6 Economic Sound Bites That Smart Investors Tune Out
NEW YORK ( AdviceIQ) -- Economic myths are harmful to your financial health.
Investors and analysts alike look to economic conditions and trends for clues to the price direction for stocks, commodities and other investments. Often enough, however, what we think we can learn from the economy and what it actually tells us are two different things.
Consider these six widely accepted "truths" that turn out, on closer inspection, to be false.
1. High unemployment is a drag on the economy and the stock market.
For people who can't find a job, high unemployment rates are a source of pain and anguish. However, for investors the jobless rate is one of the most misleading economic factors. That's because unemployment is a lagging indicator when it comes to economic recovery.
When jobs start to come back after recessions, critics often say too many are low-paying "service industry" jobs. They lament the long-term erosion of manufacturing jobs, which supposedly offer higher wages. But a check of payroll data at the U.S. Bureau of Labor Statistics (BLS) gives the lie to this belief. Manufacturing workers rank sixth among the 10 basic categories of private industry workers, behind information, educational services, financial activities, transportation and warehousing, and professional and business. Bringing up the rear are workers in the wholesale trade, health care and social, retail trade and leisure and hospitality. 3. Americans are tapped out.
We spent all our money in the run-up to the global economic crash, failed to save for the rainy day and now are out of work or working fewer hours. That may be the common perception, but BLS data show that Americans' disposable personal income and personal spending are near record levels, while savings have rebounded. In fact, consumer liquidity (cash, checking, savings and retail money market funds) is near a record, totaling 75% of annual personal income.
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