The State of the Economy

Set amongst a backdrop of an exceptionally strong jobs report last week (more on that later), we would like to take a look at longer term trends in the economy and some triggers you can use to effectively monitor them as an aspiring investor.

A lot has been said and done recently about if the Chinese lead a demise of the global economy. U.S. markets had one of their worst starts to the year on record and the turmoil has caused much lost wealth (we all feel the pain!). The Fed has seemingly slowed down its already glacial rate hike schedule and everyone is really worried. Should we be? Let’s take a look at the two things that are always on every investors mind. Jobs, and growth.

Jobs

An exceptionally strong set of numbers last Friday has really set out to confuse everyone. The economy added 242,000 jobs — far exceeding the 190,000 estimate and the unemployment rate remains at multi year lows. But what about viewing this from a longer term point of view? Let’s take a look at what the last ten years have looked like when it comes to new job growth:

Source: U.S. Bureau of Labor Statistics

You can clearly see the worst of the crisis, but it is also interesting to note that other than the rebound surge in hiring in 2010 after the worst had passed, times have really never been so good when it comes to new job growth. The unemployment rate has also steadily been on a march lower, reflecting an underlying strength to the U.S. economy. From a peak of 10% during the crisis, we are now down at 4.9% and seems to have stabilized below 5%.

Source: U.S. Bureau of Labor Statistics

So, people are hiring and being hired and the economy seems to be trending towards optimal employment. Does growth reflect this?

Growth

We spoke about this in a little more detail last time, when we were still expecting a GDP report. Fourth quarter GDP came in at 1.0 % vs the expected rate of 0.7%. While still lower than historical fourth quarters, the U.S economy proved sufficiently resourceful in avoiding a commodities led meltdown (yes we are all tired of hearing about oil!). Given the nature of the move in oil, the effect of the lower prices is being felt by producers in a concentrated and vicious way while the benefit being passed on to consumers trickles down into GDP in a much more sedated manner. So while lower oil prices are a good thing in the long run, the shock to the economy is felt in the short term.

On a longer time horizon one could definitely make the case for a weakening in momentum, but a lot would depend on the next year or so to see if this is just a blip in our fortunes or the start of a longer, more structural downturn.

Source: BEA

Trigger Happy

So with all this, the moral of the story is that economic data matters now more than ever. You can monitor U.S. job growth, unemployment rates and GDP all on your phone, in real time notifications! Take a trigger for job creation for example:

A US Economic Trigger from the product

You can choose to either be alerted about the actual number itself or place an order when the event is fired. It’s easy to forget about payrolls; after all who is paying attention on a Friday morning? And missing out on the number can cost you a great trading opportunity! At Trigger, we watch the stock market for you.

Posted by Akshay aka FinanceGuy