World Economy

US Growth Not Touching All Bases

US Growth Not Touching All BasesUS Growth Not Touching All Bases

A rising tide is supposed to lift all boats, but some are still lagging behind even as the US economy makes rapid advances.

Take business investment and housing, two traditional pillars of the economy. Although companies continue to invest and home sales are rising, the pace of improvement is disappointing. And that helps to explain why the speed limit on the economy is lower now than it was in, say, most of the 1990s when 4% annual growth was the norm, MarketWatch reported.

Wall Street will get a closer look this week at sales of new and previously owned homes in January as well as how much businesses boosted investment plans in early 2015. Don’t expect any big surprises, but economists are looking for evidence that activity on both fronts is ready to pick up.

Federal Reserve chief Janet Yellen will also weigh in on how much the economy is progressing during two days of testimony in Congress. She’s expected to sound more upbeat.

  Growth Not Pulsating

The effects of accelerating growth still aren’t pulsating through the entire economy, though. In a pair of reports this week, for example, sales of new and older homes are expected to be flat in January. Even mortgage rates back near record lows and looser lending standards have failed to spur a spike in sales.

A big part of the problem is demographics. Younger people struggled to find good-paying jobs in the years following the Great Recession and many are saddled with oppressive student-loan debt. A study by Pew in 2014 found that almost 40% households headed by an adult 40 or younger were paying off student loans, the highest rate ever.

It should come as no surprise, then, that the percentage of first-time home buyers slipped to a 27-year low in the waning months of 2014. Or that home ownership for people under 35 recently touched a modern record low of 35.3%, according to Census data.

Businesses, meanwhile, are engaging in what seems like paradoxical behavior. They are hiring new workers at the fastest pace since 1999, and even historically stingy companies such as Wal-Mart are boosting the pay of employees.

“Companies are finding much more difficult to find new workers,” said Bernard Bauhmol, chief global economist at The Economic Outlook Group. The move by Wal-Mart and other companies, he said, offers fresh confirmation.