Guest Author - Sharon Michaels
We hear about them on radio, watch the “experts” talk about them on television and read about them on the Internet – the Economic Indictors. What in the world are they and why should we even care? I felt the same way until I understood just how much they were impacting my wallet.
Believe me, I’m no expert but here’s what I learned . . .
A little history - Before the Great Depression of the 1930’s there were no fiscal measurements in place for predicting positive or negative trends in our economy. After the disastrous affects of the Depression, economists knew they needed to develop key indicators for measuring the short-term and long-term financial health of the economy. In 1948 Rutgers University met this challenge and devised a system to analyze certain important economic elements. These elements are known as Leading Economic Indicators.
A foundation - The economy is either healthy or unhealthy. A healthy economy has low unemployment, the factories are cranking out consumer goods, families are buying new homes and the items we buy are reasonably priced.
An unhealthy economy is the opposite. People are losing their jobs, factories are slowing or stopping production, homes stand empty and we find ourselves having to budget more money to purchase fewer items.
Leading monetary experts analyze certain key financial indicators in an attempt to predict the health and stability of the economy now and into the future. Certain Economic Indicators are chosen because they can give economists a general idea as to where the economy is headed and whether it will be healthy or unhealthy.
Here are four, of many, indicators economists look at:
Manufacturing and production hours: Companies adjust the hours worked by workers as the need for their products either goes up or down. The healthier the economy the more goods the factories are manufacturing and the more hours’ workers are asked to work.
Claims for unemployment: The more claims for unemployment, the more people are out of work, the weaker the economy.
New building permits: A large number of new housing starts indicate that more people have money to purchase new homes and are willing and able to make a long-term financial commitment. A sign the economy is healthy.
Stock prices: Increases of stock traded on the stock exchanges can indicate a general over-all confidence in the stock market. Stock market trading can influence interest rates, which in turn affects credit cards, bank accounts and investments. As a rule of thumb, the healthier the stock market, the healthier the general economy.
Why is all of this important to us personally?
An upswing or a downturn in the economy can be a factor in determining:
* Whether you’ll purchase your dream home or car now, or wait a little longer.
* Whether interest rates on a home or car loan will be higher or lower.
* Whether or not you could be laid-off from your job and how soon it may take to find another one.
* Whether your personal income increases, stays the same or decreases.
* Whether your buying and savings power will be strong or weak.
* And even, whether you’ll be able to afford to take that long vacation or a shorter one.
The lesson to take away - I’m not saying that every time you hear the words “Economic Indictors” you should panic or jump to attention. What I am suggesting is that you do your homework and stay current with the changing trends in the economy.
There is financial power in utilizing reliable economic information. You can use this information to help make wise and profitable decisions. Financially savvy women know when it’s time to spend and when it’s time to save.
Here’s a challenge: During the coming weeks, become consciously more aware of the Economic Indicators. When you hear or read about the housing market, stock market, factory productions or unemployment claims, realize you’re tapping into the latest key indicators of a healthy or unhealthy economy.
You may want to take a few minutes to visit my website www.SharonMichaels.com for more empowering suggestions, tools and tips.