GDP Good News or Bad News?

July joined January as the only two down months for the U.S. investment markets, and the month’s last week (down 3%) provided yet another exciting lurch of the roller coaster.  But if you put it all in perspective, July’s overall 1.5% decline is relatively small. 

One reason investors seem to be optimistic despite the market downturn is the report by the Bureau of Economic Analysis showing that the U.S. gross domestic product grew by a robust 4% rate in the second quarter this year.  This would represent a pretty large reversal from the 2.1% decline in the first quarter.

Any time the economy grows at a 4% rate, it’s an indication that we’re living in a terrific business climate.  But there is reason to wonder about that number and whether it reflects what many people seem to think it does.  For one thing, the final GDP figure will be revised at least twice between now and September.  These revisions can be significant.  The first quarter estimates initially came in at 0.1% growth, then were revised to a 1% drop, then a much larger 2.9% drop before the BEA revised it back to -2.1%. 

For another, the second quarter may have picked up some of the growth that was suppressed in the first quarter by the well-publicized weather anomalies.  Indeed, a big part of the final GDP number came in the form of replenishing inventories and stockpiles, not real spending, which grew by just 2.3% for the quarter.  (Of course, that, too, is subject to heavy revision.)

Job growth has been rising but the housing recovery, so robust last year, has stalled.  People are saving more and spending less.  Gas prices remain about where they were before the ISIS advance through Syria and Iraq.  Add it all up, and we are likely looking at another year of below-historical-average growth, rather than the long-anticipated economic takeoff which was originally projected for 2015 or, perhaps, later.  If the stock markets were buoyed by the comforting feeling that good times are here again, they may experience disappointment when the final numbers come in.

But, ironically, that may actually be good news for the markets in the longer term.  Fed Chairperson Janet Yellen is watching the economy closely for signs of overheating--for, in other words, signs of 4% or greater economic growth.  If the second quarter number is revised downward, and the rest of the year shows steady moderate growth, the Fed is likely to keep interest rates low, stimulating both the economy and the stock market, for the foreseeable future.

Where the Best Jobs Are Today

What are the best college majors for students who want a lucrative career and low unemployment in their field?  Recently, the Kiplinger magazine ranked the top ten (you can find the slideshow here: http://www.kiplinger.com/slideshow/business/T012-S001-10-best-college-majors-for-a-lucrative-career/index.html), starting with “Pharmacy and “Pharmaceutical Sciences,” where starting salaries average $42,100 and mid-career salaries average $120,000.  Unemployment rates for these graduates are 2.5%, and job growth is projected at 36.4% a year.  This degree leads to a career as a pharmacist or researcher in the pharmaceutical industry (designing and developing drugs).

Second on the list is “Computer Science,” with a starting salary averaging $58,400, mid-career: $100,000.  Job growth is projected at 18.7% a year, and the unemployment rate for these graduates is 4.7%.  Students are advised to master computer languages C++ and Java, and be prepared to work in artificial intelligence, computer system organization and digital system design.

Third?  “Civil Engineering” ($53,800; $88,800, 19.4% job growth and 4% unemployment rate).  These are the people who design and supervise large construction projects--like airports, sewer systems and tunnels.

Numbers four through ten are “Information Systems Management” (which marries computer courses with project management skills); “Nursing;” “Information Systems” (implementing technology within a company or organization, often best supplemented with a minor in business); “Finance” (requiring economics, statistics and calculus, plus accounting and financial markets courses); “Mathematics” (mastering number theory and real analysis for work with government and scientific research teams); “Information Science” (database management and programming, plus study of human-computer interaction); and “Construction: (requires a solid foundation of math and science courses, including the physics of building a structure and the accounting to build the budget for it).

The magazine also ranked the worst careers: the list included “Human Services and Community Organization” ($32,900; $41,100; 8.1% unemployment rate); “Fine Arts” ($31,800; $53,700; 7.3%); “Social Work” ($33,100; $45,300; 6.5% unemployment rate); “Early Childhood Education ($29,200; $37,600; 5.5% unemployment rate); “Art History” ($36,400; $54,000; 8.3%); “Interdisciplinary Studies” (majors you design yourself; $37,500; $51,000; 8.5%); “Studio Arts” ($35,700; $53,200; 7.3%); “Mass Media” ($34,400; $59,800; 7.9%); “Humanities” ($35,600; $60,100; 9.8%); and “Family Consumer Sciences” (aka Home Economics; $34,700; $47,800; 5.6%).