Financial trends bring reasons for gratitude
Historian and best-selling author David McCullough made an insightful comment recently to the effect that Americans like to gripe and always have. He was referring to anxiety expressed by some of the Founding Fathers, shortly after independence from Britain. Leaders at the time worried that the new nation was “just going to hell,” as McCullough related on “60 Minutes.”
Americans do like to gripe, and few areas have engendered as many complaints as the economy and financial backdrop. Certainly there are problems including sluggish growth, stagnant incomes, scarce jobs, rising poverty levels and a staggeringly high federal debt. Just last week, yet another survey came out,
this one from American Research Group, showing that a majority of Americans think the economy is still in a recession or aren’t sure.
The commonly accepted definition of a recession — two or more consecutive quarters of shrinking economic output — indicates the slump ended in 2009. But even if you don’t accept that, here are some reasons to be thankful as the year winds down:
Consumers are getting their acts together.
Many people continue to struggle and the unemployment rate is higher than it should be at this stage of the economic cycle, but a steady flow of statistics shows that Americans and Arizonans have been digging out of holes, paying bills on time and paring debts to more manageable levels.
Some of the most compelling numbers reflect delinquencies. The Mortgage Bankers Association last month reported that the proportion of homeowners 30 or more days past due on a payment is now at a five-year low. Consumers are handling credit-card debts even better, with the number of delinquencies now at a 23-year low, reports the American Bankers Association.
Another telling trend reflects bankruptcy filings, which have dropped substantially across the nation and in Arizona. The bankruptcy picture in the Phoenix metro area and Arizona overall has improved for 33 consecutive months, using year-over-year comparisons.
Many people learned tough debt lessons in recent years and are showing resolve to keep spending under control.
State and local government finances have stabilized.
We’ve had some big municipal bankruptcies lately, including Detroit and Jefferson County, Ala. But for the most part, troubles in those places were triggered by localized factors rather than broader, systemic problems.
One of the remarkable things about the recent recession and rebound is how well municipal finances recovered. Though cities, counties and state governments had to make adjustments to revenue shortfalls, often painful ones, the vast majority made it through to the other side. That’s good news for taxpayers and for investors who own bonds from the tens of thousands of municipal issuers.
No Arizona municipalities of significance defaulted on their debt during the recent slump, and few had even their credit ratings cut. Moody’s Investors Service last week said it changed its outlook from stable to positive on Arizo- na, which means the next step could be an upgrade in the state government’s credit rating, based on an improving economy and other factors. Arizona’s government debt levels including, notably, pension obligations, are below average, Moody’s said. Financial markets are rebounding. You might not have much money in the stock market and perhaps you don’t own a home, but you still probably benefit in some respects from rising asset prices.
Higher stock prices mean more overall wealth in the system, and they reflect strong corporate profit and cash-heavy company balance sheets. Businesses, though wary, are better able to expand, invest and hire than they’ve been in years. Rising real-estate prices provide benefits including more construction jobs, expanding local-government property-tax revenue and even mortgagerefinance opportunities for once-underwater homeowners.
If you do own a house or stock-market assets, perhaps through mutual funds in a 401(k) retirement plan at work, you should be feeling better about your longterm financial situation. Americans generally are not well-prepared for retirement, and they have voiced that anxiety in study after study. But rising financial markets narrow the funding gap on a personal level and ease pressure on taxpayer-backed pension systems, which also continue to recover gradually. Headline risks have receded. Bad news jumps to the forefront and makes people uneasy. Fortunately, several of the glaring problems of just a couple of years ago have receded to the background.
These include the subprime-mortgage morass, the European debt crisis and widespread failures in the U.S. banking system. All of these were once glaring issues, yet hardly anyone talks about them anymore. Even nuclear threats from places like North Korea and Iran don’t seem quite as alarming as they did just months ago. With fewer crises du jour taking center stage in Washington at the moment — over expiring income-tax rules, government shutdowns, the debt ceiling or other issues — everyone can breathe a bit easier on the political front.
Alarming headlines will return, of course, and they will cause anxiety, delay business-expansion plans, cause consumers to spend less and investors to flee toward safety. But for the moment, we have a respite on much of the rhetoric and some of the risks, and that’s something to be thankful for.