9 Reasons to Be Optimistic About the Economy
I am a glass is half-full person. As I write this the Phillies are 17 games out of first place but I still believe they can turn things around. My three kids are about to leave for college and I still feel confident that I can pay their tuition bills without going bankrupt. And I just read that there's another Rocky movie on the way (this one centers on Apollo Creed's grandson) and I'm sure it'll be great. Oh, and then there's the economy.
OK, I admit that the jobs report last Friday was disappointing. Only 162,000 jobs were created (more were expected) and most of those were very low paying or part-time. One analysis shows that the country needs at least 208,000 jobs to be created each month for the U.S. to reach pre-recession levels by...2020! And sure, there are other reasons to be gloomy. For example, consumer confidence fell and GDP growth is painful. The economy is growing at a 1.4 percent annualized rate and many experts believe the Fed will soon have to downgrade its 2013 forecast. There are lots of reasons why this is happening, most I believe it's primarily a poor business environment created by fiscal uncertainty in Washington.
No Such Thing as a Perfect Economy
Let's be realistic. Human beings are never satisfied with their lot. This is why most men keep switching channels. And the media is never happy with good news. Look back at the reports during the so-called happy days before 2007 and you'll see plenty of pundits complaining about disappointing data, ruminating over corporate earnings, or warning about the next financial calamity to hit the markets. My dad always used to say that things are never as bad as they seem, nor are they ever as good as they seem.
So I'm not overly bullish. Nor am I down in the dumps. Most of the business people I speak to seem to agree: If you're running a small- or medium-sized business, you will likely have an OK year in 2013. Investment advisor Doug Short says that "the overall picture of the U.S. economy remains one of exasperatingly slow recovery from the Great Recession" but even so, his big four indicators continue to rise. If you're like my small business you're probably making a living. You'd like to be doing better. But it could be a lot worse. In fact, it was a lot worse just a few years ago. And besides, there are a lot of reasons to be optimistic about the economy.
Here are a bunch of specific things that should put you in a better financial mood:
1. The economic situation is pretty normal.
For starters, all major economic indicators are (finally) within a normal range, according to Russell Investments' Economic Dashboard. Mortgage delinquencies are still on the higher side and economic expansion is on the lower side. But market volatility is under control and everything else is "typical." Phew.
2. Housing has recovered.
OK, housing starts took an unexpected downturn last month. But U.S. home prices rose 12.2 percent in May which was the most in six years, and a sign of a stronger housing recovery. Homebuilder optimism is at a seven-year high and the much-watched Architect Billings Index remained positive in June.
3. Manufacturing is showing significant strength.
Orders for long-lasting U.S. factory goods rose in June, bolstered by higher aircraft demand and more business spending. That followed an upwardly revised 5.2 percent gain in May. An early read of July activity is showing that the U.S. factory sector continued to pick up steam this month. And the Institute for Supply Management reported significant jumps in both its July manufacturing and services sector indexes.
4. The car industry is booming.
Ford reported record profits in North America--its second-quarter net income increased 18.5 percent to $1.2 billion, compared to a year ago, and the company is on pace to bring on 3,000 new salaried positions. Not to be outdone, General Motors also reported a $1.2 billion profit.
Employment in the durable goods sector for motor vehicles and parts increased in July to 818,000, the highest employment level in that sector since October 2008. Over the last quarter, employment in the US auto industry has increased at an annual rate of 10.8 percent.
5. The U.S. is now an oil exporter.
U.S. oil production is booming, creating thousands of jobs, cheaper energy, and a more secure future. The number of oil and gas extraction workers increased in July to 196,400, which is the highest number of direct energy-related jobs since January 1988, more than 25 years ago.
6. Recent surveys are reporting optimism.
Price Waterhouse reports that private companies' optimism about the U.S. economy's 12-month outlook rose for the third consecutive quarter. A new National Association for Business Economics survey showed that business activity increased at its fastest pace in a year in the first quarter of 2013, and U.S. chief financial officers are more optimistic about the economy as firms continue to expand globally, according to the latest Bank of America Merrill Lynch CFO Outlook. A report this week from the National Small Business Association shows an improved overall economic outlook for America's small-business owners; 40 percent of small-business owners said today's economy is better off--the highest it has been in five years.
7. Major European trading partners are doing better.
Britain's economy is on the mend and its consumer confidence jumped. French business confidence has increased to a 15-month high. Spain's unemployment fell for the first time in two years. And European stocks are at a nine-week high.
8. Interest and inflation remain at historic lows.
You can say what you want about the Fed. You can wonder just how it'll unwind us from the past few years of unprecedented monetary easing. But don't deny this: interest and inflation are really low (in fact, they are at historical lows) and show no signs of significantly fluctuating, at least in the near term. It's still not easy for many startups to get funding, but if they can, the money is cheap. I just re-financed my mortgage for 3.5 percdent! Of course, in a slow-growth economy there's not much of a demand for financing, but for those looking for money it's a great time to borrow.
9. The stock market is at an all-time high.
Maybe it's because of the Fed's easy money. And because there are not many alternatives for where to sink your cash (unless you enjoy earning .1 percent in your savings account). So maybe that's what's driving the markets. But who cares? Only a few short years ago the Dow was just over 6,000 and now it's past 15,000. A rising stock market makes people feel richer and more confident. It spurs deals. It creates wealth. When customers are feeling richer they're more open to buying my products. That's a good thing.
So stop being so pessimistic. The economy's not doing too bad. And the Phillies can make up those 17 games before October.
GENE MARKS is a columnist, author, and small-business owner. He oversees the Marks Group, a 10-person technology consultancy to small and medium-size businesses. A certified public accountant, Marks has also worked in the entrepreneurial services arm of KPMG. He writes for The New York Times, Forbes, and The Huffington Post.
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