Despite stock fall, financial health of many is still solid

Friday, August 21, 2015, Vol. 39, No. 34

WASHINGTON (AP) — Many Americans have just absorbed a financial beating — at least as measured by their stock holdings. It's the kind of blow that can feed a sense of helplessness about retirement, college savings and higher-than-expected bills.

But take a look at other gauges of Americans' financial health, and a more nuanced picture emerges:

Hiring and home values are up. Gas prices and mortgage rates are down. Inflation is low. The pace of layoffs has dwindled.

Add it up, and the evidence suggests that many Americans — though certainly not all — are doing comparatively well.

Even the stock-market swoon can be put in perspective: Yes, the Standard & Poor's 500 stock index has tumbled 7 percent over the past week. Since the end of 2008, though, the S&P index has jumped nearly 123 percent.

For some, the stock sell-off has been an occasion to take a breath, recall previous down markets that eventually recovered and summon the patience to wait for their investments to rebound.

"Hell, yes, I am worried," said Shannon Miller, a 27-year old digital content manager in St. Louis. "But what goes down.... will probably go back up."

Here's a look at key measures of Americans' financial well-being:

— JOBS

This is a clear bright spot. Employers have added a total of 11.5 million jobs over the past 58 months. All that hiring has helped cut the unemployment rate to 5.3 percent from a peak of 10 percent in 2009. And just about everyone who has a job is getting to keep it: Applications for unemployment aid, which reflect the pace of layoffs, has hit a 15-year low.

It's true that the solid hiring has yet to provide meaningful pay raises for most people. Average hourly earnings are up a subpar 2.1 percent over the past 12 months.

But there's evidence that the job market is being retooled for occupations and college graduates who command higher pay. Nearly 44 percent of the jobs added during the recovery paid a median income of more than $53,000, according to a report from the Georgetown University Center on Education and the Workforce. The economy includes a greater proportion of these jobs now than in 2008, after having shed "middle-wage jobs" — those that paid $32,000 to $53,000.

"The surge in hiring is not concentrated in dead-end McJobs," the report concluded.

—INVESTMENTS

No doubt the latest stock market plunge has dealt a setback to many retirement accounts.

But plenty of people have diversified their portfolios, as they should, so that stocks don't represent an outsized portion of their holdings. And many individuals have richly profited from the most recent bull market. A thousand dollars invested in an S&P 500 index fund at the end of 2008 would now be worth $2,230.

The investment company Vanguard reported in June that clients with retirement accounts at the end of 2009 had enjoyed a median gain of 137 percent over five years, reflecting both market returns and additional contributions.

Consider: An Associated Press analysis last week found that Republican presidential candidate Donald Trump would have multiplied his fortune more by investing in a generic stock index than in heavily-branded luxury real estate.

— GAS PRICES

Prices at the pump haven't been this low at this time of year since 2004, according to the American Automobile Association. The average price for a gallon of regular gasoline is $2.58 a gallon, down from $3.44 at this point in 2014. Analysts expect prices to fall further after summer.

The price decline has slowed economic growth because energy companies have slashed their drilling activity and equipment orders to manufacturers.

Yet for individual Americans, falling gas prices are a windfall: Families have more cushioning in their household budgets and can direct some of their gas savings to pare debt, invest or spend.

— HOME VALUES

The housing market has solidly recovered from the depths of the recession, when defaults on subprime mortgages caused a crushing wave of foreclosures and depressed prices.

The S&P/Case-Shiller 20-city home price index is up 5 percent from a year earlier. And the National Association of Realtors said last week that sales of existing homes in July reached an annual rate of 5.59 million, the strongest pace since 2007.

Homeowners are also behaving more prudently: Mortgage debt remains about $1.3 trillion below the 2008 peak, according to the Federal Reserve.

"While the stock market can fluctuate wildly, real estate is slow and steady and has returned to very healthy conditions," said Jonathan Smoke, chief economist at Realtor.com.

— MORTGAGE RATES

The Fed's low-rate policies have kept mortgage rates near historic lows for much of the recovery. And even as stocks have tumbled, it's become cheaper for homebuyers to borrow. The average 30-year fixed-rate mortgage dipped to 3.93 percent last week from 4.09 percent in mid-July, according to mortgage firm Freddie Mac.

The low rates have benefited many homeowners who have adjustable-rate mortgages from before the recession. Mortgage rates tend to track the yields on long-term Treasurys. The declining stock market has held those yields low — welcome news for homeowners such as Conal Crawley, a 49-year-old sales rep from Boston.

"It'll keep my interest rate down as long as the economy doesn't get overheated," he said.