There’s a lot of discussion in the media about the recent job growth in August. We are hearing a lot of negativity around that report, but we don’t think it’s all so bad. There’s still growth and we still have consumer confidence. The reason we point this out is because unemployment is still steady and wages are growing. For August, wages grew 0.4% and has grown 3.2% for the year. People are kind of overlooking these underlying elements of the actual job growth. The news puts out headlines to stop people in their tracks so that they’ll listen or read when the reality of all of it is that it’s a just snapshot for the moment.
Clients have mentioned to us on several occasions that they are watching the news and often ask us about what they hear from the media such as the recession discussions. Obviously, the news drives a lot of things, so we wanted to talk about the facts and the reasons we think we’re not going into a recession in the near term. We have reports showing the U.S. consumer continuing to strengthen. The jobs number and consumer spending number in August were great. All of those are good indicators. Also, central banks around the world are easing up and driving extra stimulus. What makes up world GDP? The U.S. consumer makes up 17%, China’s GDP is 16%, Japan’s GDP is 6%, Germany’s GDP is 5%, and the U.S. government is 4%. If you look at what makes up the top GDP in the world, an overwhelming 21% of it is stemming from the United States. This data proves that, near term, we’re not looking at a recession.
Around The World
In parts of the world where there’s a little bit of slowing, the central banks and the governments in those areas are easing to stop that slow-down. So, especially when it comes to markets, central banks have a lot of weight behind what they do in terms of reducing interest rates. We saw on Friday that the People’s Bank of China reduced interest rates. This week, the ECB (European Central Bank) is expected to announce a huge wave of stimulus that should prop up those two weaker areas that were big parts of global GDP. This will lead into next week in which our Fed is supposed to meet and possibly cut rates. We’re in a kind of Goldilocks area where the U.S. economy is growing good but not so good that the Fed must raise rates but also not so weak that we’re going into a recession. So we’re kind of getting our rate cut and growth at the same time. One of the things we think is losing focus is with people watching Democratic debates, the next Presidential contenders and the executive branch is focusing on China trade. Everyone is forgetting about a very important branch, Congress, that’s now back in session. They’ve got to pass a budget deal to keep the government working and funded. They also must pass our largest trade deal between Canada and Mexico that already has been agreed upon pending Congress passing it. So, these things seem to get lost in the shuffle. We need to start focusing on the upcoming events in September and October.
The Working Class
The data says that people are working. If you look at the working age range in the United States, it runs from 25 to 54. In that range, 82.6% of people are either employed or looking for employment. That’s an extremely high number, but most importantly, the growth of workers from July to August was the highest since 1960. So, data like that doesn’t suggest recession at all. People are working and that number is growing. Also, reflecting back on the wages growth for the year, 3.2%, is much higher than inflation. Wages wouldn’t be going up if businesses didn’t believe there was growth. Also, the unemployment number staying steady shows people aren’t just getting jobs but retaining them.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.