The economy has been on a pretty good path for the last 8 years or so with slow but steadily improving job numbers, reduced unemployment, and a rising stock market. Many have argued that the slow growth is ‘bad’ but I argued a few years ago that slow growth actually provides a more stable foundation and a softer landing when things do start to turn.
I’m starting to wonder if that turn is starting to happen. Moreover, I’m wondering if we’ve been used to things moving up for so long that people might be missing or ignoring the signs.
I’m not in outright panic mode but here are a few little things I’ve noticed that add up to a little bit of worry (Disclaimer: You should make absolutely no investment decisions based off of this article, which is 100% opinion).
Why I’m Worried About The Economy
- The market is in a trading range. The stock market has bounced up and down between around 1,800 and 2,100 for well over a year now. Anybody that is ‘buy and hold’ is likely seeing little or no profits, with the only people making money are the ones that have learned to trade in this range.
- Job growth really seems to be slowing down. For most of the last eight years, we’ve seen month after month of new job creation. For a long time, people wished it were growing faster, but now seem fairly settled in. However, the numbers seem to be slowing down, with only 38,000 new jobs created last month, a pale comparison to the hundreds of thousands per month that were created on average even just a couple of years ago.
- Job growth numbers are being revised down. When the job creation numbers are announced, they’re estimates. The actual numbers come in a few weeks after, and revisions occur as more data becomes available. In each of the last couple of months, the announced numbers ended up being revised down. This doesn’t seem a good pattern to me.
- A top reason given for equity recovery is kind of BS (and kind of frightening). The first few weeks of 2016 saw a pretty steep correction in the markets, around 10% or thereabouts. The recovery was swift, and last week, the market largely seemed to even shake off the Brexit news. This all seems well and good, but when I read a lot of articles, blog posts, or comments to the above, one main reason given for the growth in US equities is that people are selling equities in other areas of the world and moving them here. That’s not a great endorsement.
- Another reason is even more scary. We’re in an extended period of ultra-low interest rates. Debt has been financed on the cheap. This has left cash on the sidelines that nobody really knows what to do with, so they buy stocks. This almost seems to me like money is being invested simply because nobody knows what else to do with it. Again, not exactly a reason high on my list when plotting out catalysts for growth.
- WARN Notices are on the rise. Here in Michigan, when mass layoffs take place, the company must file advance notice with the State. This info appears on their website specific to this information. Last year, for the first six months of the year, there were 20 notices filed. This year over the same period, there have been 32.
No Doomsday Predictions Here
I’m not sounding the alarm and not panicking. I do think there are signs that the growth, as slow as it’s been, may be flat lining at best. So far the markets have been shrugging off every bit of negative data that comes out. Still, I don’t trust markets as any sort of leading indicators these days, not with a majority of shares traded each day being done by computers.
Readers, what do you think about the state of the economy right now? Where do you think it’s headed next?Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.