We’ve called upon our financial adviser, Chicken Little, for investment advice. Here’s why. According to the government’s Bureau of Economic Analysis, real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.0 percent in the fourth quarter of 2011. That’s nice, but it’s not great. Yet the Labor Department reported that the US added 227,000 jobs in February. That was the third month in a row that the country added more than 200,000 nonfarm jobs. That seems excessive when the GDP is so anemic.
Apparently, consumers are buying more things and paying for more services and that induces employers to hire more workers to make more things and to provide more services. But those nice consumers are building up their credit card debt again. After the recession hit home, people began paying off their debt instead of spending. But now, according to the Federal Reserve, revolving credit, made up mostly of credit card debt, increased during the last four months of 2011, going up nearly $3 billion to $801 billion. (It went down in the first month of this year, but January always shows a drop in credit card debt because consumers are exhausted by what they spent for Christmas.)
So people have begun once again to spend money they don’t have and maybe that’s what this improvement in the economic scene is built on. That’s why called on our financial adviser, Chicken Little.
As usual, Ms Little explained everything and put our minds at rest. “While the job numbers have improved, I would not call them excessively good,” she said. “GDP is only weakly linked to current employment numbers. It combines things like consumption, investment, balance of trade and stuff. It’s related like the stock market is related to the economy — only over time they track. Consumers always feel better and spend more when employment and the stock market goes up. We who follow such things are never bothered by contradictions.”