Pub. 6 2015 Issue 3

fall 2015 21 West Virginia Banker MFA Economic Outlook July 13, 2015 T he signs we see today are signs of an improving economy. Some exam- ples include: • The federal deficit has shrunk sig- nificantly in real and relative terms since 2009. While we still have a long way to go, the deficit represents 18% of expenditures for fiscal 2015, compared to 67% in 2009. • The U.S. Census Bureau reported that May 2015, new housing permits totaled 20,589 units for the month. That is the first time since August 2007 that the monthly total exceed- ed 20,000 units. For reference, new housing permits (nationally) peaked in June 2005 at 32,303 units. • Bank and credit union balance sheets are adding more loans. The F.D.I.C. reported that for the first quarter of 2015, insured bank loans grew at an annual rate of 5.4%, the highest growth rate since the 2008 "meltdown." Credit unions loans grew at the same rate for the first quarter. • The June unemployment rate was 5.3%, continuing a downward trend from a recent high of 10% in October, 2009. The flip side of this is that many workers have simply stopped looking for work; others are working fewer hours. • For our Michigan centered accounts, light new vehicle sales reached an annual rate of 17.6 million in June, having bottomed out at a 9.2 million rate in February 2009. Worldwide production has increased 50% since 2008, expecting to surpass 90 mil- lion units in 2015. Other signs that do not look good in- clude: • The rebound for home values is over and many homeowners are still "underwater" with no relief in sight. This is especially true in cities and regions that have not had a signifi- cant rebound in employment. This is true all over the United States, including rural areas and major mar- kets such as Atlanta. • The Economic Policy Institute estimates that 3.3 million workers are missing from the labor force and the true unemployment rate is 7.3%. Required skills and education are simply not within the grasp of many individuals, for a variety of reasons. This will become more of an issue as student loans become more scarce and the cost of higher education skyrockets. Several public universi- ties in Michigan recently announced tuition increases in excess of 8% for the fall of 2015. This cannot continue. • Wayne County, Michigan, Chica- go, the State of Illinois and Puerto Rico are all facing serious financial problems. This may be the tip of the proverbial iceberg. Take Chicago for example. Its annual budget is $3.5 billion and its pension "gap" is $20 billion. Chicago has a 9.25% sales tax; its latest proposal is to tax mov- ie downloads, like Netflix, at 10%. Other state and local governments are sure to follow. • By the time you read this, hopefully there will be an agreement to bailout the sovereign nation of Greece. Greek civil servants with 35 years of service and have reached the age of 58 retire with 80% of their pay and benefits. The retirement age is cur- rently 61 and they want to change  MFA — continued on page 22 By Charley McQueen, McQueen Financial Advisors, Inc.