The U.S. economy in 2014 finally rose from its sick bed. It’s no mirage this time.
After a gloomy five years, let’s revel in some of the healthier numbers.
Jobs. Jobs. Jobs. Friday’s employment report showed that the economy created 2.95 million million jobs last year, the fifth straight year of gains and the best performance since … 1999. The number of workers finally topped its pre-recession high.
Automakers churned out 16.5 million vehicles, their best year since 2006. Analysts expect that overall retail sales for 2014 logged a 4.5 percent increase.
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Corporate profits remained strong, IPOs surged, and the stock markets made our 401(k) accounts happy, with the S&P 500 rising 13.7 percent including dividends.
The plunge in oil prices provided the most surprising dose of economic medicine. Falling from near $100 a barrel to below $50 will give consumers what amounts to at least a $100 billion a year tax cut.
The Fed felt confident enough to begin winding down its quantitative easing, while interest rates stayed low. Defying pessimists, inflation remained caged and the price of gold fell.
Overall, the U.S. will log about a 3.3 percent increase in the GDP and easily outperformed the economies of many other countries. Thus the dollar strengthened. At the first of 2014, the dollar bought .73 of a euro. Monday it bought .85.
And finally, U.S. budget hawks should note that the deficit as a percentage of GDP is the best since before the recession.
Still, as in any recovery from near death, it’s too soon to declare the economy fully healed and sure to keep improving. A big danger now is that the Fed overestimates the health of the economy and raises interest rates too fast.
Pessimists still have plenty of bad numbers they could use to dim a rosier view. Wage stagnation, the weak labor force participation rate and rising inequality are still problems.
The numbers I find most immediately troubling are housing and business startups.
Sales of new and existing homes last year fell about 3 percent, and we’re still below the pace of single-family home construction and sales that existed even before the housing bubble.
Business startups are at their lowest in 30 years. U.S. businesses are now dying faster than they’re being created.
The overriding reason for the weakness, economists say, is that despite low interest rates, tight credit continues. Bankers just aren’t approving enough loans, even to mortgage applicants with good credit records or entrepreneurs with good ideas and decent collateral.
To help housing, Fannie Mae recently eased lending standards a bit, and the Obama administration last week said it planned to shave insurance premiums on some federally issued mortgages.
Of course, we don’t want to go back to the bubble years, when bankers were figuratively throwing money out their doors. But it’s galling that bankers who got us into this mess by being reckless are now holding back the economy out of cautionary excess.
Other economic observations:
▪ The increase in minimum wages in 25 states next year will provide a chance to see whether the boost hurts businesses and leads to significant layoffs compared with other states.
▪ Remember the angst about cutting back long-term jobless benefits? What happened to those people? Economists should figure out whether they finally began taking less-than-optimum jobs and whether that played a big part in the increase in jobs created last year.
▪ My scary prediction for 2015: Hackers will succeed in taking down a major U.S. financial institution.