The 10 biggest business stories of 2014
This year might be remembered as the one when America got its act together.
It's been a year of extraordinary financial stories, but some of the most important ones aren't about specific companies. Rather, 2014 was notable because after years of struggle, the country's economic engine finally wheezed and groaned into high speed.
The journey has been fitful, to be sure. And there are still glaring voids in it, ones where vast segments of the population still continue to struggle financially. But some of the most important puzzle pieces of the economy are locking into place in ways they haven't done since before the recession.
Americans are spending more money this holiday than they have in years. Gas prices have been in freefall, giving household budgets a much-needed break. Jobs are coming back. It's beginning to look a lot like a real recovery, and we're finishing 2014 in much better economic shape.
Read on for the 10 biggest business stories of the year.
10. The massive hack on Sony Pictures
The fact that Sony Pictures' computer systems were hacked was devastating in itself. What followed was even worse.
Sony's computer systems were down for two days in late November and employees saw a message on their screens that said, "We already warned you, and this is just a beginning."
Then came days of revelations about Sony's business practices. Cringeworthy emails about stars emerged, as did racially insensitive messages about President Obama. Leaked compensation numbers showed a gender pay gap for actors. Employee home addresses and medical records were posted.
It was a public relations nightmare of the worst kind in Hollywood, one that the company will be reeling from for years. Some cybersecurity experts estimated the leak could cost Sony (SNE) as much as $100 million, along with the possibility of lost future business opportunities as Hollywood reacts to the damage. News reports continue to link the hack to North Korea, but neither the company nor North Korea have publicly confirmed a connection.
9. Tax inversions
More companies were interested this year in relocating overseas to save millions of dollars in U.S. taxes. The move, known as a corporate inversion, picked up so much speed that even President Obama voiced his opposition, saying "it sticks you with the tab to make up for what they're stashing offshore through their evasive tax policies."
In the medical-device field, Medtronic announced plans to buy Ireland-based Covidien. Other deals were in the works, but the Treasury Department intervened in September with new rules that made it harder to invert and spin off overseas subsidiaries. That stopped some inversions cold.
Burger King pressed on, however, and became a Canadian company last week by merging with Tim Horton's. The estimates of what Burger King will save on U.S. taxes vary wildly, ranging from $10 million to $1 billion. One liberal group, Americans for Tax Fairness, estimates the chain could save at least $400 million over the next four years. Burger King insists it isn't trying to flee U.S. taxes in the deal.
8. Bitcoin's plunge
Bitcoin saw a spectacular rise in 2013, zooming up to nearly $1,000 apiece as the year drew to a close and generating excitement among fans over where it would go in 2014. But the digital currency turned into one of the worst investments of the year, steadily falling to just above the $300 mark by December.
Bitcoin's credibility took some serious hits as unregulated exchanges unraveled. Perhaps the biggest threat to Bitcoin this year was the collapse of Mt. Gox, the Tokyo exchange that handled as much as 70 percent of all Bitcoin trading in 2013.
Mt. Gox filed for bankruptcy and announced that some $450 million in Bitcoins had been stolen. While more than $100 million in Bitcoin was later recovered, many customers never saw their currency restored and lost all faith in Bitcoin.
7. Alibaba's monster IPO
The Chinese e-commerce giant had the largest IPO in history this year, raising a jaw-dropping $25 billion as the stock debuted on the New York Stock Exchange.
Alibaba (BABA) connects online buyers and sellers, and claims to have 300 million customers in China. The company hosted $9.3 billion in sales in one day in November as China celebrated the Singles Day informal shopping holiday.
Alibaba also gave U.S. investors more clear evidence of China's growing financial power. The IPO was priced at $68 per share, and opened at $92.70 in its first day of trading in September. Shares zoomed to $105.24 by mid-December.
6. Waiting for wage growth
Jobs are coming back, but workers haven't really seen paychecks beef up in response. In fact, wages this year are up only 2.1 percent -- only slightly above inflation and far below the 3 percent to 4 percent increase that's one hallmark of a healthy economy.
The median annual household income in October was just $53,713, according to Sentier Research. That's only a 1 percent increase from a year earlier, and a 3.7 percent rise from August 2011.
