Do you ever find your head spinning after reading a news article saying that the job market is quickly improving, only to see a story the next day saying the overall economic growth took a nosedive in recent months?
Well, don’t worry; you’re not alone. Sometimes getting the real picture on where the economy stands can be mind-boggling. Here are a few key factors you can watch this summer to keep your bearings on where the economy is headed:
Job growth is a key component of the U.S. economic engine. While the number of jobs added does naturally fluctuate from month to month, it generally is a good indicator of health in the labor market, and to a significant degree, the broader economy. On the first Friday of each month, the report announcing the number of jobs added for the previous month is released.
Although monthly job gains were less than ideal in the first quarter of 2014, we’ve seen a steady increase in hiring as we’ve entered the summer, most recently with a gain of 288,000 new jobs in June. Should job gains remain strong in the months ahead, look for average wages to start creeping up as employers compete for a shrinking pool of job seekers. Keep your eyes peeled for those employment reports in the coming months, and pay special attention to the direction of average hourly earnings!
The rate of growth in wages is important for several reasons. First, as mentioned, they are an indication of demand for workers out in the labor market. Even more important, they have a direct bearing on consumer spending – the amount of shopping, travel, and other purchases made by U.S. consumers. Since consumer spending accounts for about two-thirds of the economy, it’s a big deal. As you can see, it’s all tied together – and wages are an important piece of the puzzle!
Again, I’m optimistic wage growth will start to pick up in the coming months as the pace of hiring remains strong.
The housing market is also a major contributor to overall economic performance. While it’s true that rising home values have boosted household wealth to record levels, the housing industry has not been performing as well as other sectors of the economy. Many first-time homebuyers are still struggling to enter the market. A spike in mortgage rates starting in May 2013 has made buying a home more expensive. Also, lending standards remain more restrictive than they were prior to the recession and mortgage crisis – although Navy Federal continues to offer attractive zero money down loans to qualified members, helping them overcome this hurdle.
Despite these challenges, I’m seeing some very positive signs for the housing market. The most recent reports suggest a solid upturn in home sales, giving me hope for significant housing activity moving forward. Assuming home prices will rise a bit more slowly, mortgage rates remain near their current low levels, and wages inch up in the months ahead, buying a home should become more affordable and an increasingly attractive alternative to renting – for Navy Federal members and U.S. consumers alike.