Economist John Mitchell told a Medford audience Monday that a stronger economy should be in store in 2014.
"There are lots of reasons to expect a stronger performance," Mitchell told a Chamber of Medford/Jackson County Forum audience at the Rogue Valley Country Club. "We're not going to have a drag from those increase in taxes and spending cuts we saw in early 2013. "There are lot of things you can point to consistent with the notion of growth."
Among those, he said are stronger household balance sheets, falling energy prices, a revived housing market and state and local governments becoming more financially stable.
Mitchell said the upturn following the Great Recession is closing in on historical norms.
"Net worth, adjusted for households and inflations, is now essentially back to where it was in 2007," said Mitchell, a consultant with M&H Economic Consultants in Portland and former chief economist of U.S. Bancorp.
He said the recent national payroll numbers, showing just 74,000 jobs added in December, rather than the expected 200,000-plus, will likely look better once they are re-examined.
"Remember revisions," Mitchell said. "There is a terrific temptation to overreact to that first estimate that is going to be revised several times. It's an outlier piece of data and I wouldn't be too worried about it."
Workforce participation has fallen, partly due to baby boomers retiring.
"There are some broader worries in there in the sense of prime working-age people, 25 to 55, reducing their participation rate," he said. "It determines how fast we can grow in labor and productivity, what happens there is a big deal."
While conventional mortgage rates rose from 3.35 percent last May to 4.53 percent last week, Mitchell reminded his audience about the other end of the spectrum.
"If you confront me with a possibility of getting an interest rate of 4.53 percent, I'm going to have a grin from ear to ear," he said. "Like many of you, I had an 11 or 12 percent mortgage rate in the early 1980s."
To a generation used to mortgage interest rates below 4 percent, however, it's a shock.
"For 30 years, they lived with falling interest rates," he said. "That's probably over."
Economic growth is expected to rise between 2.8 percent and 3 percent in 2014 with improvement in 2015, he said, while inflation stays below 2 percent.
Asked about energy exports in coming years, Mitchell said technological changes have transformed the playing field.
"The fracking thing is a huge deal," Mitchell said. "You've got dramatic increases in U.S. production of fossil fuels. What that's going to do is change global economics. LNG was supposedly coming to the United States, and now we're likely to be an exporter, putting downward pressure on natural gas prices."
The additional supply will also spur domestic development of production sites for energy and chemical firms
He said it would also reduce trade deficits, increase growth rates and generate jobs in North Dakota, Texas, California and other parts of the country.
"We've talked for years, since the early 1970s, about energy independence," Mitchell said. "It's always been sort of a pipe dream, but it's not a pipe dream, not necessarily for the United States but for North America."
He said later the economic drag from the federal government's sequester and shutdown will fade in the year.
"You're not going to have another shutdown fiasco like you had in the fall," Mitchell said. "That's one of the significant reasons for expecting stronger performance in 2014."