As 2014 winds down, now is a good time to look back at the biggest business and economic news of the year. Here are 10 business and economic stories that made headlines over the past year:
- The end of quantitative easing (QE) by the Federal Reserve — At the end of October, the Federal Reserve officially ended the quantitative easing (or QE) bond-buying program that it started in 2008 in order to help stimulate the economy and strengthen employment.
Through three rounds of quantitative easing (QE1, QE2 and QE3) over six years, the Fed expanded its holdings of Treasury and mortgage-backed securities from less than $1 trillion to nearly $4.5 trillion. By the end of October, the Fed announced that QE had sufficiently strengthened job growth and the economy was no longer in need of the support that QE provided.
- Employment picture begins to brighten — The unemployment rate is one of the most closely watched economic barometers in the country. The national unemployment rate hit ten percent in October of 2009 as the effects of the Great Recession hit the economy hard. Since then, however, it has fallen steadily, and this year it dropped from 6.6 percent in January to 5.8 percent in October, with employers adding an average of 227,000 jobs each month this year.
However, some economists point out that the official Bureau of Labor Statistics' (BLS) unemployment rate does not reflect the true employment picture. The real unemployment rate, they say, is more than double this: 12.6 percent. This figure reflects the government’s U-6 report, which includes people who are marginally attached to the labor force and who are employed part-time for economic reasons.
- Inflation and interest rates remain low — Since the recession, the Fed has poured trillions of dollars into the U.S. economy to try to stimulate economic growth. This stimulus has consisted primarily of QE and maintaining a Federal Funds rate near zero. Under normal circumstances, when this much money is pumped into the economy, inflation rises. However, this has not happened so far, with core inflation remaining below two percent throughout this year.
Meanwhile, the Fed continues to indicate that it does not plan to raise interest rates until mid-2015 at the earliest. This could change at any time, however, based on the latest economic conditions.
- Falling oil and gasoline prices — This has been one of the most welcome economic stories of the year for most people. After watching gas prices soar to over $4 per gallon in some parts of the country, Americans are now enjoying gas prices under $3 for the first time in years.
As of November 15, the average national price for a gallon of regular unleaded gas was $2.90. In May of 2011, this average was $3.99. While sub-$3 gas looks pretty good in comparison to recent history, it is worth noting that the average national price for a gallon of regular unleaded gas six years ago, at the end of 2008, was just $1.59.
- The midterm elections — Whether you want to call it a wave, a tsunami or something else, the 2014 midterm elections clearly reflect a desire on the part of many Americans for political change — not only in Washington, D.C., but in state capitols and legislatures all over the country. Republicans not only gained control of the U.S. Senate, but they also solidified legislative majorities in many states and picked up governorships in states across the political spectrum, including deep-blue states like Maryland and Maine.
Unfortunately, the initial pledges of cooperation and bipartisanship on the part of politicians in Washington quickly degenerated into bickering and confrontation within days of the election. It remains to be seen whether the changing of the political guard will result in the passage of legislation that will help the U.S. economy and businesses — or whether gridlock and stalemate will remain the status quo in Washington.
- The year of the mega-merger — 2014 could end up going down as the year of the mega-merger. Merger deals announced this year include Comcast’s mammoth $69.8 billion purchase of Time Warner Cable, the tenth-largest M&A deal in U.S. history; AT&T’s $67.1 billion acquisition of DirecTV; and Facebook’s $19.4 billion acquisition of WhatsApp, the fifth-largest tech merger ever.
Experts attribute this year’s merger mania to the booming stock market and expectations for an improving economy. The economic environment this year has been the best for mergers since the financial crisis began, they point out. As a result, the pent-up demand for acquisitions that had built up over the past few years exploded in a wave of mega-mergers, as companies flush with cash put it to use buying other businesses.
- The introduction of Apple Pay by Apple — In October, Apple launched Apple Pay, a new payment service that could do for mobile payments what the iPod did for digital music. Mobile payments and digital wallets have been around for a few years now, but have yet to really take off. With the technological and marketing muscle of Apple behind it, Apple Pay could help these innovations finally start to reach critical mass.
Apple Pay uses near-field communication (or NFC) technology to enable owners of the newest iPhones and iPads to use these devices to pay for goods and services at the point of sale. Users simply hold their finger on the Apple device’s Touch ID sensor and then hold the device near a point-of-sale terminal. In announcing the launch of Apple Pay, Apple’s CEO said the company views it as a fix to what he called the “broken, outdated and vulnerable” payment process using magnetic strips on plastic cards.
- More huge consumer data security breaches — This year saw a continuation of the massive data security breaches at large U.S. corporations that started with the Target data breach during last year’s holiday shopping season. This breach jeopardized the security of payment data on 40 million Target customers’ credit and debit cards, while the personal information of another 70 million Target customers was stolen.
Since then, major corporations, including Best Buy, Neiman Marcus, Sony, JPMorgan Chase and Zappos, have all been the victims of data security breaches. Most recently, Home Depot announced that a data security breach has placed the credit and debit cards of as many as 56 million customers at risk, while Staples revealed in October that it is investigating a possible data security breach at some of its stores located in the northeast.
- Bull market run continues — In 2014, the U.S. stock market continued one of the longest bull runs in history. On March 9, 2009, the S&P 500 index fell to 756, a 57 percent drop from its previous high in 2007. Since then, it has nearly tripled in valued, closing at 2,053 on December 1. At 67 months and counting, this is now the longest running bull market run in 85 years.
- Obamacare: Year One — The official rollout of Obamacare culminated on March 31, 2014, when the initial six-month Open Enrollment period for buying health insurance on the HealthCare.gov online marketplace ended. Obamacare got off to a much-publicized rocky start, with numerous website glitches and the now infamous, “If you like your plan, you can keep your plan.” Nevertheless, the Administration was able to claim that it met its goal of achieving seven million signups for insurance by the end of this past March… although that number dropped through 2014.
We wish you a Happy New Year complete with upbeat business and economic headlines in 2015.