Measured
by Gross Domestic Product the economy grew 2.3 percent in 2017 - better then
2016, not as good as 2015. As usual, the spending of individuals was 80 percent
of economic activity.
What
GDP doesn't tell us is how much risk
is building up. We don't have to look back very far - only ten years - to know
that spending is just one part of the equation. If the spending that drives the
economy is only funded by more and more debt - or by the illusion of wealth from
higher and higher home prices - it can't go on forever.
It
would have been difficult to measure the risk created by the sub-prime mortgage
boom as it happened, and in the same way it's difficult to put our finger on
what the next big risk to the economy might be, but here are a couple of prime suspects:
consumer debt and a new real estate bubble.
We
don't know how much consumer debt is dangerous because we're in uncharted
territory - even adjusted for inflation and the growing population, it's never
been higher. Setting aside the $14 trillion of mortgage debt, other consumer
debt in the shape of credit cards, car loans, home equity loans and student
debt is close to $4 trillion - about $11,000 for every man, woman and child in
America. It's doubled since 2000 and it's shooting higher as we speak. At what
point will consumers no longer be able to borrow?
We're
all too familiar with the other potential risk, a real estate bubble, but that
doesn't mean we can do anything about it. So far, a boom is underway in only a
couple of dozen markets - Denver, Miami, LA, San Francisco, Seattle, Dallas,
Austin, Charleston among them - but a lot of people live there and how will
they change their spending habits when home values drop ten percent?
Total
jobs in January were up 1.5 percent over last year. Jobs were up 1.5 percent in
manufacturing, 2.3 percent in business services, 1.9 percent in healthcare, and
2.2 percent at restaurants. Jobs were flat in retail and in government.
Unemployment stayed at 4.1 percent.
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