The financial crisis of 2007 – 2008 is considered by many to be the biggest financial crisis since the great depression. Financial institutions were on the verge of collapse and the housing market took a dramatic downturn. Unemployment rose dramatically. The result of this near disaster has had a remolding effect on American society with a different approach to personal debt, savings and other social norms. This near collapse of the American economy transmitted across the oceans and Europe and Asia quaked as they fought to keep their economies afloat. Fortunately the world economy remained intact and the dire visions of the 1920s and 30s were not to be seen in the first part of the 21st century.
Despite all the problems experienced with the economy, the stock market has surged to new highs of galactic proportions. Oil and gas in America experienced a renaissance as the industry’s expertise has returned to the borders of our great nation as we cracked the nut that leads to extraction of gigantic amounts of hydrocarbon from previously inaccessible oil shale. Jobs have finally returned to the work force; albeit many of these jobs are providing employment on a part time basis or in an underemployment situation.
Pulling the economy back from the precipice of disaster has taken a joint effort by both government and business. Now that the economy is back on its feet the government must slowly remove itself from the market place and let the free market rule again. Some regulation must remain in place to prevent a repeat of 2007 but this must be limited to only absolute necessary regulations. Unfortunately, this concept is not readily accepted nor understood.
As good as the economy is looking we still have soft spots. The current oil and gas retraction will have benefits to the economy immediately. We have more money to spend, travel and tourism becomes easier and all this leads to the confidence of the American consumer becoming brighter. If the downturn is short-lived and the return to higher oil prices slowly increases, our oil and gas industry can remain intact and we can continue our rise to being the largest oil producing country in the world.
If a person listens to any financial show or reads a financial analysis they will be inundated in statistics and financial indicators that provide some level of predictions as to how healthy the economy is and where the direction of the economy is going. Several of these indicators are quit pertinent and the numbers that accompany these indicators can provide a good indicator as to where we are heading. One thing to remember is that a single month of economic data does not tell the whole story of an economy as to whether it is moving forward or retracting. It takes three consecutive reports or months of data to establish a trend. Thus three months of good data is a good indicator that we are going in the right direction. Let’s look at some of these.
New claims for unemployment is tracked weekly and indicates how willing employers are to keep their existing employees. If new claims can be less than 200,000 per week for six weeks then we can feel that our workforce is stabilizing.
New job creation shows how many new jobs our economy has created over the previous month. Brisk jobs creation shows that the economy is growing and will also signal a potential for inflation. While inflation has been the scourge for a stable economy, small inflation is actually good and can lead to wage growth. This wage growth is important to consumer spending and thus a more vibrant economy. To me new job creation of 315,000 or better for three straight months is a strong indicator that our economy is on the right track.
The unemployment rate has been a barometer of economic health. What it doesn’t show is the people that have given up trying to find a job and have become disillusioned. If we realize our new creation of 315,000 jobs or better but experience a drop in in unemployment of only .1 percent then we can revel in the fact that the chronically unemployed have re-entered the market, are contributing to the American growth, are paying taxes and our country is even stronger. Again this must happen for three consecutive months.
Durable good sales indicate large ticket items that are sold over the previous month. This represents items such as cars, washing machines, ATVs, televisions, etc. An increase in durable goods for three months shows that manufacturing is on track.
An increase in housing sales for three months will indicate that one of our major economic indicators is again fueling the economy.
To me the most important economic indicator is the consumer confidence index. If the American citizen is confident that the economy is good then all things are possible. Three months of increased consumer confidence will go a long way to growing an economy.
Of course the best forecasting tool is the American stock market. It is usually three to six months ahead of the economy when indicating the financial strength of the country. Today we are at historical highs.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s