WASHINGTON (AP) — The U.S. economy is a study in contrasts.
The housing, banking and auto industries are surging back to health and that has helped push the stock market to a five-year peak. Higher prices for homes and stocks tend to make people feel wealthier and spend more.
Yet unemployment remains high and hiring modest. The end of a Social Security tax cut is shrinking already flat pay. Federal budget fights have put businesses and consumers on edge.
Balanced between those tailwinds and headwinds, the economy is struggling to accelerate. By the end of this year, though, many analysts think the tailwinds will succeed in boosting growth and fueling a more robust economy in 2014.
"There is some underlying momentum," says Paul Edelstein, U.S. economist at IHS Global Insight. "It's not as strong as we would like, but it's there and it's building."
Uncertainty about government spending cuts could be defused by summer, and any spending cuts that do take effect will likely be phased in over several years. Also, for the first time since the recession ended 3½ years ago, several key areas of the economy are simultaneously driving growth, which means the strength is more broadly based.
The nation has finally worked off the excesses of the housing bubble. Once there were too many homes for sale; now, there are too few to meet demand. That is pushing up home prices, construction and hiring — trends that could accelerate U.S. economic growth in 2013 by a full percentage point, economists say.
Home prices rose 7.4 percent in the 12 months that ended in November, according to CoreLogic. It was the largest 12-month gain in six years.
The financial crisis hammered banks and choked off loans to businesses and consumers. But lending has been rebounding.
Mortgage and auto loans are rising. Commercial and industrial loans rose 2.2 percent in the July-September quarter from the same period a year earlier.
Bank profits reached their highest level in six years that same quarter, according to the Federal Deposit Insurance Corp. Bank of America boosted the value of its mortgage loans 33 percent in the October-December quarter compared with a year earlier.
-- STOCK MARKET
The Standard and Poor's 500 stock index has more than doubled from its low in 2009 and is just 4 percent shy of its record high set in 2007.
The S&P index has jumped 5.4 percent this month in response to healthy news on housing and corporate profits. The sidestepping of the fiscal cliff at the start of the year helped, too. Higher stock prices are boosting Americans' wealth, providing more fuel for spending and growth.
Stocks are getting a lift from Main Street investors for a change. In a reverse from their behavior for most of the past five years, small investors are buying more stocks instead of selling them. Investors put nearly $13 billion into U.S. stock mutual funds in the first two weeks of 2013, according to the Investment Company Institute, a trade group for funds.
In another sign of rising confidence, investors are shifting out of ultra-safe investments such as U.S. Treasurys. The interest rate, or yield, on the benchmark 10-year Treasury bond topped 2 percent on Monday for the first time since April. Bond yields rise when their prices fall.
In the short term, the economy's headwinds are still restraining growth. They include:
-- BUDGET FIGHTS
The heaviest millstone weighing down the economy is the rift between President Barack Obama and Republicans over taxes and spending.
Further talks are expected this spring as several deadlines arrive: Across-the-board spending cuts are set to kick in March 1. Financing to run the government will expire by March 27, raising the threat of a government shutdown. And the federal borrowing cap must be raised by May 18 or the government could default on its debt.
Haziness around future tax and budget policy may already be restraining growth. A report from the Federal Reserve last week suggested that some employers delayed hiring late last year because of uncertainty over the fiscal cliff.
-- SLUGGISH HIRING
Job gains have held steady for the past two years at about 150,000 a month. That's only about enough to slowly reduce the unemployment rate, now at 7.8 percent.
Even in sectors that are recovering, many companies aren't yet adding jobs. Some are even cutting, especially in financial services. Bank of America, for example, has shed about 15,000 jobs in the past year.
In a robust recovery, monthly job gains are usually 250,000 or more. That's what it would take to rapidly reduce unemployment and force employers to raise pay to attract workers.
-- FEW PAY RAISES
For now, high unemployment is limiting pay. When employers have lots of job applicants to choose from, they have little incentive to give raises.
Hourly wages rose just 2.1 percent last year, only slightly above consumer inflation, which was 1.7 percent. Consumer spending, which drives about 70 percent of the economy, can't improve much until pay or job growth accelerates. Americans still are still reluctant to run up credit card debt to pay for extra consumption.
A temporary Social Security tax cut expired this year, reducing Americans' take-home pay. It will cost a typical household making $50,000 a year about $1,000. A household with two high-paid workers will lose up to $4,500. The drop in pay could slow consumer spending.
The Social Security tax cut, in place for two years, was allowed to expire in the deal reached between the White House and Congress to avoid the fiscal cliff.
Most economists expect the higher Social Security tax to bite hardest in the first three months of the year. But after Americans adjust to the sudden cut, its impact should lessen over time.
If federal budget issues can be resolved, the economy could start to accelerate. Analysts forecast only modest growth this year of about 2 percent. But they think growth will strengthen as the year goes on.
JPMorgan Chase, for example, forecasts that the economy will grow at an anemic annual rate of just 1 percent in the January-March quarter. But as the drag from higher taxes fades and the debt ceiling is resolved, growth could pick up to a decent 3 percent pace by the October-December quarter.
