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Strong Job Growth Foreshadows Solid Full-Year Economic Growth

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The economy is poised for a pickup in growth in 2015 amid a strengthening employment sector, rising income growth, and declining commodity prices, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group. The labor market has started the year on an upbeat note and is expected to lift consumer confidence, in turn helping to boost consumer spending, manufacturing activity, and the pace of the housing recovery. Economic growth may face some headwinds as a strong U.S. dollar weighs on the trade deficit. However, the economy is expected to climb to 2.9 percent for the full year, up from 2.5 percent growth in 2014.

“Our forecast calls for an increase in economic growth to 2.9 percent for 2015, which is a slight downward adjustment from our prior forecast but solid improvement nonetheless,” says Fannie Mae Chief Economist Doug Duncan. “Although we are beginning this year at a more modest pace compared to the above-trend numbers seen at mid-year 2014, the country’s aggregate income has benefited from the improving labor market, which, combined with low gasoline prices, should help drive higher auto sales and overall consumer spending throughout 2015.”

“We expect housing to shift up a gear in 2015 following the uneven and ultimately disappointing activity last year,” says Duncan. “Our forecast calls for a number of factors, including strong hiring and income growth, stabilized housing affordability, and modestly easing lending standards, to translate into improving housing demand throughout the year. We continue to anticipate that the Fed will begin to hike short-term interest rates later this year, although weak global economic growth and geopolitical headwinds will likely limit the rise in long-term interest rates. We expect total home sales to increase by approximately 6.0 percent for 2015, with total single-family mortgage production climbing to approximately $1.2 trillion. Total single-family mortgage debt outstanding should be relatively flat this year before picking up gradually in 2016 and 2017.”

For more information, visit www.fanniemae.com/progress.

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