Fast Facts: Current Economic Conditions in the United States

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more. This iteration focuses on the current economic conditions in the United States.

The United States has enjoyed more than three years of modest uninterrupted economic growth since the end of the recession, with a promising improvement to select industries, including the housing market.

FACT: The US economy sped up in the first quarter of this year, with a growth rate of 2.5%. Despite growth, the Federal Reserve Bank has changed its 2013 GDP projection to an expansion rate in the range of 2.3% to 2.8%.

  • In December 2012, the Federal Reserve projected growth as high as 3.0%.
  • Consumer spending, exports, residential investment, and business spending on equipment and software rose, but it is unclear whether the trend will continue.
  • The Federal Reserve is also concerned that prices of consumer goods have only increased 1.3% year over year, instead of targeted inflation rate of 2% to reflect healthy rises in wages and employment.

FACT: According to nearly 30 investment strategists and money managers surveyed by CNNMoney, stocks will climb further, and the S&P 500 should deliver a healthy 11% return for the year.

  • Last week, the Dow Jones and the S&P 500 witnessed their worst drops since November due to discouraging international and national economic reports.
  • The declines in major stock indices came after dismal growth reports from China, reporting a growth rate of 7.7%, 0.2 percent lower than expected. The reports triggered a massive sell-off in commodities and equity.

FACT: Home prices rose by more than 7% last year, according to the S&P/Case-Shiller index.

  • The number of underwater borrowers, those whose mortgages exceed the value of their homes, fell by almost 4 million last year. While this is an improvement, 7 million borrowers, or one in five, are still underwater.
  • Headwinds from the current round of government spending cuts and tax increases could slow the housing market’s recovery.

FACT: The US unemployment rate fell 0.6 percentage points between March 2012 and March 2013, from 8.2% to 7.6%, but much of the decline from peak unemployment has occurred because of workers leaving the labor force.

  • Job growth slowed sharply in March, with employers adding only 88,000 jobs, much lower than the average monthly gain of 220,000 from November through February, although prior months were revised higher.
  • Health care, construction, and food services were among the top industries for job growth.
  • The monthly average number of Americans seeking unemployment benefits has declined steadily, if modestly, since November and in mid-April was at the lowest level since February 2008.

FACT: While others are slowly returning to work, the unemployment rate for Americans ages 16-24 stands at 16.2%. Additionally, the unemployment rate remains at an elevated 11.1% for those aged 25 and above with less than a high school diploma.

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Written by Staff