Diane Swonk, chief economist at Mesirow Financial, expects housing and other tailwinds to accelerate growth this year — as long as budget "shenanigans" don't dampen consumer and business confidence as they did in 2011.
"Could we get 3.5 percent growth by the end of this year?" she asks. "If we can get over this budget stuff, absolutely."
Some industries surge, but hiring remains modest
WASHINGTON (AP) — The U.S. economy is a study in contrasts.
High School Sports Scoreboard: 03/04/2014
A roundup of prep sports scores from across northern Michigan, including results from today's girls regional basketball tournament games:Continued ...
UPDATE: Ruling will force someone to reimburse TCAPS for violation
It’ll cost someone $25,600 to rectify the distribution of an illegal Traverse City Area Public Schools campaign flier, but who’s on the hook for that money remains unclear.Continued ...
TC native joins Team Blake on TV's 'The Voice'
Traverse City native son Ryan Whyte Maloney finally can spill the beans: He’s a bona fide contestant on “The Voice.”Continued ...
TCAPS fined $25,600 for illegal mailing
An illegal campaign flier that touted Traverse City Area Public Schools' 2012 bond millage will require a $25,656 repayment to the district, the Michigan Secretary of State's office determined.Continued ...
TC Central stuns Petoskey, 50-49
Traverse City Central’s boys basketball team has practice on Tuesday. Early in Monday’s Class A district tournament opener against Petoskey, Central head coach Jeff Turner figured he would be collecting jerseys instead.Continued ...
Editorial: Leaf pickup decision won't settle privatization debate
The issue: TC commissioners reject privatization idea. Our view: The debate is likely not over.Continued ...
Lake ice blamed for deep freeze
More relentlessly cold temperatures and relatively calm winds allowed Lake Michigan to regain ice cover, reaching around 90 percent coverage yesterday.Continued ...
Grad students to help Leelanau Twp. switch to renewables
Jeremy Good hopes to build a career on renewable energy. The University of Michigan graduate student has worked on small solar projects but nothing on a larger municipal level.Continued ...
Letters to the Editor: 03/04/2014
Give us a chance; ‘No’ to ‘Dollywood’.Continued ...
Danz sparks Gladiators to victory
Gus Danz came off the bench for a career-high 21 points to lead Traverse City St. Francis in Monday’s district-opening 72-56 home win over Kalkaska.Continued ...
TC West/Midland game moved to Cadillac at 7 p.m.
Tonight’s Class A girls regional basketball game between Traverse City West and Midland has been moved to Cadillac.Continued ...
Second emergency landing for helicopter
The same U.S. Coast Guard MH-65C “Dolphin” helicopter that was forced to make an emergency landing in a field in Gratiot County, Mich., in January had to make a second emergency landing Sunday morning.Continued ...
Local expert weighs in on boiling Ukraine crisis
Jack Segal sees local implications of the Ukrainian crisis even if it’s on the other side of the world.Continued ...
Boys Basketball Roundup: West rallies to beat Gaylord
Down nine at half, Traverse City West rallied to beat upset-minded Gaylord 63-51 Monday night in a first-round Class A district basketball game at Gaylord. (Plus more)Continued ...
TC: No events at coal dock
Commissioners scuttled a request to use the Traverse City coal dock for a fundraiser to benefit sailing programs for at-risk youth.Continued ...
Grant helps sheriff's department get new dog
A $9,000 grant will help the Grand Traverse County sheriff’s department buy a new police K-9.Continued ...
Caution urged in winter traffic crashes
Winter can be a dangerous time for travel even after a crash occurs. A Rapid City woman, 34, was hospitalized Thursday after a traffic crash on U.S. 31 near Bunker Hill, but not for injuries she received in the crash itself.Continued ...
Today in Sports: 03/04/2014
What's happening in sports across the region and the country:Continued ...
Community in Brief: 03/04/2014
Reservation deadline for Speakers Series; Winter dog walk planned; Benzie Women's History Project shows film; and more.Continued ...
Clearing the Record: 03/04/2014
Because of a reporter’s error, a story Monday about a library pajama drive misspelled the last name of Traverse Area District Library marketing and communications manager Kristen Talaga.Continued ...
- Poll: Should Traverse City consider privatizing some services?
- February 25, 2014
Voters reject Elk Rapids schools bond proposal
Voters said "no" to an Elk Rapids Public Schools bond proposal for the second time in less than four months.Continued ...
High School Sports Scoreboard: 02/25/2014
A roundup of prep sports scores from across northern Michigan:Continued ...
Authorities: Student threatened others with knife
A Suttons Bay High School student is accused of threatening two fellow students with a knife during a weekend school dance.Continued ...
Elk Rapids school bond vote today
A bond proposal that would pay for a new Elk Rapids high school gymnasium, upgrades to athletic facilities and increased school security throughout the district is back on the ballot.Continued ...
Brighton wins girls crown
Brighton may not have the pedigree of some other schools when it comes to Michigan girls high school downhill skiing. That perception changed in a hurry on Monday at the Division 1 state finals at Schuss Mountain.Continued ...
- High School Sports Scoreboard: 03/04/2014