The 2018 news cycle was dominated by political turmoil, evidenced by the controversy surrounding Judge Brett Kavanaugh’s nomination to the Supreme Court. This noise overshadows the fact that, all things considered, 2018 was a prosperous year. As Americans, we have a lot to be thankful for.
The American economy was the strongest it has been in at least a decade. Total employment, at 149.5 million jobs nationwide, is at a record high level and is 11.5 million jobs higher than before the Great Recession. The unemployment rate is at 3.7 percent for the first time since 1969. The employment-to-population ratio, or the percentage of the population that is employed, is currently at 60.4 percent, which is the highest it has been since February 2009, but it does remain below the pre-Great Recession peak of 63 percent reached in June 2008. However, given the number of Baby Boomers who have retired between then and now, the employment-to-population ratio is unlikely to fully recover to what it was before the recession. For all intents and purposes, the economy is at full employment.
Wages are growing at a healthy pace, as well, at 3.5 percent in August, according to the Federal Reserve Bank of Atlanta. Wage growth does remain slower than during the economic boom of the late 1990s; however, wages are growing faster than at any point during the recovery. Wage growth is currently on-par with what it was during the mid-2000s. Adjusted for inflation, median household income (income earned by the household in exactly the middle of the income distribution), is at a record-high level of just over $61,000.
The Dow Jones Industrial Average is also at a record high – pushing 27,000 points. This has caused the average 401(k) balance to regain all of the loss that occurred during the Great Recession.
There are some issues with the economy that make economists nervous, such as tariffs and the federal budget deficit; but these issues are not making the market nervous (at least not yet), and we are enjoying, arguably, the strongest national economy since the late 1990s.
Usually, when the economy is strong, inflation becomes a concern; however, inflation does not yet appear to be an issue in this economy. The market is forecasting inflation at just over 2 percent per year for the next ten years, a forecast that is largely unchanged since at least 2014. The yearly inflation rate has remained stable since 1990. The average household only spends 2.5 percent of its income on clothing, 2.7 percent on gasoline and 10.5 percent on food. The low consumer prices of these goods would have been unthinkable a generation or two ago.
Despite all the noise in the media and political arena, 2018 has been a time of peace and prosperity, which we should be thankful for during this Thanksgiving season. Here’s to a peaceful and prosperous 2019!