Part 2: Econ 4.1 - Cutting through the BS. What it all means to you

posted by Brian Mudd - 

Part 2: Econ 4.1 - Cutting through the BS. What it all means to you 

Bottom Line: In the first part of today's story I reset what US economic growth generally means to us and also pointed out the inherent dishonesty about comparing today's economy to 2014's – the last time we had a quarter of growth above 4%. In this story I'll show what today's economy is really like and what you really can compare it to for a better understanding of what we can expect going forward. 

First, about that 2014 growth comparison again real quick. Through the first half of 2014 the average US economic growth rate was only averaging 2%. That's why it's nonsense to use it as a comp. Through the first half of 2018 we're pacing economic growth of 3.2% for the year. That's a growth rate that's 60% faster than 2014's. Any questions? Plus, I'd bet that you've heard more about soybeans over the past few days than you'd ever heard before. If it seems like a stretch to try to say that soybean sales created a 4%+ quarter you're right. At the high-end trade policy added .6% growth in the quarter. That means that without soybean polooza the economy would still have grown by at least 3.5%. 

Here's what really happened in the economy: 

  • Business spending +7.3% 

  • Consumer spending +4% 

  • Government spending +3.5% 

And here's the thing. Over time you and me – consumers – account for about 70% of the US economy. And we grew our piece of the pie by 4%. If we keep spending around that pace for the rest of the year (which is absolutely possible with low unemployment, an expanding labor force and net take home pay increasing by over 5% year over year) - we've got a good economy regardless of who is or isn't hording soybeans today. 

The last time we had 3%+ growth in the US economy in a year was 2005. The US economy has grown at a 3.1% rate for the past four quarters and is pacing 3.2% for 2018. Look backwards and we have a good economy. Look forward and we're pacing a good economy. Everything else is noise and a heavy dose of political BS. We have the best economy in 13 years right now with lower unemployment, lower interest rates and a bigger increase in take home pay than we had back then which is something else you can feel good about. In 2005 a lot of the growth was built on debt. This time around we're not even spending all of the increase in take home pay. That's a recipe for success for the country and for you. And as a reminder here's what this economy really means to you. 

  • Retirement account balances are at all-time highs 

  • Corporate profits are at all-time highs 

  • Net take home pay has increased by the most year over year in 32 years 

  • Record low minority unemployment rates 

  • Record low unemployment rate for women 

That's what the US economy getting its groove back can do. 

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