That slow growth is thought to be one of the main reasons the economy isn't doing better. There are some signs growth may be picking up, however. The November jobs report showed that average hourly wages rose by 0.4 percent. And while that might not seem like much of a leap on its face, consider that it's the largest monthly spike in wages in more than a year.
5. General Motors recalls
General Motors (GM) has announced 79 recalls this year, an unprecedented move that is costing the company billions. The recalls came after the automaker included faulty ignition switches in some cars that have been linked to at least 40 deaths and dozens of accidents.
The company's CEO, Mary Barra, was grilled by members of Congress earlier this year -- an event that provided fodder for a "Saturday Night Live" sketch. Lawmakers were concerned about a $400 million compensation program the company has announced for victims and how General Motors allowed the faulty ignition switches in its vehicles in the first place.
The company's earnings took a big hit from the recalls, falling some 80 percent in the second quarter. But sales have been solid for the company all year, which is fueling hope among investors that GM's turnaround is firmly in place. Still, GM shares have fallen nearly 24 percent this year.
4. The shrinking middle class
The U.S. economy is recovering, but you wouldn't know it from looking at the country's middle class. That group continues to suffer from "dissavings," which occurs when spending is greater than income.
A recent paper from a New York University economics professor puts the middle class into a dissavings rate of 9.9 percent relative to median income. In other words, the group is going further into debt and depleting assets to maintain their lifestyles.
The middle class is on the wrong side of the widening income and wealth gap in the county. Incomes at the top are growing sharply, propelled by gains in the stock market, but since the 1970s the income gains for the middle and lower rungs have slowed.
Economist Thomas Piketty hit a nerve earlier this year when his new book on economic inequality stirred a wide-ranging debate on the wealth gap and the diminishing opportunities for upward mobility in America.
3. Stock market's continued climb
Plenty of bears predicted doom for stocks as 2014 began. And yet the market hit new highs all year, surprising even the most optimistic investor. Experts said bonds were in for a terrible year as well, and yet bonds rose by nearly 6 percent.
Even though the Standard & Poor's 500 index has turned down in December, it's still up nearly 8 percent for the year. Investors celebrated low interest rates, a steadily improving economy, decent job growth and stronger corporate earnings.
December's downturn is worrying investors, however. Some fear that we could be ending the year on a sour note that could cast a long shadow on 2015.
2. Unemployment recedes at last
The unemployment rate slid below 6 percent this year for the first time since 2008. And U.S. companies added 321,000 jobs in November, the biggest monthly spike in three years.
Those are extraordinary figures for economy watchers. Unfortunately, many of those new jobs were part-time seasonal work at companies bulking up for the holidays. January's jobs number will shed more light on how many of those jobs stuck around. And high-paying industries aren't adding many new positions at all.
Still, the unemployment rate and the jobs momentum may be leading the Federal Reserve to normalize its monetary policy, which was another big business story this year. The Federal Reserve meets this week and will issue a regular policy statement Wednesday. Observers are watching the statement for language about whether regulators will keep a key interest rate near zero for a "considerable time." If that phrase disappears, look for the Fed to start raising rates next year.
1. Oil's plunge
The biggest business story of the year is the staggering drop in oil prices and the wide ripple effect worldwide. Oil has plunged nearly 50 percent over the last six months to levels not seen in years.
There are many reasons for the decline. Libya has quadrupled its oil output this year, and the U.S. is producing oil at the fastest rate in nearly three decades. Meanwhile, global demand for oil has slumped as economic growth slows in Asia and Europe. The International Energy Agency has cut its forecasts for oil demand growth five times in the last six months.
Oil's freefall has left some oil-producing countries facing a financial crisis. Russia's currency has lost 18 percent of its value this month, and the country's economy -- already battered by Western sanctions -- is on the brink of a recession.
The picture is quite different in the U.S., where drivers are celebrating a steep drop in gasoline prices. Gas has now fallen below the $2-a-gallon mark in 13 states across the country. If prices stay low, the average American family could save $750 over the next year, according to IHS. That would be similar to cutting taxes in the U.S. by between $100 billion and $125 billion, Goldman Sachs economists estimate.
And here's one area where the middle class can cheer. That drop in gas prices helps everyone, but it's expected to help the middle class the most.