Econ 4.1 Cutting through the BS pt. 2

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 that in 2014's. That was the last time we had a quarter of growth above 4%. In this story, I'll show what today's economy really is like and what you really can compare it to for a better understanding of what we can expect going forward. 

First, a little more about that 2014 growth comparison. 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 comparison. As we pass through the first half of 2018, we're pacing economic growth of 3.2% for the year. A growth rate that's 60% faster than 2014's. 

Moreover, 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 palooza the economy would still have grown by at least 3.5%. 

So, what really happen in the economy?  Business spending increased by 7.3%, consumer spending went up by 4% and government spending grew 3.5%.

Here's the thing, over time you and me, the consumers,  account for about 70% of the US economy. We grew our piece of the pie by 4%. If we keep spending around that pace for the rest of the year, we've got a good economy regardless of who is or isn't hoarding 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 at 3.2% for 2018. Look backward 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.

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. As a reminder here's what this economy really means to you. Retirement account balances and corporate profits are at all-time highs. Net take home pay has increased by the most year over year in 32 years and there are record lows in minority unemployment rates and women unemployment rates.

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

Photo by: Getty Images


View Full Site