The State of the Economy -Miller Hoffman

Charging Bull as found in The Financial District in Manhattan, New York City

With hundreds of media outlets, both locally and nationally, craving attention from audiences across America, it can be incredibly difficult to determine the authenticity of just about anything nowadays. From social issues to the latest political bombshell, Americans subscribe to a variety of news outlets for partisan updates. This article is not immune to bias, but I will attempt to give you an honest take of the U.S. economy through the first two quarters of 2018.

Depending on your choice of news, you may have two very different perspectives on the health of the economy. For the sake of simplicity, those on the right see a tax-relieved strengthened economy that continues to improve businesses and families financially across the States. For those on the left, the rich seem to be getting richer while wage growth and trade wars seem to pull down the economy. I see a mix of both; however, I believe the former is the most accurate. I’ll discuss two major subjects that I believe are important when judging the health of the current economy: a historically-low unemployment rate and a continuation of a bullish stock market.

The unemployment rate gradually increased to 4% in June of 2018, up from 3.8% in May 2018.  The unemployment rate is a measure of those who are unemployed and actively seeking work (Sorry, Ocasio-Cortez). The performance in May tied the lowest unemployment rate in almost half a century, indicating a solid labor market. Wage growth, on the other hand, has been left behind in terms of growth. Jerome Powell, the Chairman of the Federal Reserve, pointed to a strong economy and low unemployment as the remedy over time. Some economists believe there may be even more room for lower unemployment as the labor market still appears to have room to grow.  The historically-low unemployment rate, with the potential to improve, remains a positive sign for America.

Measured and Projected Unemployment Rates, 1950-2020

Furthermore, the bullish (positively trending, growing) stock market we’ve been experiencing for approximately nine years, including a strong 2017, reflects consumer confidence in American and international companies. Although the stock market isn’t the sole indicator of a solid economy, a rising market boosts the financial industry and investment instruments, such as 401(k)s and IRAs held by many Americans. Many companies, citing tax reliefs, have awarded bonuses to employees, declared dividend increases to shareholders, and continued investing in their lucrative business models.  Just recently, for example, JP Morgan (JPM) reported $8.32 billion in profits, an 18 percent increase over analysts’ expectations.  How many more records will the stock market break? Only time will tell; for now, consumer confidence indicates a strong belief in the American economy.

There are literally hundreds of metrics used by economists (and Salon.com unpaid interns) to support or criticize the state of the economy. In this article, I have only delved into two basic measures which I believe to be influential in this current time. The economy is no different from the business cycle; there are periods of expansion and contraction. For now, let’s enjoy a strong U.S. economy that has continued to offer opportunities for its citizens since 1776.

Miller Hoffman is a Senior Finance Major, Accounting Minor, and CUSG Treasure r

 

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