Hands-On Evidence That The US Economy Is Growing

When accessing the state of the economy, we often tend to focus solely on metrics – like consumer spending, unemployment rates, etc. – from various governmental agencies. While these metrics are good pointers to the state of the economy, it is good to note that no one metric can tell the whole story of the state of the economy. One way to confirm if the stories these indicators tell are accurate is to look at the world around us. Are these same stories obvious around us?

Earlier this month, the Fed issued a report that indicated that the US economy is growing at a “modest” to “moderate” rate. Despite this, there is no shortage of commentaries suggesting that the economy is not improving. However, in defense of the Fed, here are two real-world indicators that the US economy is growing.

Air travel demand

Let’s pin down a relationship between air travel demand and the state of the economy. When the economy is regressing or is in recession, air travel demand will be down. First, because business activities will be down, the number of people who take to the sky for business reasons will decline, ultimately, affecting the number of people who fly. Second, the number of people who travel for leisure will also reduce, as people will have less money to spend on leisure. You have to note that the fact that they are travelling for leisure quite translates to a willingness to spend more, not only on traveling, but also at their leisure destinations. Just to be sure, the reverse of the explanation above is also true for an improving economy. Now, let’s look at how current air travel demand trends show an improving economy.

The first indicator is the record profit that US airlines reported in 2014. You want to note that this isn’t an indication that airlines are offering better experience, as many reports have since found that airlines are still way behind in satisfying consumers. In addition, a recent report from International Air Transport Association (IATA) predicts that the airline industry will post a record profit of $29.3 billion in 2015, largely attributing this potential growth to the growing US economy.

This report comes after another report from Airlines for America (A4A) that US airlines will carry a record 222 million passengers this summer, overtaking 2007’s 217.6 million passengers. A4A also attributed the expected record traffic to a growing economy. And traffic growth is quite been the new order in the airline space in recent times.

Proportion of distressed properties

This is quite not an obvious angle to look at the state of the economy. However, you want to note that during the last recession through to the period just after the recession, one-third of all home sales in the US were in the distressed property category. Distressed properties are essentially properties that are put under foreclosure and short sales. At the end of 2014, the RealtyTrac reported that distressed home prices are increasing at a faster rate than non-distressed home prices. It also said that short sales in the US fell to 2006 – pre-recession – levels.

We should also look at Atlanta, which is quite the fastest-growing real estate market in the US, as evidence that there is an improvement in the economy. As CNBC noted in January, Atlanta’s housing market crash was almost as big as the crashes in Las Vegas and Phoenix. However, last year, the Financial Times reported that the Atlanta housing market grew the most in the US in the 12 months to June 2014. And since the city was also hit hard by the recession, you can expect that the number of distressed properties in the city would have been high. However, as of May, Total Atlanta Realty reported that distressed home sales in the three months to May in the City accounted for 11.8 percent of the overall sales, down from 22.3 percent. In addition, RealtyTrac also said the overall proportion of distressed properties for sale in the US has been on a decline in recent years.

That distressed home prices are increasing means that distressed home inventories are dropping, as obvious in the decreasing proportion of overall home sales. You want to note that properties usually go into a ‘distressed’ status mostly because owners have issues with mortgagees. Therefore, that this figure is decreasing means that consumers are doing better on their mortgage, mostly because things are more favorable financially.

Last note

Combine the trends in the two discussions above, and it is safe to say that the US economy is on its way up, contrary to what many analysts want you to believe.