economy

Is The Economy Good or Bad?

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I occasionally get questions regarding the economy that sound frustrated in the inability to get a clear answer. That is understandable. The U.S. economy is getting better, but it isn’t really getting better fast enough for anyone to be able to benefit from the fact that it is getting better. Add in the fact that many news outlets have gone partisan and that their reporting is designed more to highlight certain aspects that make their guys look good and the other guys look bad, and you get a confusing picture about whether the economy is good or bad right now. Doesn’t make much sense does it? To really understand what is going on economically, it may help to read an article from The Economist. As an aside, whenever you really want a reasonable idea of what is happening in the U.S. it can be helpful to read non-U.S. publications such as The Economist, and to a lesser extent, the Guardian. The Economist leans toward the conservative side, but that doesn’t mean the same thing as it does here in the U.S. More specifically, the publication does not have an owner or readership with a dog in the hunt, so to speak, …

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Jobs Looking Good for September

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Every time a jobs report, or other important economic numbers, come out politician run screaming into newsrooms across the country to spin it so that it says what they want it to say. If you want to know what economic data really mean, ignore the politicians. On Wall Street, investors put their money where there mouth is. Spinning for an investor is the same thing as deliberately losing money. While a politician is more than happy to say something that isn’t true, no investor is willing to throw away their cash for the sake of appearances. September Jobs Report Is Good News The stock market is up 206 points as I write this. No matter what some politician says, this was good news. In some places, they are calling this the “Goldilocks” jobs report. It was not too hot, and not too cool. The economy added 248,000 jobs and the unemployment rate dropped below 6 percent to 5.9 percent. Wall Street wants job growth; they need job growth. An economic recovery can’t go anywhere with too many people unemployed. However, job growth can mean inflation, and no one wants inflation. More accurately, no one wants the Fed to worry about inflation and start …

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Fourth Quarter 2014

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Welcome to the fourth quarter of 2014. It’s been an interesting year so far. Let’s jump right in. First, if you own a small business, like me, your third quarter estimated tax payments are due to your buddies at the IRS by October 15. By now, you should start having a little bit of an idea how your income might go for the year. If you are doing more business than last year, consider bumping your payment to keep up with your higher income. On the other hand, if business is off, then back that withholding off a bit too. Also, if you are a small business owner and you don’t get your health insurance through a spouse or other plan, don’t forget about the Obamacare open enrollment period for 2015, which runs from November 15, 2014 to February 15, 2015. You got an extra extension into April this year while the government worked out some bugs. That won’t necessarily be the case this year, so double-check your plan, or see what the new ones are. You can go to HealthCare.gov and they’ll redirect you to your state exchange if necessary. September Jobs Number The September labor report is due …

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Second Quarter GDP Stays Good

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We’ve talked a bit about the economic numbers that came out this summer. In large part this is because the economy is in a transition period. After a seemingly unending drift (upward, but drifting nonetheless), the economy might, MIGHT, finally be sputtering to life. However, economic numbers can be tricky. Earlier this year, the GDP numbers unexpectedly showed a major contraction. Most analysts dismissed this as an abberition due to the harsh weather experienced in the Northeast during the first quarter. At the half way point of the year, the economy looked like it was at least heading in the right direction. When the second quarter numbers came out, they were pretty good, but there was fear that the revisions might not be so pleasant. Revised Second Quarter GDP In order to produce numbers for each quarter without a significant delay, economic reports are released based upon preliminary data. It is accepted that these numbers are likely to be revised later as economic figures that aren’t as readily available come in. Typically, the adjustments to numbers like the GDP are relatively small. Big adjustments are unusual and come with lengthy explanations about what went wrong. The final numbers are issued …

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U.S. Economy Update

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It seems that there is a never ending stream of economic data coming from all directions. Actually, that is true. However, it usually isn’t as dynamic as it has recently been. Typically, the economy moves in one direction, at one speed for a certain period and then adjusts and moves in a mostly predictable manner yet again. However, with the U.S. economy still recovering slowly from the Great Recession, things seem to be a little more erratic. The latest economic data, released Wednesday, suggests a big bounce back from the surprising decline from earlier this year. If you remember, the beginning of the year, a major weather system in the northeast knocked the economic recovery off track, and led to a mixed mid-year review of the American economy. While every major economist at the time considered the dip to be a temporary phenomenon, things got even trickier when the already down news was revised further downward. The latest data suggest that the recovery is back on track for this year, at least. The U.S. economy grew at an annual pace of 4 percent in the second quarter. (There is a misconception that this means the economy actual grew the full …

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US Economy Not Doing So Well After All?

