For someone who follows news stories closely it can be easy to get depressed with the state of the world. There are constant stories about conflicts in various regions. In addition we hear reports about company layoffs, the plight of the unemployed and how high the costs of various products and services are.
Despite all the doom and gloom that is prevalent, there are a number of things that are getting better. For most people their employment situation is the most important factor in their financial well-being.
Our unemployment rate both nationally and in California is higher than historical averages. However, it has been coming down for several years, and should continue to drop further next year. In addition, new jobless claims are near long term averages, and we have been experiencing steady and moderate job growth.
For those who have a retirement plan at work, or their own IRA, this has been a very good year. With the stock market up more than 25 percent this year, as measured by the S&P 500, having only 50 percent of your money in stocks would have generated returns in excess of 10 percent.
The strong stock market has also been good for the state of California. With another tech boom occurring in Silicon Valley, this has resulted in substantial revenue occurring from capital gains and stock options. This source of extra revenue should last through at least next year.
Those who are homeowners are also experiencing a good year. Prices in our local market are generally up more than 10 percent in most neighborhoods. Foreclosure activity is also down significantly. Even for homeowners who bought near the prior peak during the 2005-2007 period, prices have now recovered close to those original levels.
Many people tend to focus on the high cost of living. However, overall inflation remains quite low, generally around 2 percent. We are seeing gasoline prices at their lowest level of the year, which provides an extra source of purchasing power.
Certainly there have been places where inflation has exceeded these 2 percent levels, notably in college tuition and healthcare. In these two areas there is a wide variation in people’s overall spending, so it is difficult to categorize the overall impact for most individuals.
For many, wage gains have barely kept up with even relatively low inflation levels. However, for those who own homes or have investment accounts that is providing a positive offset.
Readings on consumer confidence have generally been lower than historical averages. Still if you look at consumer spending, especially regarding automobile purchases, it has held up quite well. In essence the behavior of consumers has been somewhat different than what is being said in surveys.
Looking internationally, it is always easy to focus on wars and disasters. However, in any given year there has always been some area of the world that is experiencing unusual difficulty. Overall the global economy is improving, and there are less people in severe poverty than there were in recent years. This international growth has also opened up new investment opportunities.
Of course not everyone has seen improvement in their financial life this year. However, for most I think when you step back and try to put things in perspective, things aren’t too bad, and we have plenty to be thankful for.
Allen Wisniewski has been involved in finance for more than two decades. He lives in Culver City with his family.
