Top 5 U.S. Economic Trends

Pay Attention to These Trends in 2017

Seeing economic trends with binoculars
These five trends are impacting you whether you know it or not. Illustration: sorbetto/Getty Images

There is a lot of uncertainty surrounding Donald Trump's plans and their impact on the U.S. economy over the next four years. But the following five trends will occur regardless of whatever Washington DC does. Trump can only accelerate or slow them down, but he can't stop or reverse them. That's because larger forces are at play. Understand these five trends, and you can protect your financial future.

 

Baby Boomers Aren't Retiring - A recent Prudential survey showed over half of those aged 45-75 are being forced to delay retirement because of the recession. Even those who can afford to retire will probably keep working in some capacity. The Great Recession left emotional scars. That created a new willingness among many Baby Boomers to keep costs low and incomes high. That means the old idea of playing golf and truly retiring gives way to many forms of semi-retirement.

This means the older generation won't get out of the way for the younger generation. That is making Millennials adapt by giving up the old "career track." They want to earn a living that is meaningful to them. Some use technological innovation to create new jobs that don't exist today. Many have gone on to receive higher level degrees. For more, see Retirement Crisis: Why Boomers Won't Retire.

Others use temporary jobs to fund a rewarding lifestyle, such as travel.

They are complying with a business trend. Companies are less likely to hire full-time workers for three reasons: 1) To keep overhead low, 2) To remain flexible in an uncertain environment and 3) To keep from paying higher health care benefits.

To thrive, workers must create multiple streams of income, and remain flexible themselves.

The best ways to do this? Try to find a way to make money from a hobby. Be realistic about your attractiveness in the job market, whether due to your age or your work history. Get new skills for a part-time job that could turn into something more. Be open-minded about what you can do to earn more money. Stay focused on turning your skills, assets and time into more cash. Be aware of economic trends, and take advantage of them. For more, see How to Thrive in a Freelance Economy.

America Is Declining in Global Economic Power -  Before the recession, the United States was the world's only superpower. In 2009, the G-20 took center stage in the global economy. That organization gives more clout to China, Russia, India, and Brazil. These countries initially survived the recession better than Europe or the United States did. That's because they regulated their banks to avoid derivatives. Their strong economies gave them the leverage to demand more global economic power. Although they've since created new economic problems for themselves, they've retained much of their clout.

That shift in global economic power has contributed to American unease. It's behind the attacks on free trade, jobs outsourcing, and currency manipulation. But even if Trump succeeds in passing protectionist policies, these emerging market nations will continue to grow in power. Their people want the same standard of living that America has. Their leaders know they must provide that to stay in power.

Interest Rates Are Rising - The Federal Reserve wants to raise the Fed funds rates to its 2 percent goal. That's the Fed's sweet spot. It means inflation is at its 2 percent target, and unemployment is at its natural rate of 4 percent. As long as the economy doesn't look like its falling back into recession, the Fed will keep raising rates. 

That means the cost of loans for everything from furniture and appliances to automobiles to mortgages will rise. It also means savers will earn more on their deposits. 

Financial Markets Control Prices - Supply and demand are becoming less important in controlling prices. Instead, commodities traders set prices for oil, gas, and food. Foreign exchange traders determine the value of the dollar.  

The speed of transactions also increased economic volatility. Gas and oil prices rose and fell, depending on investors' moods. That translated to either higher food costs or plummeting commodities prices. 

Gold prices hit an all-time high in 2011. The following year interest rates hit a 200-year low. The dollar rose 25 percent in 2014 and 2015. At the same time, oil prices fell to an eleven-year low. 

The Economy Is in the Expansion Phase of the Business Cycle - The phases of the business cycle are like the seasons in the year. The 2008 financial crisis was so devastating that the economy took seven years to recover. That was delayed by the U.S. debt crisis in 2011, the fiscal cliff in 2012, and the government shutdown in 2013. 

We are currently in the expansion phase. The economy can remain in this phase for several more years. But at some point it will go into the peak phase. That's marked by the irrational exuberance that creates asset bubbles. That's the precursor to the contraction phases, and another economic crisis. The history of booms and busts predicts that will occur between 2018 - 2020. Here are Five Steps that Protect You from an Economic Crisis.  

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