Augustine (Gus) Faucher is senior vice president and chief economist of The PNC Financial Services Group, serving as the principal spokesperson on all economic issues for PNC.
Prior to joining PNC as senior macroeconomist in December 2011, Faucher worked for 10 years at Moody’s Analytics (formerly Economy.com), where he was a director and senior economist. He was responsible for running the firm’s computer model of the U.S. economy, edited a monthly publication on the U.S. economic outlook, covered fiscal and monetary policy, and analyzed various regional economies. Previously, he worked for six years at the U.S. Treasury Department, and taught at the University of Illinois at Urbana-Champaign. He was named senior vice president in March 2015, deputy chief economist in February 2016, and to his current role in April 2017.
Faucher is frequently cited in international, national, and regional media outlets including The Wall Street Journal and The New York Times. He has appeared on ABC World News, CBS Evening News, NBC Nightly News and Nightly Business Report, and is regularly featured on CNBC, CNN and Fox Business. In addition, he appears regularly on CBS Radio, NPR and Marketplace.
Webcast Transcript:
Hi, I'm Gus Faucher, Chief Economist for the PNC Financial Services Group with an Economic Outlook for the first quarter of 2025. The U.S. economy is in solid shape in early 2025. In particular, we've seen the Federal Reserve easing monetary policy. Starting in September of 2024, the Fed started to cut the Fed funds rate, their key short term policy rate, and it's down by about a percentage point since then.
It fell from about 5. 25 percent in the fall of 2024 to about 4. 25 percent by early 2025. That being said, the Fed has indicated that they will probably not be cutting rates anytime soon. And in addition, although short term interest rates are coming down in the U.S. economy, long term rates have actually moved up slightly over the past few months because of concerns about higher inflation and potential larger federal government budget deficits.
That being said, the stock market continues to do well, indicating investor confidence about the outlook for the U.S. Economy. We continue to see Increases in stock prices in late 2024 and early 2025 and stock market volatility, although up slightly over the past few months, is still low. This is signaling investor optimism about the outlook for the U.S. economy over the next couple of years. The biggest reason for optimism is that the U.S. Labor market remains very strong. Throughout 2024, the U.S. Economy added about 170, 000 jobs per month on average. This is down somewhat from 2023, but is still very solid and is consistent with underlying growth in the U. S. labor force.
The unemployment rate is slightly above 4%, up a little bit from where it was in 2023, but still historically low. And workers are finding it easy to find a new job, and that's supporting strong wage growth and strong growth in consumer spending. And the U.S. Economy continues to do very well compared to our peers.
Among the G7 nations, the U.S. Has had by far the strongest recovery from the recession caused by the pandemic. Since the pandemic started in early 2020, the U.S. Economy has increased by about 12 percent. These are higher volumes, not higher prices. More goods and services sold within the United States.
That is much better than other G7 economies. The U.S. Has had strong growth in both the labor force, the number of people working and available for work, as well as strong growth in what economists call productivity, output per worker, supported by strong business investment and technologies that make their workers more productive.
And this has allowed the United States to have a much stronger recovery than its peers. The labor market should remain strong throughout 2025. Layoffs, the blue line on the left hand scale, expressed as a share of total employment, are very low historically. Businesses were caught with too few workers during the recovery from the pandemic, and therefore have been reluctant to lay off their workers concerned about being able to find them again as demand remains strong.
That being said, hiring growth has slowed over the past couple of years, as seen in the orange line on the right hand scale. Businesses are not laying off workers, but they're not hiring as much as they were a few years ago. Still, the job market remains very strong, and as long as we have more jobs and rising wages, consumers will continue to increase their spending.
Since consumer spending makes up about two thirds of the U.S. Economy, this means the overall economic expansion should continue throughout 2025. Real GDP, the blue line on the left hand scale, will see a bit slower growth this year, about 2 percent in 2025 compared to 2. 5 percent in 2024. But that's still a very solid number.
We expect that the Federal Reserve will cut the Fed funds rate a couple of times this year, bringing it down a little bit lower to below 4%. And that should support a pickup in economic growth towards the end of 2025 and in 2026. The unemployment rate, right around 4 percent currently, should stay at that level throughout 2025 and 2026, and the labor market will remain historically strong.
Thank you very much for your time. You can see all of our materials at pnc.com/economicreports, and you can follow me on X, formerly Twitter, @gusfaucherpnc.
