Looking Back at 2013
Unemployment fell, the economy improved and home prices rose, all without measurable inflation. So why don't you feel better?
People will tell you that the stock market had a record year-the best in decades. But you will ignore this, go on, admit it, and instead focus on the Broncos. People will tell you that the Broncos had a record year but you will ignore this, go on, admit it! You are worried that this weekend, we will lose to the San Diego Chargers!
Why is it that we look at the downside more than the good side?
Partially this is because our feelings are created and stored in a very large part of our brain that reacts faster than the neocortex where we process information logically. We remember feelings, and strong feelings we have felt in the past, instantly, regardless of how long ago they were. We have to slow down to process these feelings in our neocortex(es) before we realize that we're making a mistake to ignore the facts. The facts, as outlined below, are largely positive.
One other note on "facts" and feelings. It is a fact that right now Winter Park Ski Area is having one of the best snow seasons it has had in years. In fact, my 8 year old says it is the best year in 10 years (as if he would know)! Yet that statistic belies the fact that it's been wicked cold up there and for only the second or third time in my life, I had to leave behind fresh powder snow because of the frigid temperatures!
Here are some of the facts to help soothe our animal emotions about how and why the stock market is doing so well:
- GDP improved. Our economy expanded just 0.1% in the fourth quarter of 2012, but things got better in 2013. The Bureau of Economic Analysis measured GDP at 1.1% for Q1, 2.5% for Q2 and 4.1% for Q3.(1)
- The job market began to turn around. In November, the jobless rate hit a 5-year low of 7.0%. From August through November, non-farm payrolls grew by an average of 204,000 jobs per month, compared to average growth of 159,000 new jobs a month from April to July.(2)
- Homes grew more valuable. In late November, the September edition of the S&P/Case-Shiller Home Price Index showed a 13.3% year-over-year gain. Prices haven't risen so dramatically in a 12-month period since February 2006.(3)
- The Consumer Price Index barely rose. It was flat in November, and that put yearly consumer inflation at only 1.2%. The annualized gain in the core CPI was also minor at 1.7%. As recently as the summer of 2011, consumer inflation was approaching 4%.(4)
Again, just because the snowfall is a record, the temperatures may make it hard to enjoy. Perhaps that is the case for you, if you are not feeling as positive as these economic indicators suggest you should.
1 - money.cnn.com/2013/12/20/news/economy/gdp-report/index.html [12/20/13]
2 - cbsnews.com/news/unemployment-rate-dips-to-7-percent/ [12/7/13]
3 - tinyurl.com/jvl25lh [11/26/13]
4 - marketwatch.com/story/consumer-prices-unchanged-in-november-2013-12-17 [12/17/13]