Is the economy really as good as it looks?
Things appear to be looking up for the economy.
On Wednesday the Federal Reserve felt confident enough to begin slowly withdrawing the huge economic stimulus the central bank has been pumping into the economy.
Unemployment is the lowest in five years. Economic growth picked up recently. The housing sector — which got us into this mess in the first place — is bouncing back. Home sales, prices and construction are all on the rise.
Auto sales recently had their strongest growth since 2006. Gas prices have fallen dramatically this year, and the stock market has risen sharply.
And there’s some reason to be hopeful for next year too. The Fed announced a slightly improved outlook for unemployment in 2014.
But things aren’t always as good as they seem.
For many Americans, all the good news in the larger economy isn’t translating over to everyday life.
Only 24% of the public believe economic conditions are improving, while nearly four-in-ten say the nation’s economy is actually getting worse, according to a recent CNN poll. Meanwhile, the Consumer Confidence Index declined two months in a row.
The economy still feels depressing because for many people, it is, said Elise Gould, a labor economist at the liberal-leaning Economic Policy Institute.
“Those at the very top have bounced back, but we have not seen that for people at the middle or at the bottom,” she said.
Stocks may be rising, but only half of Americans actually own them. Sure, companies are flush with cash, but workers’ wages are up only about 1% from a year ago, making it harder for average folks to make ends meet. Union-led strikes by fast-food workers are on the rise.
Then there are those who still cannot find work: About 11 million Americans remain unemployed, and 37% of them have been out of a job for at least six months.
“We continue to be very concerned about the long-term unemployed,” said Secretary of Labor Tom Perez. “Their problems persist.”
And while a recent report on gross domestic product showed the economy picked up pace in the last quarter, the improvement wasn’t nearly as good as it looked and isn’t expected to last.
With the Fed’s decision to begin pulling back on economic support for the economy,mortgage rates will likely continue to rise, making homes less affordable for average Joes.
So yes, there are positive signs in the economy that will hopefully continue.
But will 2014 be the economy’s breakout year? Probably not, says Jim O’Sullivan, chief economist for High Frequency Economics.
“The word ‘break-out’ is too strong,” he said. “We’re four-and-a-half years into the recovery, and if we haven’t got a V-shape recovery now, we’re certainly not going to get one.”
The Federal Reserve predicts the economy will grow 3% next year, marking more solid, but still not robust, improvement ahead.
“The positive signs are great, but we have to see this happen month-after-month for a few years for us to feel like we’ve really dug ourselves out of the Great Recession hole,” Gould said