Thoughts from Atlanta

I am blogging from Atlanta while attending the NAPFA (National Assn Personal Financial Advisors) Core Competency Conference.  This morning we had an excellent speaker from the Atlanta Federal Reserve named Michael Hammill.  I will share with you some of the key ideas that I gleaned from his presentation:

• We are in a period of moderate economic growth (about 2.5%) since the first quarter of 2010.  While this is not a great number, at least we are moving in the right direction
• Consumer confidence is fairly pessimistic which translates to weak consumer spending.  Since consumer spending is 70% of GDP growth, you can see how this translates to the slow growth numbers cited above.  Wages drive consumer spending and when you consider the number of people unemployed or underemployed, it makes perfectly good sense that people are not spending because they cannot spend. And the savings rate is up sharply. When we went into this recesssion, the savings rate was negative.  It is now hovering around 7%.  As a financial planner who preaches a 10% savings rate for people, this makes me very happy.  Although the paradox is that we need people to spend in order to grow our economy. 
• Unemployment is around 9%.  However when you factor in the number of people who are underemployed (working part time instead of full time) and the folks who are so discouraged that they have actively stopped looking for work, this number should be doubled.  So, the TRUE unemployment rate is more like 18%.  Ouch!  We are adding about 100,000 jobs a month but when you consider that we were shedding more than 800,000 jobs a month during the recession (depression?), it will take us 5 more years to get back to pre-recession job growth.
• Business inventory levels are growing --a good thing!
• Housing market is very poor.  It was propped up with the generous tax credits but those have all expired.  The forecast is that housing market will remain very weak for the next four years.  It will take until 2012 to work thru the short sales and foreclosures clogging the market.  And until 2014 before housing prices start to rise. Bad news for people trying to sell their home.  Hardest hit areas are Florida, Calif, Nevada and Phoenix--the sunshine states where the biggest bubbles were.  No surprise there. 
• Inflation not expected to be an issue for several years--good news
• Financial markets adjusting to a new normal--stricter credit --weak loan demand.  Loan defaults (except for real estate) have peaked and are now declining. 
• Europe is working through their debt issues and not as much effect on US markets as expected. 

Well,  now you have the good, the bad and the ugly.  My bottom line take is that we are in for a long and slow recovery but we will recover. I am committed to helping you navigate the road ahead.  One of my colleagues said that he feels like Moses--leading his clients to the promised land of prosperity and recognizing that it may take the next 5 years to get there.  Great analogy.  Let me be your Moses!