With all the discord associated with the Egypt and Zimmerman news cycle, the good news about the US economy has been smothered. Consumer confidence is at a six-year high. In the last quarter, approximately 200,000 new jobs a month were started. And, credit card delinquencies are at a 20-year low. The purchase of cars and houses is one driving force behind the shift.
After almost every recession going back 50 years, cars and houses have led to the economy’s recovery. They’re large purchases, they are quite expensive, and when people start to buy them, they shift the economy back to normalcy. Jordan Weissman, using data from economist James Hamilton, was able to show that growth due to car and home purchases accounted for more than half of the recovery in the 1970s; a third of the recovery in the early 1980s; and a sixth of the recoveries in the early 1990s and 2000’s.
Driving the recovery
According to TrueCar, new vehicle sales are on target to hit 16.5 million this year, leading domestic auto production to hit a seven-year high. This is the highest since 2006. However, the real turnaround over the last year has been in the housing market. This spring, housing starts increased to a five-year high.
The positive outlook for the future of our economy is confirmed by two anchors on economic growth, residential investment and construction employment. Both have been gaining momentum and continue to increase. In addition, the addition of 195,000 new jobs reflects that the economy is poised for faster growth.
According to the Labor Department, payroll increased by 195,000 workers for a second consecutive month. The unemployment rate is at a four-year low, 7.6 percent. Jonathan Basile, director of US economics at Credit Suisse Holdings USA in New York said, “Job growth is starting to hum along. All of it is laying the groundwork for more spending and more jobs. This virtuous cycle is really taking hold for the second half of the year.”
In June, employment growth was led by retailers, professional and business services, healthcare, and leisure and hospitality businesses. Construction companies added 13,000 new jobs and automakers added 5,100 new jobs.
Retail payrolls were increased due to hiring at auto dealerships and home-improvement outlets. In June, new cars and trucks were sold at the fastest pace since 2006. The rebound in housing construction created the need for new trucks. Don Hicks, owner of Shortline Auto Group in Aurora Colorado (which employs 150 people at four dealerships) said, “We would take 10 sales people in a heartbeat. If they were available and trained, or trainable, we’d take another five or six technicians. It’s crazy trying to find people.”