Practice Good Theory

A downturn in the economy or the stock-market usually causes people to pause spending to see where the chips will fall. Even people/businesses who think their jobs/revenues are relatively secure become cautious. This caution, in turn, implies less sales for some businesses, creating a downward spiral. Only to a point, though: as it spirals down, business profits start to increase and personal savings increase too. Confidence starts to come back. Savings rate: The red circles in this chart show temporary increases in the Personal Savings Rate during recessions. Unfortunately, after each recession the personal savings rate started to decline once more. We see that the savings rate has flattened once again. This is the flip-side (and downside) of confidence. [Update (2017/June: This rate still remains mostly above the 5% mark] Retirement confidence: Compared to previous years, workers who are still employed are less confident that they will have enough money to live ...

Overview:   Slow economy, rocketing stock market ! Since the 2007-08 downturn, most measures of the economy have stabilized. Despite this, total-employment is still lower. The broadest GDP measure has been increasing very slowly. Meanwhile, house-prices have turned up for the last two years, and the stock market is at an all-time high. Corporate profits are high since GDP is growing slowly while firms have kept a reign on costs. In addition, companies have been buying back stock at above-average levels . This is different from the type of excitement that drove the dot.com boom, because it does not cascade into higher salaries and expenditures: quite the opposite. In the short/medium term, this does not bode well for employment numbers and wages. Here are some of the details: Employment: Though the unemployment rate has been falling, it is mainly because so many people (particularly younger folk) have given up looking for jobs . For the core age-range 25-54 years, employ...