By Mark Buescher, C.P.A.
The year 2011 has officially ended. Downtown Madison’s Christmas decorations have been stored away for another year, party hats and horns bringing in the new year have been tossed, and New Year’s resolutions are in full swing.
Although 2012 has arrived and we are all looking forward to a fresh new start, the news media reminds us daily that we are facing major problems in this country. Our national debt is an alarming $15 trillion and climbing. Our economy is still struggling to produce jobs and get healthy again. Our politicians seem unable to grapple with even the smallest issue without partisan bickering that leads nowhere.
However, glimmers of hope are on the horizon. According to economic estimates ahead of the official Commerce Department figures coming out next week, December 2011 retail sales were up 5.5 percent over the previous year. This is especially good news since consumer spending accounts for about 70 percent of our economy.
In the employment area, the unemployment rate and job numbers have shown continued improvement as well. Although still at high levels, the unemployment rate in the state of Florida has dropped two percentage points since January of 2011. According to Governor Scott’s office a total of 8,500 new jobs were added in November, 2011 (the most recent numbers available), making the total net new jobs for the year more than 120,000 in the state of Florida. Madison County statistics have shown comparable improvements as well.
The Florida unemployment rate, although still higher than the national rate, is at the lowest level in 31 months. The good news for Floridians can not come soon enough. The state of Florida has already borrowed over $1.7 billion from the federal government to pay unemployment compensation benefits. Florida businesses will continue to see higher unemployment tax rates for 2012 paid on behalf of their employees. However, with improved employment numbers, this figure will eventually begin to shrink, which in turn will benefit employment taxes for all businesses.
Another glimmer of hope: consumer confidence. Retailers and other businesses seem to be benefiting from a rise in consumer confidence. The Thomson Reuters/ University of Michigan preliminary sentiment index rose this month to the highest level since June, according to the survey median before the official report due out this weekend. Of course, stock market gains have played a significant role in the optimism, along with the President’s deal with Republican leaders to keep social security tax rates from rising.
Investors in retail stocks are driving up share prices as consumer spending picks up. The Standard and Poor’s Supercomposite Retailing Index has gained more than 30 percent since June 30, 2010, compared with a 23 percent advance for the broader S&P 500 stock index. Even auto sales in December reached a 12.53 million annual pace, the highest since the government’s so-called cash-for-clunkers incentive program in August 2009.
On another front, the Federal Reserve is continuing their efforts to keep borrowing costs low, benefiting the business sector and indirectly the sluggish Florida real estate market. Fed Chairman Ben Bernanke last week reiterated the central bank will buy an additional $600 billion of Treasuries through June in an effort to trim joblessness further and avert deflation, or an extended drop in prices. With the Federal Funds rate (the interest rate on overnight loans between banks) already close to zero, the Fed is buying securities in an effort to keep borrowing costs low.
All in all, there are continued areas of improvement in our economy and glimmers of hope at every turn. Without a doubt, 2012 is an important year. The presidential election coming up in November, the Supreme Court’s ruling on the new health care law expected this summer, and the expiration of the current Federal tax rates on December 31, 2012, are major coming events on the national level. On a local level, Madison County will start ground-breaking on a new hospital facility and several new employers will continue to fill the employee ranks. All of these events will have an impact on every one of us.
Keep a watchful eye. With continued prayers and the right amount of luck, 2012 could be the year that we make the big turn in our economy.
Mark Buescher, CPA is owner and principal of Buescher and Ruff, LLC, a local full service accounting firm in Madison, specializing in tax preparation, business consulting and tax planning. Tax laws contain varying effective dates and numerous limitations and exemptions that cannot be summarized easily. For details and guidance for your specific situation, contact your tax advisor.