The economy’s bright spots and hurdles were spotlighted at the annual Birmingham Bloomfield Chamber of Commerce Economic Forecast breakfast. The Center proudly sponsored the February 13th event at the Townsend Hotel in Birmingham. The featured speakers were Paul Traub, a business economist from the Federal Reserve Bank of Chicago-Detroit, and Sam Valenti, CEO of Valenti Capital and World Capital Partners investment firms. Both discussed the bright areas in our economy, while also touching on some of the challenges investors can expect to face in 2014 and beyond.
Unemployment rate declining: The national unemployment rate is now at about 6.5%. Some argue that the reduction is due to people no longer looking for work. However, even with decreased participation rates, companies are doing more hiring and attracting quality talent, helping a still recovering economy to thrive.
Housing market turning around: As many of us have seen first hand, homes are selling faster and for more than a few years ago. Recently, areas in the Detroit metro area have even seen 25% - 40% increases in home values. Both speakers predicted mortgage rates to stay at or below 5% for 2014, which should further assist the housing turnaround and entice people to make moves they may not have considered just a few short years ago.
Obstacles for the Economy:
Income increases lagging behind historical averages: Over the past few years, income has only risen approximately 1.5% per year. Historically, for an economy to prosper, that number needs to be closer to 3%. Companies are still cautious and have been more focused on improving balance sheets and re-investing in business than increasing employee wages. As the economy continues to improve, wage increases are expected to follow.
Don’t forget about the debt: As the market improved tremendously in 2013, the talk of our country’s debt issues became somewhat swept under the rug. Valenti called the U.S. debt issues an area of concern, but not cause for panic. Many of the “hyper-inflation” headlines have diminished as inflation has actually been slower than the fed would like to see in order to stimulate growth. He indicated that there could be some potential market volatility within the next couple of years surrounding this issue and suggested that clients consider maintaining some liquidity and view a potential market pull back as a buying opportunity.
Center team members Tim Wyman, Laurie Renchik, Angela Palacios, Matt Trujillo and Nick Defenthaler were all on hand. Calling the breakfast interesting, Nick said,
It’s great to hear what other experts are saying because it helps us work on being the best planning team we can be to advise our clients. Although no one has a crystal ball, it’s important to look at economic trends and determine how they could affect clients in the short and long term.”
Nick Defenthaler, CFP® is a Support Associate at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.
The information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Raymond James is not affiliated with and does not endorse the opinions or services of Paul Traub, Sam Valenti, or the companies they represent.