The economy looks better, so why do we worry?

The country may be nearing a crucial turning point, economists say.

By MSN Money Partner Jul 24, 2014 12:54PM
Image: Worried couple © Digital Vision, Getty ImagesBy Everett Rosenfeld, CNBC

The U.S. economy has churned out some pretty encouraging news lately, but plenty of skeptical Americans still have much anxiety about this recovery.


Major questions remain about certain aspects of the health of the economy, including stagnant wage growth, unemployment and corporate taxes.


After some weak numbers at the beginning of the year, the U.S. economy may be nearing a crucial turning point, economists told CNBC.


"The economy is mediocre," said Joel Naroff, president of Naroff Economic Advisors. "But it's getting better by the month."


A Gallup poll from July found that Americans are less worried about unemployment and jobs issues in the U.S. than in previous months, although 14 percent still said they think it is the most important problem facing the country.


Despite these concerns, Michael Feroli, J.P. Morgan's (JPM) chief U.S. economist, said he sees a promising employment picture. Jobs growth "seems to be doing as well as one could hope," he said.


Some worry, however, that strong jobs numbers -- U.S. companies gained 288,000 nonfarm payrolls as the unemployment rate dropped to 6.1 percent in June -- are masking less rosy economic trends. Not only are marginally attached workers still a significant part of the "regular" employment figure, but many Americans have become discouraged and disappeared from the workforce altogether.


"I am concerned about the labor market," Wells Fargo (WFC) senior economist Mark Vitner said in an email to CNBC. "We have so many people working part-time today that would like to find more meaningful work."


But as employment figures continue positive trends, wages have remained stagnant, and this is "the missing link in this whole economic recovery," Naroff said.


While jobs growth is usually expected to lag behind economic growth, workers' wages will trail positive employment trends, Naroff said. But as the economy begins to reach full employment (a point he estimates to be about nine months in the future), employers will be forced to increase pay to attract the best workers.


Wages should begin to rise in the next six months, Naroff projected. Feroli agreed, saying "we may be close to a turning point."


If this turning point comes, the Obama administration may see some alleviation of one of its major economic concerns: income inequality causing weak economic growth. As companies are forced to increase compensation, Naroff said, middle- and lower-class workers should begin to drive consumption growth.


Consumption remains a major worry for corporate America. In an earnings call Tuesday, McDonald's (MCD) president Don Thompson said he has seen a bifurcation in spending habits wherein those making less than $45,000 annually are "a little bit tighter" with their discretionary spending than their higher-earning peers.


"Inequality is more than a buzzword," Vitner said, adding that income disparity is in part a function of job training, and so may be long-lasting regardless of any change in minimum wage.


The Obama administration's other major economic talking point has been the issue of American corporations conducting tax inversions -- when firms shift their tax domicile overseas to avoid the burden of U.S. taxes. Several 2014 deals occurred for this purpose, including Chiquita Brands International's (CQB) purchase of Ireland's Fyffes, but the significance for the overall economy is not clear.


While Feroli said he did not see inversions as a significant macroeconomic issue, Naroff said the practice could result in small businesses facing an increased tax burden.


"There's no such thing as a free tax break," Naroff said, explaining that these large corporations have exploited a loophole in the tax code to the same effect as a legislature-granted break. "If someone doesn't pay what their fair share of taxes should be, someone else will have to."


Although Naroff said the country's tax policy remains one of the single largest problems plaguing its economy, Vitner said the U.S. continues to benefit from those hoping to enter its borders.


"The biggest bright spot is that for all our problems, the best, brightest and most ambitious entrepreneurs and workers still seek to come to America," he said. "As long as the Elon Musks of the world come to the USA so that they can change the world, we will be OK."


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176Comments
Jul 24, 2014 1:34PM
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the people are living this "recovery" every single day.  its not anxiety.  its real life.

 

MSN just because you write a headline saying the economy is recovering DOES NOT MAKE IT TRUE!

Jul 24, 2014 1:32PM
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"The economy looks better..."

Does it?  Appearances can be deceiving.  That chick at the bar who looked homely at 11pm sometimes looks like a supermodel by 2am.  Our perceptions of reality are easily altered, especially when influenced by ideologues and/or alcohol. 
Jul 24, 2014 1:14PM
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millions of americans not only don't pay their fair share of income taxes, they get back more than what they paid in all year.

 

how is that fair MSN?

Jul 24, 2014 2:37PM
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Loopholes. You've got to love it. We've created a tax system that requires a forest of trees to be sacrificed just to print it out. Then we complain about loopholes. Fix the system. We have the highest taxes on business in the world and we wonder why they want to move somewhere else. We have an administration that shoves a law down our throats without even reading it and then modifies it, without the due process established by our constitution, whenever one of it's many glitches pops up. Unemployment goes down, not because we have more jobs. It's because everybody has given up or retired. We give away billions to countries that hate us. We spend billions on people whose first act is to break our immigration laws. And yet we have citizens that do not have a roof over their heads or food in their stomachs.

Why worry? Because the people in charge have no clue how to solve the issues in this country. This is true for ALL political parties and those associated with them.

Jul 24, 2014 1:10PM
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-2.9% GDP is the economy looking better?  Home sales are down to almost their lowest in 5 years and this is the economy looking better?

 

MSN laying off18k jobs and this is the economy looking better?

 

weekly first time unemployment filings are still near 300k a week and this is the economy looking better?

 

WOW MSN you guys are delusional.

