding better pay. Accordingly, lawmakers have agreed to raise the minimum in several U.S. cities and states in 2015:

  • $12.25: Oakland, CA (March 2, 2015); San Francisco, CA (May 1, 2015)
     
  • $11.00: Seattle, WA (April 1, 2015); Berkeley, CA (October 1, 2015);
     
  • $10.50: Washington, D.C. (July 1, 2015)
     
  • $9.15: Connecticut (January 1, 2015); Vermont (January 1, 2015)
     
  • $9.00: Rhode Island (January 1, 2015); Massachusetts (January 1, 2015); Minnesota (August 1, 2015); New York (December 21, 2015)
     
  • $8.75: Alaska (January 1, 2015); West Virginia (December 31, 2015)
     
  • $8.00: Nebraska (January 1, 2015); Maryland (January 1, 2015)
     
  • $7.25: Federal minimum wage

The years ahead look even better. For example, my home state of Hawaii is set to experience minimum wage increases every year for the next three years: $7.75 (2015), $8.50 (2016), $9.25 (2017), and $10.10 (2018).

2. U.S. Consumer Spending Power Will Be Strong

The fracking revolution has increased oil production, which, combined with lower global energy demand, caused oil prices to decrease about 50% in 2014. This has benefited the average U.S. consumer by providing extra room in their budget. Some places around the country are enjoying gas prices below the $2.00 per gallon mark. However, there are several other goods and services that will also experience price drops. (See also: 8 Buys That Will Be Cheaper in 2015)

The best news is that no matter which U.S. inflation forecast you peruse, price levels are forecast to remain stable in 2015, meaning your dollar will buy just as much (if not more in some cases).

3. U.S. Will Continue to Attract Foreign Investment

In 2015, the U.S. is poised to outperform almost all developed nations. Our country is finally experiencing the benefits from the end of 2009's recession and our GDP is expected to grow 3% for the first time in 10 years. Some of the key drivers of our strong economic growth are:

These and other economic factors create an ideal scenario for America's economy, and economists forecast that our positive economic outlook will attract strong foreign investment in 2015.

4. U.S. Interest Rates Will Go Up

This is the consensus from Wall Street's biggest banks.

And this is not bad news at all. Given our stronger economic growth, the Federal Reserve needs to tighten up interest rates a bit. Otherwise, the economy would get "too hot." Plus, it rewards savers by giving their accounts a boost. According to the economists from those same Wall Street's big banks, here is what we can expect:

  • Short-term rates: Forecasts put this federal funds rate at 1%.
     
  • Long-term rates: The expected rate for longer-term securities, such as a 10-year T-bill, is around 2.5%.
     
  • 30-year fixed mortgages: A separate report predicts that this critical interest rate should be just 4.4% at year-end. This is a slight increase from current 30-year fixed rates averaging between 3.60% to $3.90, depending on location.

2015 is likely to be the year when the U.S. economy's recovery is felt by most average Americans. While not every single economic problem has been solved, these four predictions show us that there is good reason to stay positive.

Do you expect 2015 to be better for the economy — and your pocketbook?

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