7 Reasons to Be Optimistic About Your Finances in 2011
OK, I get that I am supposed to be concerned that third-quarter GDP growth wasn't really as good as the headlines would suggest. And yes, I realize that there's little to cheer in the fact that the unemployment rate has only inched down from 10 percent a year ago to 9.8 percent. But in the spirit of the season, I think there are a few reasons to be optimistic about 2011.
Or more to the point, there are plenty of reasons to be less pessimistic. And in my "new normal" way of thinking, that qualifies as reason enough to feel marginally more optimistic. Here are seven reasons I am going to go glass half-full into 2011:
1. GDP forecasts are being revised...up. In the wake of Washington passing the tax/stimulus bill, the likes of Pimco's Mohammed El-Erian and Moody Analytics' Mark Zandi said GDP growth in 2011 might venture into the range of 3.5 percent or higher; that's a full percentage point higher than forecasts earlier in the year. And just yesterday, Charles Plosser, president of the Federal Reserve Bank of Philadelphia weighed in that 3.5 percent GDP growth was in fact doable next year, telling Bloomberg radio that "the economy is still in the midst of a modest recovery...[and] my confidence that it is sustainable is growing." (As noted in an earlier post, Wall Street forecasts this is all good news for stock market performance in 2011.)
2. Interest rates are rising. As my MoneyWatch colleague John Keefe explains, rising interest rates may have inflicted a little pain on your bond fund returns recently, but it's actually a really good sign for the economy.
3. Retailers aren't slashing prices. A disappointment for you last-minute holiday shoppers, I realize, but strong holiday spending means retailers haven't been as desperate to discount this year. This is another welcome sign that the economy may be ready to move up a notch or two from its anemic growth pace.
4. Small business owners are feeling (a bit) more hopeful. Between a drop-off in demand during the recession and epic tight-fistedness among lenders, small business owners have had every reason to feel intensely pessimistic since the beginning of the financial crisis. But two new polls show a glimmer of hope among small business owners.
The latest reading of the Wells Fargo/Gallup Small Business Index saw a promising 24 point uptick in small business owners' perceptions of market conditions. Now that said, the index is still hovering at a -4; it peaked at 114 in late 2006. There's no denying that's awful, but the reason to be a little optimistic is that it is getting less awful. The chart below shows business owners' expectations for how things might shake out over the next 12 months. Again, not exactly bullish territory, but at least it's finally moving in the right direction. And it's pretty well accepted that getting small businesses humming -- and hiring -- is a huge key to the fortunes of our overall economic growth.
In another survey, the National Federation of Independent Business (NFIB) reports that its Small Business Optimism index is now at its highest level since December 2007. Once again, that's not exactly reason to start swinging from the economic chandeliers; the NFIB points out the performance of the index during this recovery is the weakest recovery bounce it has seen since it started tracking small biz sentiment in 1973. But it's a start.
5. Most of us are getting a 2 percent raise next year regardless of what our boss thinks of us. If you pay into the Social Security system, your required contribution for 2011 is being cut by 2 percentage points. For a high earning couple, that's an extra $4,000 or so in take home pay. Whether you choose to spend, save or invest your payroll tax break, that's money that either helps the economy or your personal balance sheet.
6. Mortgage and delinquency rates will continue to fall. The TransUnion credit bureau forecasts that mortgage loan delinquencies will fall 20 percent in 2011, and the credit card delinquency rate will fall 10.7 percent. Yes, both are coming off of epic highs. But --and you know where I'm going here -- at least we're moving in the right direction. And that's welcome progress.
7. Betty White was named 2010 Entertainer of the Year. The 88-year old comedic gem recently nabbed that honor from the Associated Press. Granted, not every older American can count on a massive Facebook campaign to help land them a high-profile gig, but that she got such props from younger generations made me a little less pessimistic about the plight of older employees in the workplace.
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