Your whole life is a lie. The fortune cookie did not originate in China. Rather, it was originally concocted in California in the early 20th Century by a Japanese restaurant no less. That may or may not be true, but a lot we believe isn’t true and those lies don’t keep us awake at night. With enough wine, this week’s inconsistent and incongruent economic news didn’t keep us up at night, either.
The Federal Reserve Board of Governors kicked off the week with its Consumer Credit Report. It’s important to remember that, like MSG, what’s good for retailers is not necessarily good for consumers. Consumer Credit jumped $26.0 billion in July, in addition to June’s $18.8 billion jump. Non-revolving credit, mortgage, student loans and especially auto loans, maintained their strong upward trends. This concerns us enough because at some point even mortgage and student loan debt are detrimental. What concerns us more is that revolving credit, consumer debt, increased considerably by $5.4 billion in July in addition to a $1.8 billion increase in June. With stagnant wages and lackluster employment figures reported as recently as this week, consumers may be taking on more debt than they can afford. As with The Iraq War 3.0, we’ve already been down this road.
Tuesday gave us two important reports, the National Federation of Independent Business (NFIB) Small Business Optimism Index and Job Openings and Labor Turnover Survey (JOLTS – not to be confused with the 80’s banned soda that put kids in sugar commas). The NFIB Small Business Optimism Index was like a broken fortune cookie when it showed that small business job openings rose 2 points in August to 26, as future plans to increase employment fell three points to 10 and plans to increase capital spending rose 4 points to 27. While this doesn’t suggest direct job improvement, someone must make the stuff on which small business will spend its capital. Then the Labor Department released its JOLTS that indicated the number of job openings, hire rate and separate rate on the last day of July all remained little changed from the last day of June. When the separation rate was broken down further, it showed that quits and layoffs both remained little changed. Basically nothing’s happening anywhere. The volume of employers hiring and firing and employees quitting are all stuck as if in a Chinese Bird’s Nest.
Neither Wednesday nor Thursday gave us anything worth reporting.
Friday, however, gave us a few worthwhile reports. First, the Census Bureau released its Retail Sales Report, which gave us the sweet and sour sauce of the new economy. Despite stagnant jobs and wages, consumers are spending. Retail sales jumped 0.6 percent in August after July’s 0.3 percent jump. The driver of the jump was auto sales, as previously indicated in Monday’s Consumer Credit Report. Then the University of Michigan and Thomson Reuters reported the preliminary September calculation of their Consumer Sentiment Report, which came in at 84.6 points. That’s 2.1 points higher than Augusts’ final reading of 82.5 points and suggests consumers feel better and is in line with the earlier Consumer Credit and Retail Sales Reports.
We wish our yuyan changed, but it persist. Stagnant unemployment and wages and The Fed’s unwinding of Quantitative Easing (QEIII) remain our three major concerns. Your job remains the same, decrease expenses and increase savings and investing.
A Harvard Business School Alumni Survey showed that 40 percent of respondents predict that pay and benefits for workers will worsen in the future. What’s the problem? Many businesses prefer to outsource work, rather than hire full-time workers. Most workers who are hired will likely be part-time. This puts eager to spend consumers in a predicament from which only Jackie Chan could escape.
This doesn’t bode well for the housing market, as a Fannie Mae’s National Housing Survey for August suggests that a majority of Americans are pessimistic about the housing recovery because of jobs and personal income growth concerns. If this is the case, why are consumers spending and why are they spending on credit? The only market seeing significant growth is the stock market and data suggests most American’s have missed that Dragon Boat.
University of Michigan’s analysis showed that a majority of Americans have not enjoyed and don’t expect to enjoy recent and future stock market growth. Their analysis showed that the percentage of Americans who own any stock, including non-pension stock funds, dropped from 30 percent in 2001 to 16 percent in 2013 (the latest year for which the data is available) and the same as in 1962.
Our best advice is to focus on your net worth rather than your income. Many who earn six figures are financial nightmares and will work until they die. A focus on net worth will increase assets and assets equal security. A six figure job can be lost any day of the week, especially with stagnant unemployment and wages and economic volatility caused by QEIII’s unwinding.
The best way to increase your net worth is to have a long-term plan is to avoid the See Cash/Spend Cash phenomena and live below your means. Better than the See Cash/Spend Cash phenomena, try the See Cash/Invest Cash experience. We must have fun once in a while, but watching our Apple stock skyrocket like it’s the Chinese New Year is more fun than Apple’s iWatch.
If you want to get into the stock market, but can’t afford to now, get your finances in order with a budget. A budget can be a diligent way to monitor income and spending that leads to savings like help to a Kongming Lantern. If a budget sounds boring and complicated, it’s not.
That’s this week’s #MoneyConscious Mash Up, all things economics and personal finance that we think is worth your while. Come back every week, as we hopefully put an entertaining twist on a topic that may otherwise put you to sleep like Coldplay’s Chinese Sleep Chant. Also, don’t forget to pre-order your copy of #MoneyConscious Financial Planning Guide: 12 Steps to a Richer You before this Monday, September 15th.