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Is the U.S. economy falling? Recently reports from various economic organizations, including the International Monetary Fund, or IMF, have begun to predict that the American economy will not grow as much as had been predicted by many organizations at the beginning of 2014. So, what does that mean? Is America Heading for Another Recession? Thanks to the extreme polarization in American politics, these reports have been met with either an uninterested dismissal, or with warnings that the end is nigh. As always, neither is completely accurate. So, what is really going on? The northeast part of the United States holds not only a lot of the population, but it also contains some of the biggest financial and manufacturing centers. So, when something affects the Northeast, it affects all of America, at least statistically speaking. The long, harsh winter weather, now being referred to as a deep freeze, appears to have substantially affected everything from customer spending, to shipping goods, to manufacturing. In other words, that long spell of adverse weather put a break on economic activity in that region, enough to affect the overall numbers for the U.S. economy. Economists now suggest that the American economy contracted at an annual …

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Coming to FinanceGourmet – Personal Finance Blog

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This coming week, we have some interesting new articles for Finance Gourmet to help with frequently asked about and requested personal financial health topics. First up, as May draws to a close, June marks both the end of the second quarter, and the midpoint of the year. What kinds of things should you be aware of at this point for optimal financial health? We’ll discuss quarterly tax payments, how the markets are looking at the half way point, what things you might want to be thinking of for minimizing your taxes, and more. Next, we tackle signing up for a 529 plan, step by step. Not long ago, I wrote about how a financial planner can help keep you from getting stuck on your financial planning actions such as setting up a 529 plan. But, when you can find them, a detailed step-by-step guide to setting up financial accounts such as a 529 plan can be just as valuable. We’ll give you a detailed guide on how to open a Colorado 529 plan, including how to fill out all the Colorado 529 plan forms to set up an account. Then, we’ll look at some of the new IRS numbers that …

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Why Raising Minimum Wage Doesn’t Hurt Anything

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Minimum Wage Worker

Recently, several news outlets reported that Vermont is raising its minimum wage and will now become the state with the highest minimum wage in the nation. Seattle is looking to raise its minimum wage to nearly $15 per hour. Before these events dozens of states and cities had already raised their minimum wage above the federal minimum wage of  $7.25 per hour. The Colorado minimum wage is now $8.00 per hour and $4.98 per hour for “tipped” employees. This wage is indexed for inflation, so it will continue to rise as the economy expands. As is often the case, before any of these increases, opponents predicted doom, massive layoffs and closing businesses. In the case of various cities raising their minimum wage higher than the rest of the state, many opponent experts claimed that businesses would flee the cities raising wages. None of that ever happened. Why Higher Minimum Wage Doesn’t Affect Businesses The argument against minimum wage goes something like this: Businesses will flee to areas with lower minimum wages Businesses will fire workers or cut employee hours Businesses will raise prices The economy will suffer The fact is, however, that after all of these states and cities raised the minimum …

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Unemployment Hits 7% for November

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Unemployment numbers for November were released today. The unemployment rate hit 7.0 percent for the first time since November 2008. If your recent economic history is a little fuzzy, that’s right about the time the banking crisis and housing market implosion was a full tilt. In other words, we’ve been over seven percent unemployment since the so-called Great Recession started. I get  a lot of questions about economic news stories. In particular, people want to understand the significance of the various economic statistics that come out better so that they can separate real new from hyperbole. So, let’s take a look at these unemployment numbers and see what the deal is. What Is the Unemployment Range? First, off, it can be hard to overstate how important unemployment (or more accurately, employment) is to the overall well being of the economy. I’ve covered before what makes unemployment numbers so important, so we’ll leave that out for today and focus instead on what is going on here, and why it matters so much. One question I get from time to time is why people get so excited over small movements in the numbers. That’s a good question. It can help to have …

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What Is the Misery Index?

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There are few institutions examined more scientifically or mathematically than the U.S. economy. After all, in-depth understanding of economic conditions mean billions of dollars to the right people and policy makers. Unfortunately, a nation’s economy is a complex machine composed of an almost infinite number of moving parts. Economists seek to study and understand the economy in many ways, often by simplifying things with numbers and formulas. One of my favorite names for an economic statistic is the Misery Index. How to Calculate Misery Index The original Misery Index was surprisingly simple. You calculate the Misery Index by adding the unemployment rate to the inflation rate. The idea is that both unemployment and inflation are negative factors acting against a positive economy. By combining them, you could get some idea of how much of a headwind the economy is facing. Under this methodology, things would be worst during a time where unemployment was high and inflation was also high. Also, check out this review of Credit Karma Ironically, the Misery Index can peak right before a strong recovery. Consider a situation where there has been a recession or depression. Unemployment rises as companies lay off workers to reduce costs and …

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