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Excellent News, Smithers

There was a slew of good economic news this morning, starting with reports that state and local pensions gained more than 12 percent in fiscal year 2013, driven by a strong US stock market. This isn’t going to be the new normal; Fed policy has pushed stocks up to record levels. But for now both public pensions and peoples’ 401(k) retirement funds are feeling the relief. This isn’t going to bail out underfunded systems, and it won’t rescue individuals who aren’t saving enough, but it’s always easier to make progress when the markets are working your way.

Household finances are “in their best shape in decades,” as bank card delinquincies fell to their lowest level since 1990 and household net worth hit a record high this year. It looks like households have repaired their finances since the recession, and US consumers now have their debt to asset ratio in better shape. With solid credit, it’s likely that consumer demand can play a larger role in the next stage of the economic recovery. There was good news on the jobs front, as well: the ratio of job seekers to open positions fell to its lowest level in four years, a “positive sign for wages and the broader economy.”

The vital service sector is also picking up steam, expanding in July at its fastest rate since March and up sharply from last month’s three-year low. And as America’s economy continues to strengthen domestically, the trade deficit has fallen to a 40-month low. One of the biggest drivers of this welcome change is a decrease in oil imports, thanks in no small part to shale.

There are still plenty of stubborn problems, of course. According to a recent Gallup poll, Americans remain wary about their prospects, significantly less confident in the US economy now than they were in June. The recovery has a ways to go before millennials and minorities start seeing significant improvements on the jobs front. Too much of the growth we’re seeing is in part-time work, and having three workers for every open job is not the proportion we really need. But that being said, there are some very good things are happening out there.

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  • Andrew Allison

    I submit that the fact that the growth in employment is all part-time is an issue which deserves more attention that provide in this post.

  • Nick M.

    Great. We made some great growth in the stock market this year. Now get the money out of the stock market and into something more stable, lest we lose all those gains (like the tech bubble burst, the financial meltdown, etc.)

  • Nick M.

    Oh, and on the ratio aspect, that may also be a mere facade, as many people just gave up looking for work, or that the jobs they got are part-time, judging by the labor participation rates. That’s basically why unemployment is so low.

  • Marty Keller

    As soon as the Fed gives up QEing, all this nice news will disappear. Sad to see WRM forget the fundamentals this time.

  • Bruce

    This post was disappointing from a normally thoughtful blog. Maybe there is no economist on staff. The debt is unmanageable. The money to buy the debt is counterfeited. The market is at high valuations which have been created by zero interest rate policy (costing savers $425 billion annually). The jobs are part time. Hourly wages went down last month (the equivalent of a 525,000 loss of jobs). The labor participation rates is down. Food stamp and disability recipients are up. As I read somewhere, “The Federal Reserve has deprived us of a badly needed reset.” We’ll get our reset at some point and it will be a monster of a reset. It would have been over by now and we would have legitimate growth if they had let it happen.

  • FrankArden

    “..; Fed policy has pushed stocks up to record levels. But for now both public pensions and peoples’ 401(k) retirement funds are feeling the relief. ”

    Yes,the Fed has pushed up equities, but at the same time has pushed down interest rates to historic levels. This is not good for the growing number of older investors with more risk averse fixed income portfolios of bonds, CD’s, etc.

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