http://money.cnn.com/2015/03/29/investing/stocks-market-lookahead-us-economy-jobs/index.html?iid=Lead
The United States economy is starting to show cracks after finishing out a strong 2014. The U.S. job market had its best year of gains since 1999, and economic activity hit a whopping 5% in the third quarter the best quarter since 2003. Yes, the economy looks like it is moving along in the right direction, but it seems as though we are losing momentum. Federal Reserve chair Janet Yellen states, "If underlying conditions had truly returned to normal, the economy should be booming." We are currently facing two main problems according to economists: wages aren't growing much and many foreign economies are slowing down, which puts pressure on the U.S. The U.S. added over a half a million jobs in the first two months of this year alone. Thats a 50% increase from the same two-months stretch a year ago. Unemployment is down to 5.5%, its lowest mark in seven years. These are all positive signs, but wage growth is a major issue. It has barely grown over the year. With little wage growth over the year and recent months, will this lead to the consumer saving and slow the growth of our economy?
4 comments:
slow wage growth affects consumers' spending ability. However, since the inflation rate is quite stable, unemployment rate fell, the wage growth issue would not affect much consumers' confidence.
I'm not sure if consumer confidence is as important in this situation. Spending power is what drives people to participate, and so many of the jobs added in the last few years have been part-time.
This is very interesting because the US economy has added so many jobs, yet we are still struggling in terms of wages. What matter is, like Hannah said, is their willingness to invest in the economy by spending power to allow it to grow. With low wages, this is our problem.
I don't think consumer confidence is the issue either. With the fallen gas prices, consumers do have extra money in their pockets, even though it is not coming from a wage increase. I think consumers are taking this time to save or pay off debts. In case gas prices happen to go back up, they are in a better position financially. If both wages increased and gas prices stay low, I think consumer would split between saving and investing into the economy.
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