Cause and effect—it’s one of the first things we learn as children. But few people truly understand its meaning, which can become the source of all kinds of trouble.
The economy is a perfect example. Just because the stock market keeps reaching or approaching all-time highs does not mean the United States economy is thriving. In fact, in recent weeks several indicators have pointed to a continued economic struggle as the nation deals with the ongoing recovery from the 2008-2009 crisis.
Mortgage applications fall to 14-year low: The Mortgage Bankers Association (MBA) reported that total applications fell 7.2 percent last week, dropping their weekly index to a 14-year low. Purchase applications are also down 12 percent from last year’s level.
Experts blame this drop on multiple factors, which we’ll examine next.
Low Wage Growth: According to a survey released last week by compensation consultant firm Towers Watson, the average worker can expect a raise of about 3 percent in 2015. That’s in line with the average number of 2.9 percent reported in 2012 and 2013, but the expected numbers barely outpace inflation, currently running at 2.1 percent.
Calling the numbers ‘disappointing’, the study said companies are falling short of certain incentive programs, and are not basing pay increases on performance to the degree they have in the past. What’s more, of the 32,000 workers who were surveyed, only 40 percent said they believed their raises—or lack thereof—were commensurate with their performance.
Disappointing Jobs Report: Perhaps the biggest economic news of the week has been the most disappointing of all—only 142,000 jobs were added in August, shocking experts who’d predicted 225,000 new hires. This continued the summer-long trend of decline, starting with 267,000 new jobs in June, 212,000 in July all the way down to August’s 142,000 figure—the lowest in 2014.
Some experts expressed hope that the number could be revised with teachers returning to work towards the end of the month, but agreed the troubling decline was too drastic to ignore.
So while the daily stock figures may paint a rosy picture, the overall economic climate is much cloudier. Investors are left to wonder how long it will be until Wall Street follows suit.