 

Jul 24, 2014 1:42PM
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housing sales in june fell 8.1% according to a MSN article today, yet msn is trying to tell us the economy is getting better?

 

LOL

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This is 1984 all over again -- the book not the year

In the book the collapsing government is always telling people things are getting better and the oceanic war is being won.

Just remember the economy is getting better as they kick you out of your job and you lose your house as you can not pay the mortgage. Think about all the mortgage money you are saving and be happy. P.S. the whippings will continue until moral improves.

Jul 24, 2014 2:50PM
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Nope i don't believe the article.....that wages to turn the corner in 6 to 9 months and rise as we near full employment. If you look real hard, we're at a market cap (synthetic QE built) seond longest bull in history and due for a nasty correction...experts say 10%....I'll call it 40%. We never paid for our sins in 2008, we masked them...we still have to pay the piper. We never got out of the recession...sorry. from now until Sept 2016 we'll have "our" geo-political event (war) to blame the depression on. Experts will one day realize the significance of 2008 and clock back the start of the depression as 2008. Just my thoughts do you own diligence.
Jul 24, 2014 4:07PM
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MSN:              " Your Setting In Your Castle In The Sky And Lying To Us"


Pharmaceutical Companies are changing the "Tier" ratings  of prescription drugs and people

are paying more "out of pocket costs" for the same drugs as a year ago.. Some as high as a 100%

increase ..


 "Gas" Prices  are destabilizing and prices are rising.


Winter months are about to be upon us "A Colder Winter is Being Predicted" and Propane is  increasing to a higher rate.


Interest in going  up for "Homes" that will be purchased..


"Right To Work States" are springing up in "States That Never Had  Them"

Workers are receiving less money for more work done..


Teachers are having to buy their own "School Supplies" in order to keep their classes updated.


THERE ARE NO JOBS: 

 The "Government Jobs  Report" look as though it is decreasing, when in reality those who once were listed  have become so disillusioned they are no longer in the system..


YET........ OUR INFRASTRUCTURE IS FALLING APART IN AMERICA

Bridges are in need of repairs or total replacement ,  New Schools should be built 

The Rail System is outdated and Oil is being transported in old tanker cars and  their derailments

are "BURNING OUR TOWNS" to the ground.


 We could change Export and Import Laws to give Americans a fare "Fighting  Chance"

with other countries....


BUT the DOW "Keeps Right On Growing" and CEO's "Make More Money" and their "Stock Options" get Larger and Larger..  and YOU help "Fuel The Fire" with your false MSN reporting.




 



 

Jul 24, 2014 4:11PM
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If only the guy in the WH knew something about business. 
Jul 24, 2014 4:46PM
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Vitner is clueless. The economy is a mirage created by printing money. When the printing presses stop as they must, the economy will grind to a halt. Many Americans know this intuitively. That's the reason for the anxiety. 
Jul 24, 2014 4:00PM
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99% of the sheople would rather hear comforting lies than uncomfortable truth. MSN is only too happy to obligue.
Jul 24, 2014 9:09PM
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Didn't  many of the candidates for President last time say we needed to address tax reform, immigration, etc. Congress candidates also.  Nothing is done and they will have the gaul to stand up there in Nov. and spout rhetoric again? Throw a shoe at them.
Jul 24, 2014 3:33PM
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OBAMA HAS SIGNED A NEW EXECUTIVE ORDER!!!!!!!!!!!!!!!!!!!!

ISSUE "ROSE COLORED GLASSES" TO THE ENTIRE U.S. POPULATION!!!!!

THE NATIONAL AQUARIUM IN WASHINGTON IS GOING TO CLOSE.

BUT DON'T WORRY, IF YOU'RE IN D.C. AND YOU STILL WANT TO SMELL SOMETHING FISHY, STOP BY THE WHITE HOUSE, THEY'VE GONE FROM:

"CHANGE YOU CAN BELIEVE IN"

TO

"CHANGING THE STORY UNTIL YOU BELIEVE IT"


`JAY LENO`

Jul 24, 2014 3:28PM
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The Economy is getting better?......_ULL _HIT!!! Microsoft buys Nokia and is now ready to layoff 18,000 people by November of 2014. One of the largest Electrical Contractors in the DC area has just closed its doors, They have been in business for 100 years. Inflation is about to come down on the American people like they have never seen. The World is coming apart with great speed and this man we all call the (LEADER) is so out of touch with what is going on. (HE DOES NOT CARE ABOUT AMERICA) IMPEACH THIS IDIOT AND ALL OF HIS CRONIES NOW BEFORE IT IS REALLY TO LATE!!!


The only two accomplishments this man has is to separate us from one another and destroy our place on this planet.

Jul 24, 2014 4:27PM
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Enjoy this your 6th annual "Recovery Summer"!  Due to the budget, we had to do away with the mustard for the hot dogs Biden is grilling.  And there will be no beer to go with them because Moo-chelle thinks you're too fat.


For those that need to take a dump, the Presidential Library, is the small building with the quarter moon on the door...

Jul 24, 2014 3:21PM
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obama has been president for almost six years now and didn't know about a corporate tax loop.  He's really will it isn't he?
Jul 24, 2014 4:48PM
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Yesterday the IMF downgraded the US GDP to 1.7 % for the year. Today MSN Money says the economy looks better, so why do worry? We worry because our president still has 21/2 years left in his term.
Jul 24, 2014 3:56PM
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Oh, the 'economy is near a crucial turning point' all right.
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