6 things you should know about the U.S. economy

The economy took center stage this weekend as some of the biggest names in finance held their annual meeting in Jackson Hole, Wyoming.

You might think a three-day conference is plenty of time to work through some of the biggest financial problems facing the U.S. But this economy is a tangle of conflicting indicators, and Federal Reserve chair Janet Yellen kicked off the event Friday with a speech about how tough it is to pull all the pieces together.

Other economists chimed in with their views, and the consensus was clear: This is no easy puzzle. Here are six things experts are saying about the economy.

1. The job market is weaker than you think. The recession ended five years ago, and by now the labor market should be hopping. It's not. The unemployment rate, at 6.2 percent in July, is giving a misleading picture of the health of the market. There are too many part-time workers who want to work full time. Job turnover is unusually low, a sign that too few opportunities are out there. And too many people are applying for disability benefits and going back to school.

2. The economy is close to firing on all cylinders. Although the labor market isn't operating at full power, nearly every other aspect of the U.S. economy is showing significant improvement, according to economists. Home sales are rising faster than expected, businesses are investing again, the unemployment rate is steadily falling and consumers are getting more confident about spending. Most forecasters expect U.S. economic growth of at least 3 percent in the second half of the year, up from 1 percent in the first half.

3. Wages and inflation will tick up later this year. More businesses are complaining that it's hard to fill jobs, and more households are saying it's easier to find jobs. That, along with a strengthening economy, will trigger a rise in wages -- and core price inflation -- later this year, according to Capital Economics. Experts say a long-overdue rise in wages will speed up the economy.

4. The housing market continues to improve. Existing home sales fell during an unusually harsh winter, but have risen for four straight months. The median sale price rose nearly 5 percent in July from a year earlier to about $223,000. Housing starts jumped in July as well. "Housing is still far from healthy," note economists at PNC Financial Group in a recent report, but the firm expects conditions to continue improving over the next two years.

5. There is a raging debate on when to raise interest rates. Inflation hawks are already pushing for tighter credit, while others still doubt that the economy's gains will hold. Economists at Capital Economics expect the Federal Reserve to start raising short-term interest rates next March. Others, including analysts at economic research firm IHS, think the first rate hike won't come until the third quarter of next year.

6. Signals remain mixed. The Great Recession has left deep scars on the economy, particularly the labor market, that still need sorting out. Economists say there are still too many factors at cross currents, making it tough to develop policy. That's part of the reason the picture is still so unclear about when rates will start rising. A hike could come early next year, but the data points are still so fluid and volatile that disappointing numbers could quickly skew everything in another direction. "There is no simple recipe for appropriate policy in this context," Yellen said in her speech Friday.

  • Kim Peterson

Comments

Market Data

Market News

Stock Watchlist