What’s up with the economy? Econ made simple
Bottom Line: On Friday we found out that our economy grew at 2.1% for the 2nd quarter and that was better than expected. Ok, what does that actually mean? What does it mean to you? Here’s a quick explanation...
- The 1% growth economy is one which places the economy at imminent risk of recession and isn’t producing new employment or income growth
- The 2% growth economy that is treading water. This economy will generally only keep pace with inflation making it difficult to achieve upward mobility in employment and income growth
- The 3%+ growth economy, which if sustained, produces a steady stream of new employment opportunities and significant opportunity for income growth
Over the past year we’ve now averaged a 2.3% economy, taking a step back from the 3% growth we had previously. But here’s the thing. While 2.3% is just an ok number – the economy is actually better than what the numbers suggest. Here’s what drives the economy...
- Consumer spending: 70%
- Business spending: 20%
- Government spending: 10%
The bottom line is that as we go as consumers our economy goes. And we have been spending big time. Overall consumer spending rose 4.3% last quarter. The best since late 2017 when the tax cuts were getting passed and bonuses handed out to us. That’s great news. If business spending hadn’t been lower, we would have had a blowout quarter. That’s exactly what we’re setup for now in the third quarter. With an average increase in net take home pay that’s nearly $2k better than a year ago and near record low unemployment... we’re spending, and once businesses step up, so with economic growth once again.