Economic Outlooks


12 Things Going Right for a New Year

An economy that can’t find its footing. Unemployment still near 9%. Roller-coaster markets. Dysfunctional government. Staggering debt at home, and a debt crisis abroad. What else can go wrong?

Actually, we’re here to remind you of a few things that are going right, 12 to be exact, as the holiday season begins and 2012 beckons. We hope you enjoy them. Please offer your own suggestions in the comment box below.

You've enjoyed a tax cut this year -- and odds are good you'll have it for all of 2012 as well.. The Social Security payroll tax holiday -- a 2% cut -- saves a taxpayer earning $50,000 a year $83.30 per month. Despite the sturm-und-drang on Capitol Hill this fall that resulted in only a two-month extension of the cut, we believe it will be extended for the full year.

You’ll likely not see mortgage rates this low again anytime soon. Rates for a conventional, 30-year fixed-rate mortgage dropped below 4% for the first time ever in October, and have stayed there. Mortgage research Web site HSH.com said in its latest forecast that “there seems to be little reason to expect rates any higher than they are at the moment for some time.” High unemployment, weak consumer demand and tougher credit standards continue to hamper sales of new and existing homes. But for first-time home buyers and homeowners looking to refinance, a fixed rate below 4% is a once-in-a-lifetime opportunity.

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Some welcome news for drivers: Vehicles are becoming more crashworthy, largely because of SUV and pickup redesigns that take less of a toll on smaller cars during collisions. Fatalities from crashes between big and small cars have dropped by two-thirds from a decade ago because of the industry’s safety push. And the trend will only pick up speed as the newer, safer models being sold steadily replace older trucks and SUVs now on the road. More high-strength steel, already essential for improving fuel efficiency, will also bolster small-car safety. Down the road: Even bigger safety gains as automakers shift their focus to electronics that will help avoid collisions instead of making them more survivable. For instance: radar or laser-based systems that automatically apply the brakes. Mercedes-Benz, Volvo and others offer versions in some higher-end models.

More good news for the U.S. auto industry … especially for workers and their communities: The share of cars made in America is on the rise. Last year, about 76% of cars sold domestically were made in North America -- up two percentage points from 2009. Together, Ford, GM and Chrysler gained half a point, while transplants (foreign brands manufactured here) snagged a full percentage point more of total sales. Two-thirds of North American production is in the U.S. Imports’ share will rise further in coming years, with production from transplants continuing to climb and U.S. auto companies expanding domestic production.

Other U.S. manufacturing sectors are thriving. Big-name U.S. retailers are increasingly hunting for growth overseas as American consumers continue to guard their wallets. Specialty apparel stores Gap, Victoria’s Secret, American Eagle Outfitters and others, as well as Crate & Barrel and other home-related outfits, are reaching into South America, Asia and elsewhere to enhance sales in the coming years. Similarly, China’s soaring market for private jets means big business for U.S. makers. China’s small fleet of corporate jets will expand tenfold by 2020 as the government opens up airspace and firms there seek faster travel routes to remote factories. A lack of Chinese producers opens the door to American jet manufacturers. Gulfstream Aerospace, Cessna, Boeing and Hawker Beechcraft should benefit.

The economy is sprouting in unlikely parts of the American countryside. While the Fed recently cut its projection for national gross domestic product growth and thinks the U.S. jobless rate will finish 2011 near 9%, U.S. farm and energy sectors are pumping strength into many rural areas. Rural unemployment has dropped from 10.2% in January 2011 to 8.5% in September, according to the Bureau of Labor Statistics. And overseas, nations that are top buyers of U.S. farm goods are hiring more workers. That’s good for U.S. farm exports.

Cheaper medicines are coming for millions of Americans as ten of the world’s top-selling drugs lose patent protection by the end of 2012. The move will allow first-time generic copies of top-selling Lipitor and Plavix. These cholesterol and clot prevention drugs account for $13.1 billion in annual sales. Also coming off patent protection are the antibiotic Levaquin; cancer drug Taxotere; Concerta, for attention deficit hyperactivity disorder; and Zyprexa, for schizophrenia. That’ll save big bucks for patients and for employers that provide health coverage. In 2009, retail prices for generics averaged about 75% lower than for brand names. Market share for generics is expected to hit 85% by 2014, up from 75% in 2009.

New benefits from the 2010 health care reform law have started to kick in. Adult children up to age 26 are now eligible for dependent coverage under all individual and group policies. A young adult can qualify for this coverage even if he or she is no longer living with a parent, is not a dependent on a parent’s tax return and is no longer a student. Both married and unmarried young adults can qualify. This provision has helped one million uninsured young adults get coverage. For seniors, drug manufacturers now must provide a 50% discount on brand-name prescription drugs filled in the Medicare Part D coverage gap, the so-called doughnut hole. At midyear, the feds announced that some 500,000 people had received a discount on their brand-name drugs, with an average savings of $545 per beneficiary. Also, Medicare beneficiaries now can receive preventive services, including an annual wellness visit to the doctor, without cost sharing.

There's been a breakthrough in the treatment of lupus. Benlysta, from Human Genome Sciences, is the first drug in more than 50 years to be approved specifically for treatment of the disease, which afflicts five million people worldwide. Lupus can lead to arthritis, kidney damage, chest pain, fatigue, skin rash and other problems. Before this drug, doctors had only limited options, usually high doses of steroids, which have bad side effects.

Beleaguered airline passengers now have more rights, thanks to the Department of Transportation. Penalties for bumping passengers have increased. Those facing short delays will get double the price of their tickets, up to $650, while those subject to longer delays will get payments of four times the value of their tickets, up to $1,300. The ban on lengthy tarmac delays was expanded to foreign carriers and 303 smaller U.S. airports. Airlines must refund baggage fees if the baggage is lost.

So long, insect pests? Entomologists have hatched an ambitious venture to help good bugs and control bad ones. It’s called i5K, a plan by bug experts to sequence 5,000 insect genomes, picking the critters most beneficial to mankind, such as honey bees and other pollinators, and those most harmful, including ones that eat crops and spread disease. The project is expected to take five years, but the detailed genetic information will help researchers develop ailment-free bee populations as well as highly targeted pesticides that are safe for people and other animals. In some cases, scientists may be able to boost the abilities of predator insects to kill bad bugs.

The national bird soars again. No, not turkeys, which are doing just fine. But the American bald eagle has staged a remarkable comeback. Reduced to 417 breeding pairs in the 1960s by the ravages of DDT, bald eagles were removed from the endangered species list in 2007. There are now almost 10,000 breeding pairs in the wild. And the majestic animals’ return has made news this year in Wisconsin, Ohio, New Jersey and Michigan.

Happy Holidays, and Happy New Year!

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