The financial environment in the United States is still confusing.
There is still a huge level of credit card debt. Spending is a boost to any economy, but if it is spending that individuals can ill afford, then is it a recipe for disaster?
A recent survey by USA Today/Wells Fargo makes for interesting reading. Of the respondents that had a view on the US Economy, as many took a positive stance as a negative one. Half the respondents had no strong views either way, but they must clearly have doubts.
The majority of respondents did tend to have a more positive view of their own individual prospects than that of the economy as a whole. Perhaps that is backed up by the significant level of credit card spending at present. Consumers believe they will be able to pay their bills and manage their finances. It is a strange scenario when people who have seen the damage the recession caused are wary, at best, at the national economy’s prospects, and are happy to spend so liberally. ‘Liberally’ is subjective of course. Some commentators feel that spending should be at a higher level if the recovery is real. The fact that it isn’t, they say, is something that may be a decisive factor in next year’s Presidential Election.
Beyond the general split between those thinking the economy has good prospects and those that don’t, respondents were asked what they expected to see in a year’s time. The figures were pretty much the same in the survey of 3,500 US adults in June of this year.
It is a cliché, but the US has been described as the land of opportunity; it is a generalization. It seems that in detailed terms, people feel there is less opportunity today. It may be because of their current employment and the relatively poor signs of increased salaries. Banks are still reluctant to lend, but in contrast, online lenders are beginning to make a bigger penetration into the personal loan market, which will certainly cheer up those who have tried to get financing through traditional channels but failed.
Experience Guides Opinion
It is important to think about the differing experiences of people during the recession to get an idea of why the feelings about the economic outlook vary. Anyone employed in the real estate and construction sector is likely to feel a combination of despair and helplessness, anger and frustration. That sector will bear scars for many years.
In contrast, someone who lives in a community that was not as badly hit as others, and can see the smiles back on their neighbors’ faces, is likely to feel better about prospects in general. Whether they are influenced too greatly by the wellbeing in their personal communities, which does not exist to the same extent nationwide, is a question that is difficult to answer.
Unemployment Figures Not the Whole Picture
Nationwide, the unemployment rate has returned to pre-recessional levels, around 5.3%, though there are still plenty of regional variations. The 30% or so who feel positive about employment prospects may be a surprise, especially as that unemployment rate reached double figures at the height of the recession in 2009. In numerical terms, jobs are being created at a rate in excess of 200,000 per month presently. There may be reason for the relative pessimism.
Those who are in jobs for which they are well over-qualified do not appear in any statistics. Neither do some that are only in part time work or certainly not working the number of hours they would like. If pay raises were better, everyone’s minds might change. Certainly the poor figures on the numbers that have proper retirement provision suggests the average American is struggling financially or ignoring the need to build for the future. However, there is a feeling that the education system is failing; only a fifth of respondents feel it is producing the skills required in the market place.
Personal Optimism But Is Something Missing?
However, when questioned closely, 40% of respondents felt their personal finances would improve in the year to come, even if the national economy was still not performing as well as they would do themselves. Those people who had got through the recession and maintained their real estate mortgage payments were the most positive, because their asset was growing once again, while mortgage rates remained relatively low. It is perhaps time that those who find themselves more secure than in recent years should start to look at the things that may hit their comfortable lifestyle in the future?
Healthcare, an emergency fund and retirement fund are three things that a minority of Americans seem really prepared for and that is a concern. It seems they tend to regard retirement as something fairly remote, certainly until they have reached middle age. Optimists who believe they are fit and healthy and believe nothing will happen to them may also shelve the idea of healthcare provision and an emergency fund.
Lenders Have a Role
People work on their perceptions; that is what guides their decision making. Reality may be different, but if someone doesn’t recognize reality, they may be harming their future prospects. They should just spend a little time asking themselves about the future and the possible financial needs they may have. The current breed of online lender is playing an important role in helping people to stabilize their finances. If they are in trouble there are realistic loans at competitive rates even for those with a poor credit score. Those who have finally decided that they should put away a sum as an emergency fund can do that or repay the loan over installments that are manageable within their existing monthly expenditure.
It costs nothing but a little time to plan a financial future. Likewise, no lender seeks any commitment from an enquirer until he or she is happy with what they hear. There may be differing views on the US Economy and everyone is likely to act on their own perception of what is happening now and what is likely to happen in the future.