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. 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. However, the numbers seem to be slowing down, with only 38,000 new jobs created last month. This pales compared to a couple of years ago.
- Job growth numbers are being revised down. Job creation numbers are actually estimates. Later, the actual job numbers are refined. Lately, the actual numbers have been even lower. This is concerning.
- A top reason given for equity recovery is kind of BS (and kind of frightening). Have you noticed how much information the market is able to shake off? It seems like a lot. Part of it is that other parts of world are seeing market declines. They're putting their money here. That's all and good, but is it a ‘real' reason?
- Interest rates. 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 are often buying stocks. It seems like this is a poor reason to invest.
- 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?