DEC 24, 2013 3:37pm ET

Ten Economic Questions for 2014

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While “other important questions,” may surface higher up in the list of top concerns for 2014, a combination of housing and macroeconomic issues appear to stand out to Calculated Risk analysts.

1) Economic growth: “It seems most analysts expect faster economic growth” in 2014 as it is not yet clear whether next year will actually be the best year of the recovery so far. Many related questions remain, they note in a recent report including: Could 2014 be the best year since the 1990s?  Or will 2014 disappoint?

2) Employment: “How many payroll jobs will be added in 2013?” Concerns remain about real and reported employment data. Will there finally be some pickup over the approximately 2.1 to 2.3 million job creation rate of 2011, 2012 and 2013?

3) Unemployment Rate: Will it improve enough? What will the unemployment rate be in December 2014? The unemployment rate is still elevated at 7% in November forcing many rating agencies to re-evaluate among others, the performance of securitized loans. For the last three years Calculated Risk has been “too pessimistic on the unemployment rate” expecting some minor bounce back in the participation rate. “Instead the participation rate continued to decline. Maybe 2014 will be the year the participation rate increases a little, or at least stabilizes.”

4) Inflation: Will the inflation rate rise in 2014?  Will too much inflation be a concern in 2014? Maybe not, analysts note. “The Fed has made it clear they will tolerate a little more inflation, but currently the inflation rate is running well below the Fed's 2% target.”

5) Monetary Policy: Is yet another big concern for many even though it has been well controlled by the Fed so far. It appears the Fed's current plan is to reduce their monthly asset purchases by about $10 billion at each FOMC meeting in 2014 and “put the monthly purchases at close to zero in December 2014.” Will the Fed complete QE3 in 2014? Or will the Fed continue to buy assets in 2015?

6) Residential Investment: How much will it increase in 2014? Residential investment did pick up solidly in 2012 and 2013, but it is worth noting it is “mostly investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales.” Hence, concerns whether these investments will remain at the current historically low level.

7) House Prices: The national repeat sales index as measured by Case-Shiller and CoreLogic will be up about 12% or so in 2013. What will happen with house prices in 2014?

8) Housing Credit: Will we see easier mortgage lending in 2014? Will we see positive mortgage equity withdrawal after six years of negative MEW?

9) Housing Inventory: It appears housing inventory bottomed in early 2013, but will inventory increase in 2014, and, if so, by how much?

10) Downside Risks: Such risks are tough to list and calculate, so the question is an open one. It can be everyone’s guess. What are the downside risks in 2014?

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