If last week was a celebration of birth and rebirth, this week feels like growing pains. The economic recovery has been happening in fits and starts and this week is no different.
The first and most important bit of news this week was released on Monday. The Conference Board’s index of leading indicators showed a 0.8 percent increase in March, which is the third consecutive monthly increase. Increased hiring and consumer sentiment drove much of the gains. As an index of leading indicator suggests, lagging indicators like backup singers are likely to follow.
On Tuesday, it was reported that existing-homes sales dipped 2/10 of a percent to 4.59 million in March from 4.6 million in February. Existing home sales are down 7.5 from March 2013. Increased sale prices and increased mortgage rates continue to dampen home sales like a racist comment ruins an otherwise entertaining fight with the federal government. It, also, doesn’t help that freshly educated college grads can’t leave mom and dad’s nest to make their own nest.
Because mom and dad’s basement is a rabbit hole too deep for many millennials, they aren’t making their first home purchase and doing subsequent home renovations, they aren’t getting married or having children and doing all of the spending that comes with starting a new family. Housewarming parties, weddings, wedding registries and baby showers are anomalies compared to previous generations at the same age. This is a good case study for trickle-up economics.
To add insult to housing’s injury, it was reported on Wednesday that mortgage applications fell 3.3 percent last week. Refinance applications were down 4.4 percent, which means home equity loans aren’t being used for home renovations, as we mentioned above, aren’t happening, and purchase applications were down 3 percent.
Don’t lose all hope on housing, however, as Barron’s reported this week that Home Depot is hiring 80,000 additional workers for the spring season. Indeed, Home Depot shares are up 6 percent since last April. Businesses only hire when they sense growth and this may be a good indicator that housing has more growth potential. It was, also, reported that the average sale prices of purchased homes is at a record $290,000. This is a good case study for trickle-down economics.
Thursday brought a mixed bag of news. It was first reported that jobless claims were up by 24,000 from last week, which was a shorter workweek for some people due to Good Friday. Shortly thereafter it was reported that durable goods orders and capital spending were up. Durable goods orders, orders for items that last longer than three years such as dishwashers and dryers, were up 2.6 percent in March and capital spending, spending your boss does, was up 2.2 for the same period. Both are good news, but we’re happier to see capital spending increase. It’s time business starts to do more than buy back shares of their stock.
Continuing the mixed back of news from Thursday the PMI services sector index was reported on Friday to have fallen to 54.2 in April from 55.3 in March. To close out the week on a positive note, the University of Michigan and Thomson Reuters’ consumer sentiment index rose in April to 83, up from 82.6 in March. This beats economist’s expectations and is at its highest since July. We’d tell you to hit up happy hour tonight, but it looks like you may already have that plan.
Ironically, though the country is being run by the party of the middle class, the American middle class took a shiner this week when it was reported that it was no longer the richest middle class in the world. That sash is now worn by O Canada. Part of the reason for the sash exchange is the increased number of laid off male workers who, also, learned this week that they will lose one to one and a half years off their life because of their employment challenge. Since bad things come in threes, Netflix just had to announce its subscription prices will increase. If it costs more to sit on the couch Al Bundy-style and watch TV, temp job permanence and missing jobs will lose their luster.
While many suffer from unemployment and underemployment, we hope the slow, but steadily improving economy sparks a renaissance of entrepreneurship. Entrepreneurs make long-term investments in their lives and in the economy. Entrepreneurs are the richest people in America. There’s a lot of information out there to inspire you and get you started, as Modest Money points out with three important things for small business start-ups to consider. Go get ‘em!
If running your own business isn’t your cup of unlimited coffee for $45 a month, manage your personal balance sheet. Don’t pay the average credit card interest rate or 21 percent. Pay off your credit cards and other debt and put your extra money towards your retirement now, so you’re not sorry later. Save your money and be proud regardless of how much you have, as J Money points out. Higher returns are coming for your savings. After you have security savings, invest the rest of your money. Read at least some of these eight books recommended by The Becomer, if you need help investing. Finally, don’t rely on your house as your retirement plan. As we’ve been saying for a while, a home is not an investment plan.
Finally, don’t forget to preorder your copy of the #MoneyConscious Student now available on iTunes and Barnes & Noble to help the student in your life.
That’s the economic and personal finance news that’s worth reading this week. Come back every Friday for another edition of Debt Free Guys’ “#MoneyConscious Mash Up” to learn what’s going on in the world of money and achieve your financial goals.