Which way goes the economy? Unemployment is still a solid red light, while consumer confidence, stocks, and real estate are showing green and yellow.
The news can be so confusing to so many. The unemployment measure I look at, U6, is at an ugly 15%. That number is different than the headline number that the media reports. It counts everyone who is unemployed, underemployed, and those who gave up looking for work.
At same time, consumer confidence keeps going up. A new report from the Conference Board finds the consumer confidence index is up to above 70. Put in context, that number was down in the 30s at the depths of the recession, while an economy going great guns would be around 90.
Why is consumer confidence up? In spite of high unemployment, stock market values are robust, and real estate has turned a corner in most parts of country. The latest numbers from the S&P/Case-Shiller index shows prices firming up and supply continuing to shrink.
Meanwhile, the average American’s debt level has declined significantly over the last 5 years, and our ability to service the debt we have represents the lowest percentage of our income since the beginning of the Reagan era.
Finally, corporations are sitting on $1 trillion or more in cash, depending on whose measurements you believe. Businesses are waiting on the sidelines for the clouds over political Washington to clear. That money they’re sitting on will fuel a meaningful significant recovery.
Of course, the unknown here consists of things like that crazy general in Iran talking about World War III. We got some crazies in the world and unfortunately they’ve got weapons.