The economy has been trending upwards for some time, or so that’s what the media and everyone in D.C. would like to lead us to believe. There is more than meets the eye though. Yes, it is true the stock market’s prices have been on the up and they appear to be doing quite well over the last six years. However, underneath that shiny looking exterior is a grimmer and unsettling picture. The economy has been adding jobs, but these jobs aren’t high paying and they aren’t providing the full 40 hours that adults need in order to live a stable lifestyle. Furthermore, people with full-time jobs aren’t seeing wage growth needed to keep up with inflation.
Dawn J. Bennett has been tracking and covering these problems in detail for years now and is calling out to investors to put their thinking caps on. It is no longer enough or safe to simply be well educated on the markets; investors need to really dig deep so that they have a more fundamental understanding of what is happening with the economy. For example, just recently the University of Michigan’s final February consumer sentiment numbers were released and it went from 98.1 in January to 95.4 in February. This means people are beginning to lose hope in the idea that incomes will rise and better business opportunities are coming.
Another warning signal that has smacked us straight across the face is the drop in the Chicago Business Barometer from January to February. In January the rating was 59.4 and in February it plummeted to 45.8 – that’s the lowest it’s been since 2009. For those not familiar with the Chicago Business Barometer it is also known as the Chicago Purchasing Manager Index (Chicago PMI). It measures the health of the manufacturing sector and in general when the score falls below 50 it indicates contraction in the future for the economy.
We all wish the bad news ended there, but Dawn J. Bennett has done her research and has more that indicates a storm is coming for us. The Bureau of Economic Analysis (BEA) also recently revised its estimate for fourth quarter 2014 GDP growth down. The revised number was 2.18% which was roughly a 43% drop from the third quarter. Downward revisions in GDP growth are always a major warning for the economy and it appears as those in the Federal Reserve and D.C. are blind to these realities.
It’s time for investors to stop glossing over these important numbers and details. There has been too much aggressiveness in the market lately over unstable investments. It’s time to pay attention to the smaller numbers and dig into reports to gain a real understanding of what is happening in our economy. It’s time for everyone to stop letting themselves be told the future is sunny and smooth sailing because the reality is we’re heading into a major economic storm that will be brutal for lots of us.