Fi­nan­cial health of many solid de­spite fall

The China Post - - WORLD BUSINESS - BY JOSH BOAK

Many Amer­i­cans have just ab­sorbed a fi­nan­cial beat­ing — at least as mea­sured by their stock hold­ings. It’s the kind of blow that can feed a sense of help­less­ness about re­tire­ment, col­lege sav­ings and higher-than-ex­pected bills.

But take a look at other gauges of Amer­i­cans’ fi­nan­cial health, and a more nu­anced pic­ture emerges:

Hir­ing and home val­ues are up. Gas prices and mort­gage rates are down. In­fla­tion is low. The pace of lay­offs has dwin­dled.

Add it up, and the ev­i­dence sug­gests that many Amer­i­cans — though cer­tainly not all — are do­ing com­par­a­tively well.

Even the stock-mar­ket swoon can be put in per­spec­tive: Yes, the Stan­dard & Poor’s 500 stock in­dex has tum­bled 7 per­cent over the past week. Since the end of 2008, though, the S&P in­dex has jumped nearly 123 per­cent.

For some, the stock sell-off has been an oc­ca­sion to take a breath, re­call pre­vi­ous down mar­kets that even­tu­ally re­cov­ered and sum­mon the pa­tience to wait for their in­vest­ments to re­bound.

“Hell, yes, I am wor­ried,” said Shan­non Miller, a 27-year-old dig­i­tal con­tent man­ager in St. Louis, Mis­souri. “But what goes down ... will prob­a­bly go back up.”

Here’s a look at key mea­sures of Amer­i­cans’ fi­nan­cial well-be­ing:

Jobs

This is a clear bright spot. Em­ploy­ers have added a to­tal of 11.5 mil­lion jobs over the past 58 months. All that hir­ing has helped cut the un­em­ploy­ment rate to 5.3 per­cent from a peak of 10 per­cent in 2009. And just about ev­ery­one who has a job is get­ting to keep it: Ap­pli­ca­tions for un­em­ploy­ment aid, which re­flect the pace of lay­offs, has hit a 15-year low.

It’s true that the solid hir­ing has yet to pro­vide mean­ing­ful pay raises for most peo­ple. Av­er­age hourly earn­ings are up a sub­par 2.1 per­cent over the past 12 months.

But there’s ev­i­dence that the job mar­ket is be­ing re­tooled for oc­cu­pa­tions and col­lege grad­u­ates who com­mand higher pay. Nearly 44 per­cent of the jobs added dur­ing the re­cov­ery paid a me­dian in­come of more than US$53,000, ac­cord­ing to a re­port from the Georgetown Univer­sity Cen­ter on Ed­u­ca­tion and the Work­force. The econ­omy in­cludes a greater pro­por­tion of these jobs now than in 2008, af­ter hav­ing shed “mid­dlewage jobs” — those that paid US$32,000 to US$53,000.

“The surge in hir­ing is not con­cen­trated in dead-end McJobs,” the re­port con­cluded.

Prices

In­vest­ments

No doubt the latest stock mar­ket plunge has dealt a set­back to many re­tire­ment ac­counts.

But plenty of peo­ple have diver­si­fied their port­fo­lios, as they should, so that stocks don’t rep­re­sent an out­sized por­tion of their hold­ings. And many in­di­vid­u­als have richly prof­ited from the most re­cent bull mar­ket. US$1,000 in­vested in an S&P 500 in­dex fund at the end of 2008 would now be worth US$2,230.

The in­vest­ment com­pany Vanguard re­ported in June that clients with re­tire­ment ac­counts at the end of 2009 had en­joyed a me­dian gain of 137 per­cent over five years, re­flect­ing both mar­ket re­turns and ad­di­tional con­tri­bu­tions.

Con­sider: An As­so­ci­ated Press anal­y­sis last week found that U.S. pres­i­den­tial can­di­date Don­ald Trump would have mul­ti­plied his for­tune more by in­vest­ing in a generic stock in­dex than in heav­ily­branded lux­ury real es­tate.

Gas Prices

at

the pump

haven’t been this low at this time of year since 2004, ac­cord­ing to the Amer­i­can Au­to­mo­bile As­so­ci­a­tion. The av­er­age price for a gallon of reg­u­lar ga­so­line is US$2.58 a gallon, down from US$ 3.44 at this point in 2014. An­a­lysts ex­pect prices to fall fur­ther af­ter sum­mer.

The price de­cline has slowed eco­nomic growth be­cause energy com­pa­nies have slashed their drilling ac­tiv­ity and equip­ment or­ders to man­u­fac­tur­ers.

Yet for in­di­vid­ual Amer­i­cans, fall­ing gas prices are a wind­fall: Fam­i­lies have more cush­ion­ing in their house­hold bud­gets and can di­rect some of their gas sav­ings to pare debt, in­vest or spend.

Home Val­ues

The hous­ing mar­ket has solidly re­cov­ered from the depths of the re­ces­sion, when de­faults on sub­prime mort­gages caused a crush­ing wave of fore­clo­sures and de­pressed prices.

The S& P/ Case- Shiller 20- city home price in­dex is up 5 per­cent from a year ear­lier. And the Na­tional As­so­ci­a­tion of Real­tors said last week that sales of ex­ist­ing homes in July reached an an­nual rate of 5.59 mil­lion, the strong­est pace since 2007.

Home­own­ers are also be­hav­ing more pru­dently: Mort­gage debt re­mains about US$1.3 tril­lion be­low the 2008 peak, ac­cord­ing to the Fed­eral Re­serve.

“While the stock mar­ket can fluc­tu­ate wildly, real es­tate is slow and steady and has re­turned to very healthy con­di­tions,” said Jonathan Smoke, chief economist at Re­al­tor.com.

Mort­gage Rates

The U. S. Fed­eral Re­serve’s low- rate poli­cies have kept mort­gage rates near his­toric lows for much of the re­cov­ery. And even as stocks have tum­bled, it’s be­come cheaper for home­buy­ers to bor­row. The av­er­age 30- year fixed- rate mort­gage dipped to 3.93 per­cent last week from 4.09 per­cent in mid- July, ac­cord­ing to mort­gage firm Fred­die Mac.

AP

Visi­tors to Times Square walk past the ABC news ticker an­nounc­ing a stock re­bound, Tues­day, Aug. 25, in New York. Hir­ing and home val­ues are up. Gas prices and mort­gage rates are down. In­fla­tion is low. The pace of lay­offs has dwin­dled to a trickle. Add it up, and the ev­i­dence sug­gests that many Amer­i­cans, though cer­tainly not all, are far­ing com­par­a­tively well.

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