Posts Tagged ‘Economic Trends’
“5 Economic Trends to be Thankful For”
First, I hope everyone had a great Thanksgiving! For those of you who in countries that don’t share our festival of thanks, I hope you had a great Thursday!
Kuddos to Neil Irwin, writing in the Washington Post yesterday. I agree 100% with his list, and wanted to reproduce it here:
1. Household debt is way down. Neil lists this as his first item, but I would suggest it has plusses and minuses to it. On the plus column, we really WERE over-debted as a society. On the minus side, changes household debt carries with it complex implications for the consumption side of GDP, as well as corporate investment (see my prior blog post) and even trade relationships. Nonetheless, this is, on net, a good thing.
2. The cost of servicing that debt is way down — as Neil points out, from 14% of disposable income in 2007 to 10.7% today. Of course, remember that one person’s interest EXPENSE is another person’s interest INCOME. Nonetheless, this constitutes a significant wealth transfer from people who HAVE money back to people who NEED TO BORROW money.
3. Electricity and natural gas prices are falling. It’s hard to find a downside to this one. From last year, consumer natural gas prices are down 8.4%, and electric rates are down 1.2%. I would add to Neil’s analysis that more of this money is staying at home — the U.S. is well on its way to being import-neutral on energy. Of course, this has some geopolitical implications, which we’ll deal with on another day.
4. Businesses aren’t firing people. While unemployment remains high at 7.9%, at least the arrows are pointed in the right direction.
5. Housing is dramatically more affordable. Neil points out that in 2006, the typical homebuyer faced a payment equal to 41% of the average wage of a private-sector worker. Today that’s 26%. This is a combination of both lower house prices (which proportionally lowers down payment requirements) and lower mortgage interest rates.
Congrats to Neil Irwin and the Washington Post for an insightful and timely article!
From a small northwestern observatory... 