Happy Holidays!

What a year 2017 has been! The economic recovery that has been in place for several years accelerated over the course of the year. The jobless rate continued to drop, more people exited poverty, and the outlook for many families has improved. But there are some growing risks to this expansions. Some of our thoughts on 2017 are below.

Some positives from 2017

GDP annual growth is surpassing 3% annual growth in late 2017. What a Christmas gift that is for everyone! While three percent is not as fast as some of the past economic expansion, when considering the fact the economy has been growing now for over 8 years, that 3% growth is incredible!

Maybe a little closer to home for many families is that the unemployment rate is at a 17 year low of 4.1%. That sure does spread some 2017 holiday cheer to many people who were jobless 5-10 years ago. Not only that, but employers are still “begging” for workers, just like they have been over the last 3-4 years. There are now over 5 million open jobs in this country, a record high.

Another positive sign is the reduction in poverty rates. This leads to fewer people needing financial help for paying their bills. More families can pay their rent or mortgage, cover transportation and health insurance costs, and buy Christmas gifts for their kids! All of that is very positive of course. As 2017 ends, and people celebrate the New Year, note that the poverty rate is “down” to about 14 percent.

There are of course other positives in place. But those are some of the items we highlighted from 2017. Feel free to add your thoughts below.

Are there risks brewing though?

Of course no one knows what 2018 or subsequent years will bring. Maybe the economy continues this slow but steady path of growth. Maybe GDP will accelerate. Or maybe 2018 is the starting point of the next recession. We are sorry to bring this potential bad news up during the holiday season! But there are some risks as we start the new year, and they include the following:

-Credit card debt – This is increasing, and Americans have now surpassed the total debt levels that were in place right before the last recession.

-Interest rates – The Federal Reserve brought some bad news right before the Christmas shopping season; they raised short term interest rates. This trend will continue in 2018, with many predicting 2-4 more increases.

-Mortgage rates – These may trend up now as the federal reserve unwinds its balance sheet, as the increases in long term rates will follow the trajectory of 10-year bonds.

-Inflation – With the unemployed rate at 4.1 percent as indicated above, inflation may start to rear its ugly head as there are no more workers for companies to hire. Higher wages have a downside, and that is it can lead to higher inflation.

One major risk of course is the fact that the economic expansion can’t go on forever. The party can’t continue, as things do go in cycles. Once we think there is a new “normal” of saying unending growth or stock markets that go up year after year, and when everyone believes that, that means that things more than likely will change! As things do move in cycles, including economies. So as we exit 2017, and start the new 2018, be prepared for anything…plan for the worst, and hope for the best!

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