What's the outlook for the economy in 2013? First, economic growth will strengthen. Second, most economic reports are encouraging. Third, there are some structural problems in the global economy that need to be addressed. Until they are, they could cause the fourth economic trend in 2012, which is volatility. Best of all, the year will end on a higher note -- just like every year since the financial crisis of 2008. Here's why:
- Economic Reports Continue to Improve -- GDP growth will improve to 3% in 2013. However, that's not enough to substantially reduce unemployment. As a result, the number of long-term unemployed will grow, unless many of them simply drop out of the labor force. To address this structural unemployment, a national program of retraining should be rolled out.
- Uncertainty -- Unfortunately, the national stage will continue to be dominated by issues that don't create jobs, such as sovereign debt crises in the U.S. and Europe, gun control and immigration reform. Although important, bitter battles do nothing but dampen confidence, creating uncertainty and further volatility, as they did in 2011 and 2012. If the policymakers could instead focus on job creation, the economy would bounce back and reach 4% GDP growth levels.
- The Housing Market Will Strengthen -- Continued reduction in the foreclosure rate is all that home investors and home-builders have been waiting for. As housing prices rise across the country, billions of dollars that have been sitting on the sidelines will return to the housing market, and prices will rebound. This has already happened in Phoenix, AZ and other previously hard-hit markets.
- Gas Prices Will Rise -- High gas prices are something you can count on . Oil and gas prices rise every spring, and drop every fall. If tensions rise in the Middle East, prices will rise higher and faster.
What It Means to You
What's the best way to navigate to improve your personal economy in uncertain times? Stay relentlessly focused on what your own financial well-being. Don't get caught up in fear, pessimism and doomsday predictions. Instead, work with a trusted financial adviser to develop a sound plan. Continue to improve your skills. Chart a clear course, and then stick to it. In that way, 2013 will be your best year ever.