The US economy is doing better than most anyone thought: the early Q3 GDP number is 3.5% — much better than the estimated 3%. If you are less than excited by this news, you can hardly be blamed, given that recent economic growth has somehow occurred in a way that has done nothing to better the lives of 95% of Americans.
Here's a number you might like better. This Friday morning, the Bureau of Labor Statistics released the Employment Cost Index for Q3, and the number, 0.7%, was better than the 0.5% expected. The ECI is considered perhaps the best overall indicator of what's happening with wages and salaries, so it would appear that after years of punishing wage stagnation, America's exceptionally productive and hard working workforce is finally beginning to receive a share of the prosperity it is creating.
This is important, as it also indicates that the seemingly endless slack in the labor market is beginning to be taken up. It has been an eventful week, but this news deserves to be shouted from the rooftops. That sound you are hearing is 1,000 tons of dead weight sliding off of the chest of America's economy, allowing it to truly breathe for the first time in six years.
So, all that… that's exactly what I would be saying right now, but for this: also this Friday morning, the US Commerce Department reported that personal income rose a less-than-expected 0.2% in September. Why, if the wage growth is real, is it not reflected in September's numbers? Worse yet, personal spending for September, expected to rise by 0.1%, actually fell by 0.2%.
Americans not only made less than expected, they spent considerably less, suggesting that workers must have come to accept that things just aren't going to get any better, so they'd better put some money aside and prepare themselves to take care of themselves by themselves.
And about that… that's what I would be saying right now, except that my minor extrapolation on that report – little more than a restatement of the data – is nonetheless wrong. The consumer sentiment index, published by Thomson Reuters and the University of Michigan, was revised upwards to 86.9 from 86.4 this Friday morning, having risen from 84.6 in September. From the report: “Overall, five years after the start of the recovery, consumers have finally begun to adopt the expectations and behaviors that have driven past expansions.”
So what to conclude? The numbers are more good than bad on balance, but it is going to be difficult to muster up any real faith in the economy while we are still seeing so many weird, bad, and baffling economic reports.
Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.