Posts by Rick Newman
- The Exchange15 hrs ago
America is rich again — if you add up all the money. But a familiar, unhappy tale is playing out as the nation recovers the household wealth lost from 2007 to 2012.
The total amount of household net worth hit a new record of $80.7 trillion at the end of 2013, according to the Federal Reserve. That’s certainly better than the grueling declines that occurred during the twin housing and stock-market busts. But a deeper look at the numbers shows that the kind of wealth held primarily by the affluent — financial assets — has soared beyond prior levels, while the most common middle-class asset — home equity — is still far below prior highs.
Here are the numbers:
Total amount of financial wealth now: $66.9 trillion. Pre-recession high: $54.3 trillion (third quarter of 2007). Change since then: 23% increase.
Total amount of real-estate wealth now: $22 trillion. Pre-recession high: $25 trillion (fourth quarter of 2006). Change since then: 11.9% decline.
The changes aren’t quite as stark if you adjust for inflation:
Total change in real financial assets from the pre-recession peak: 9.7% increase.
- The Exchange1 day ago
At some rarefied level of the workforce, there’s apparently a “war for talent” in which companies beg workers to sign on, throw money at them and ply them with perks to lure them from competitors.
You might assume this type of offer applies only to a few Mark Zuckerberg types in Silicon Valley. But companies increasingly struggle to fill certain jobs, and a recent survey by Payscale, a compensation-research firm, found 57% of firms say retaining workers will be a top concern in 2014 — up from just 20% saying that in 2010.
“The war for talent is heating up,” says Cathy Shepard, a principal in the talent practice at Mercer. “I see it in specific functions or job categories, where there’s just enough labor and you have to pick off folks from your competitors.”
- Yahoo Finance1 day ago
It now seems pretty clear that late 2012 or early 2013 was the ideal time to purchase a home: Real-estate prices and interest rates were both near record lows, creating an unprecedented buying opportunity for those who could muster a down payment and qualify for a mortgage.
Home affordability is still pretty good by historical standards, but typical buyers are once again being priced out in at least two dozen markets ranging from coastal hotspots to lower-cost inland cities. Three factors are pushing the cost of owning a home beyond the financial reach of ordinary families: Mortgage rates are ticking upwward as the Federal Reserve backs away from the super-easy monetary policy of the past five years. Home prices are rising as the economy recovers. And incomes are barely budging, which means typical families are once again falling behind as they try to bank enough to buy a home.
- The Exchange3 days ago
There’s been an endless amount of speculation on how the Affordable Care Act will affect the real economy. Now we’re finally getting data to displace the guessing.
Consumer spending in January was restrained except for one obvious exception: Spending on healthcare soared. It will take a while for economists to sort out the details, but it seems clear that new enrollees in Obamacare, as the ACA is known, were responsible for a burst of visits to doctors and other healthcare providers.
Spending on services, which increased by an average of .17% per month in 2013, surged by 0.9% in January, or more than five times the 2013 rate. That was the largest monthly jump in spending on services since 1998. Higher costs for energy explain part of the jump, since the cold winter has pushed up utility bills. But Obamacare seems to be a much bigger factor, by far.
Measured another way, spending on healthcare rose by an estimated $29 billion from December to January, or 1.7%, after adjusting for inflation. “The strength in this report was on spending in healthcare,” says economist Chris Christopher of forecasting firm IHS Global Insight. “We’re not seeing strength elsewhere.”
- Daily Ticker3 days ago
Remember when children were an economic asset?
No, you probably don’t, because that was back in the 1800s, when kids labored on farms and in factories and kicked in a few pennies to help cover the family expenses. “The more [children] you had, the better off you were,” Jennifer Senior, author of the new book All Joy and No Fun: The Paradox of Modern Parenthood , explains in the video above. Since most kids produced a positive financial return for their parents, there was a natural incentive to have more.
The financial implications of having kids have completely changed, needless to say. The average middle-class family these days will spend about $295,000 to raise a typical kid, one reason the average mother now gives birth to just two children, down from three in the 1970s and more before that. With fewer kids, parents tend to dote on them more. Children, Senior writes, have become “economically worthless but emotionally priceless.”
- The Exchange5 days ago
The recession that ran from 2007 to 2009 seemed to be good for family cohesion: The divorce rate hit a 40-year low, lots of grown kids moved back in with their parents, and the proportion of people leaving their home town for greener pastures sank to the lowest level since the idyllic 1950s.
The family cohesion, of course, was largely an illusion. What really happened was that people put off big decisions that might have hurt their budgets, no matter how much teeth-gritting it required. The economy is still iffy, as new Fed chair Janet Yellen indicated in recent Congressional testimony, pointing out that jobs are still somewhat scarce and consumer spending hesitant. And the latest data shows the economy grew more slowly at the end of 2013 than previously thought.
Yet more Americans are now making the tough decisions they put off a few years ago, which might look like bad news but actually shows people are feeling more confident about taking risks, busting a career move or going it alone. Here are five offbeat indicators of a growing economy:
- The Exchange6 days ago
Wishful thinkers have been hoping 2014 will be a year of fatter paychecks. After all, corporate profits are strong, unemployment is falling and the economy seems to be recovering for real.
Reality is harsher. While most companies are in good shape, there is still so much slack in the job market that few workers have the leverage to demand much of a pay increase. And while companies are paying up for a few highly skilled employees, most firms still have a relentless cost-cutting mentality. “There’s never been less pressure on employers to give raises at the same time there’s so much pressure to control costs,” says Dave Van De Voort, a principal with Buck Consultants. “Employers have learned they can squeeze more and more out of their workforce.”
- The Exchange7 days ago
Washington may have discovered a new way to shrink the $17 trillion national debt. But you won't hear anybody crowing about it.
Fannie Mae (FNMA) and Freddie Mac (FMCC) — the once-doomed federal housing agencies — have both reported record profits for 2013: $84 billion for Fannie and $45 billion for Freddie, or a total combined profit of $129 billion. Apple (AAPL), by comparison, earned a puny $37 billion in 2013. Exxon Mobil earned (XOM) $33 billion; Walmart (WMT), just $16 billion. In 2008, Exxon edged out Freddie’s $45 billion profit by a couple hundred million dollars, but Fannie’s $84 billion trophy last year appears to be the largest annual profit ever recorded by a company.
- The Exchange8 days ago
The debate seems to be intensifying over whether the U.S. minimum wage is too low, too high or just right. But compared with the minimum wage in other countries, it’s nearly the lowest in the developed world.
Earlier this month, President Obama signed an executive order raising the minimum hourly wage for new federal contractors from $7.25 to $10.10, fulfilling a promise he made in his State of the Union speech to hike pay where he could without the approval of Congress. That move affects a very small percentage of people, but it could generate momentum for a broader effort to do the same thing nationwide, as one bill pending in Congress would do.
- Yahoo Finance9 days ago
The housing recovery ought to be gathering steam, since the economy is improving, the unemployment rate is falling and banks are easing up on lending standards. Yet the opposite seems to be happening, with home price gains flattening out and sales of existing homes--the vast majority of all sales--dipping.
A particularly cold winter is probably responsible for part of the housing chill. But a variety of other factors suggests fewer Americans are interested in owning a home, even if they could muster the down payment and get approved for a mortgage. “We’re just losing our general sense of optimism about housing,” real-estate expert Robert Shiller, a professor at Yale University, said in a recent conference call. “It’s not fun anymore.”