As the new year is flush with many prognostications on the health of the nation's economy for 2016, it's prudent to look back and assess how we as a nation have performed economically in 2015. The past year was notable for collapsing oil prices, slowdown in Chinese economy and subpar domestic stock market performance. However, the overall U.S. economy was on the strong footing in the past year. Five key economic metrics--Jobless Rate, Wage Growth, Retail Sales, Consumer Confidence and Inflation--seemed to have captured the broader economic health of our nation. An unbiased analytical dissection may provide insight into underlying strength/weakness of the U.S. economy last year (2015).
* Jobless Rate: Heading into 2016, there is ample proof that U.S. economy is headed, barring an unanticipated shock, into near-full employment as can be evidenced by a significant drop in unemployment rate by six basis points from 5.6 percent in December 2014 to 5 percent in December 2015. During this time, the U.S. economy has added 2.65 million jobs, averaging little over 200,000 jobs per month, definitely a feat by its own standard. Although many who oppose Obama administration on one pretext or other would like to overlook these hard facts and focus on the low employee participation rate in the economy, they couldn't link this phenomenon to poor performance of our economy as nobody knows if this is an outcome of expanded healthcare coverage due to Obamacare, thus obviating the need for some to continue to work for uninterrupted healthcare coverage, or renewed vigor of millions to pursue entrepreneurial zeal, or something else.
* Wage Growth: This is the real weak spot in the U.S. economy as the income of American families has remained more or less stagnant since the country has emerged from the shadow of the worst recession in generations in March 2009. The average hourly wage in December 2015 stood at $25.24 compared to $24.62 a year ago, thus making a meager gain of 2.52 percent in income gain in the past year. However, as a natural outcome of the U.S. economy heading toward the near-full employment in 2016, the nation is expected to see a brighter future this year in terms of income rise.
* Retail Sales: Since consumer activity drives almost two-third of our economy, retail sales is an important indicator for the overall health of our economy. Preliminary data show that retail sales over the past year jumped by 2.2 percent, not a jaw-dropping increase, but nonetheless robust. At the end of last year, the December retail sales stood at $448 billion compared to a little over $438 billion a year ago. Part of the stunted growth was due to falling oil prices and the subsequent dips at the pumps.
* Consumer Confidence: American consumers seemed more optimistic about the economy than most of the politicians, especially Republican presidential candidates. The consumer confidence, a barometer of consumers' outlook about nation's economy, as reported by the private Conference Board, for all of the last year, moved in a healthy range of readings over 90, hitting the highest level of 103.8 in January, then dipping to the lowest level in July (91), and eventually ending the year with a reading of 96.5.
* Inflation: American consumers for the most part of the last year enjoyed low gasoline prices, putting some extra cash for spending at retail stores or restaurants. However, these savings didn't always get infused into the economy as consumers remained cautious and made smart buying decisions, a behavioral change that had transformed the American shoppers' buying habit during 2008-09 Great Recession. The core-inflation, measured as change in CPI minus that of food and fuel, rose about 2 percent last year, thus allaying any fear of rising inflation that many economists had thought would be triggered by Federal Reserve's long-pursued low interest rate regime. At the December 2015 Open Market Committee meeting, Fed policymakers at last announced a modest rate hike after keeping the overnight federal funds rate to record zero percent for the past nine years.
Looking back in the rearview mirror, last year (2015) seems to be a robust year in terms of nation's economic health with America's economic engine firing on several, not all, cylinders. Hope that this year (2016) will be a transformative year for American economy that will eventually begin to fire our growth engine on all cylinders.
* Jobless Rate: Heading into 2016, there is ample proof that U.S. economy is headed, barring an unanticipated shock, into near-full employment as can be evidenced by a significant drop in unemployment rate by six basis points from 5.6 percent in December 2014 to 5 percent in December 2015. During this time, the U.S. economy has added 2.65 million jobs, averaging little over 200,000 jobs per month, definitely a feat by its own standard. Although many who oppose Obama administration on one pretext or other would like to overlook these hard facts and focus on the low employee participation rate in the economy, they couldn't link this phenomenon to poor performance of our economy as nobody knows if this is an outcome of expanded healthcare coverage due to Obamacare, thus obviating the need for some to continue to work for uninterrupted healthcare coverage, or renewed vigor of millions to pursue entrepreneurial zeal, or something else.
* Wage Growth: This is the real weak spot in the U.S. economy as the income of American families has remained more or less stagnant since the country has emerged from the shadow of the worst recession in generations in March 2009. The average hourly wage in December 2015 stood at $25.24 compared to $24.62 a year ago, thus making a meager gain of 2.52 percent in income gain in the past year. However, as a natural outcome of the U.S. economy heading toward the near-full employment in 2016, the nation is expected to see a brighter future this year in terms of income rise.
* Retail Sales: Since consumer activity drives almost two-third of our economy, retail sales is an important indicator for the overall health of our economy. Preliminary data show that retail sales over the past year jumped by 2.2 percent, not a jaw-dropping increase, but nonetheless robust. At the end of last year, the December retail sales stood at $448 billion compared to a little over $438 billion a year ago. Part of the stunted growth was due to falling oil prices and the subsequent dips at the pumps.
* Consumer Confidence: American consumers seemed more optimistic about the economy than most of the politicians, especially Republican presidential candidates. The consumer confidence, a barometer of consumers' outlook about nation's economy, as reported by the private Conference Board, for all of the last year, moved in a healthy range of readings over 90, hitting the highest level of 103.8 in January, then dipping to the lowest level in July (91), and eventually ending the year with a reading of 96.5.
* Inflation: American consumers for the most part of the last year enjoyed low gasoline prices, putting some extra cash for spending at retail stores or restaurants. However, these savings didn't always get infused into the economy as consumers remained cautious and made smart buying decisions, a behavioral change that had transformed the American shoppers' buying habit during 2008-09 Great Recession. The core-inflation, measured as change in CPI minus that of food and fuel, rose about 2 percent last year, thus allaying any fear of rising inflation that many economists had thought would be triggered by Federal Reserve's long-pursued low interest rate regime. At the December 2015 Open Market Committee meeting, Fed policymakers at last announced a modest rate hike after keeping the overnight federal funds rate to record zero percent for the past nine years.
Looking back in the rearview mirror, last year (2015) seems to be a robust year in terms of nation's economic health with America's economic engine firing on several, not all, cylinders. Hope that this year (2016) will be a transformative year for American economy that will eventually begin to fire our growth engine on all cylinders.
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