2014 Economy Forecasting – Are Things Getting Better?
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With the New Year fast approaching, now is the time many people like to analyze the economic statistics for 2013 and forecast the potential for economic growth or decline in 2014. Due to the nature of the economy, there is a domino effect with one sector declining before it affects others. Bankuptcy attorneys point to bankruptcy filing statistics as an important indicator for the health of the economy because those statistics reflect employment, income and the failure to handle debt among consumers. A brief look at bankruptcy statistics may leave us with more questions than answers, but the biggest question which everyone, and particularly investors, want answered is, ‘Are things getting better at the beginning of 2014?’
Bankruptcy Statistics from 2006 to 2013
Economists recognize that the 2008 economic collapse really began in 2006 with rising numbers of bankruptcies among consumers. According to CNN, the 2006 bankruptcy filings were 573,203 but rose to 801,840 in 2007. Lehman Brothers partially collapsed in 2008 because it had exposure to failing mortgage-backed securities (MBS), which were at least in part, impact by the rising numbers of bankruptcies. Lehman’s collapse ushered in the recession, which drug down the entire economy because the capital markets were damaged.
These government statistics, with fiscal year ending September 30 list the following consumer bankruptcy figures:
- 2009 = 1,344,095
- 2010 = 1,538,033
- 2011 = 1,417,326
- 2012 = 1,219,132
- 2013 = 1,072,807
As we can see from the bankruptcy statistics, the peak for consumer bankruptcies was in 2010. Gradually, the number of bankruptcies have declined, which is a good sign. Unfortunately, the figures still remain above 2006 figures.
A recession is over unofficially when the economy returns to the level at which it was before it started. Thus, the economy in 2013 still has not recovered to 2008 levels. That could be viewed as disconcerting. Every year, more people need not only jobs and but jobs that produce salary growth to increase their income.
Are Consumer Debt Loads Improving?
In 2008, high consumer debt loads were one of the many causes for the economic collapse. According to the US Debt Clock, the debt figures were as follows:
- Total personal debt was $17 trillion
- Mortgage debt was $14 trillion
- Credit card debt was $956 billion
- Total personal debt was $16 trillion
- Mortgage debt was $12 trillion
- Credit card debt was $863 billion
Thus we see that consumer debt is decreasing. This is a good sign meaning that there should be fewer problems with bankruptcies. On the other hand, in a debt-based economy, less debt could also be due to less economic activity.
Shadowstats is a site that offers alternate data compared to official government data. It shows a chart with alternate unemployment figures:
- 2007 was 12%
- 2009 was 20%
- 2011 was 22%
- 2013 was 24%
The rising unemployment figures are a serious problem because without jobs, people cannot afford to spend their money or even qualify for debt. The lingering effects of 2008 are continuing into 2013. However, the Dow Jones Industrial Average has increased by more than 10% from 2012 to 2013. So, at least when it comes to Wall Street, things seem to be improving. That may however, not necessarily be the case when it comes to Main Street – or, the way average, everyday Americans are living.
Thus, any answer to the question “Are Things Getting Better?” necessarily leads to more questions. The stock market is booming at the end of 2013. Bankruptcy statistics are down. Consumer debt loads are down. But, unemployment remains high. Many economists would really like to see employment figures rise in industries and sectors across the board as that would be a clear sign of health and strength returning to the economy. In all, while many things do seem to be getting better and look like they will continue to do so in early 2014, there is still much room for growth and improvement in other areas.
Consumers can give themselves the best start to the New Year by finding smart ways to manage their debt and cut expenses as they wait for raises or search for new, more profitable employment opportunities.
Photo courtesy of: CanStockPhoto.com
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