Economy Made Simple

On Friday we found out that our economy grew at 2.1% for the 2nd quarter. That was better than expected. But, what does it mean to you? It means that the 1% growth economy is one which places the economy at imminent risk of recession and isn’t producing new employment or income growth. Also that2% growth economy is treading water. This economy will generally only keep pace with inflation making it difficult to achieve upward mobility in employment and income growth. Lastly, 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 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. If business spending hadn’t been lower, we would've had a blowout quarter. That’s exactly what we’re set up 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 will the economic growth once again.

Photo by: Getty Images

 

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