Although it may not look like it through the recent decline in the market, and the seemingly slower growth jobs report, the economy is actually improving.
First, consumer borrowing just spiked way up.
U.S. consumers sharply increased use of their credit cards in March, pushing up total borrowing at the fastest pace in more than a decade.
The Federal Reserve reported Friday that total consumer borrowing rose $29.7 billion in March, a 10 percent jump from the previous month. It was the largest percentage gain since a surge of 18.4 percent in November 2001, when consumer borrowing surged in response to government officials urging Americans to boost spending to support the economy following the September terrorist attacks.
Second, those jobs growth figures look things are slowing down? Not so fast there. The quality jobs that drive our economy are actually going up:
While the pace of growth slows down as recoveries mature, the quality of those jobs improves. The first jobs to come back following a recession are in places like stores, restaurants and hotels, said Raymond James chief economist Scott Brown. This activity boosts job numbers and lowers unemployment but does little for wage growth, since most of these jobs tend to be lower-paying. As recoveries mature, the pace of growth slows down but the quality of those jobs improves.
Some stats from the article:
o Biggest gains in April were professional services and healthcare, which added 65,000 and 44,000 jobs, respectively
o Gains in professional services jobs included 21,000 jobs added in management and technical consulting services, and 7,000 in computer systems design and related services
o This rebound, combined with the dynamic of higher demand and fewer workers across the board, is leading to rising wages
o Annualized rate of wage growth rose to 2.5 percent. By comparison, wage growth was at 2 percent 18 months ago
When you look at these two pieces of information as a composite (1. consumer borrowing is going up and 2. quality jobs with better wages are going up) you can see that the economic condition is actually heading exactly where we want to go.
Those better paying jobs just got a boost last month, and to celebrate their new jobs and wages all those folks bought some nice things in March - the biggest boost in credit card purchases since 2001.
All these things mean a good thing for our growth stocks. But since these activities just started in March we’ll have to wait until next quarter to see them in our earnings reports.