The American economy feels precarious to people, regardless of what GDP numbers may show. (Image courtesy Shutterstock)

Unappreciated facts about our economy:
40% of people change jobs each year

Paychecks can vary dramatically

Spending at local businesses is falling 
The 2016 election ignited rich debate and discussion about the economic health of our country and our people. Such a debate makes it all the more necessary to have sound underlying data for our nation’s and leaders’ economic decisions.
We have never had better access to real data than we do right now. New data in both the public and private sector are increasingly mined, linked to one another, and analyzed. Whether policy makers are tackling tax policy, job growth, or infrastructure investments, we need real, on-the-ground data to obtain a true picture of the economic health and needs of our people, households, businesses, and communities.
Government data indicate that the economy in aggregate is improving, but the data do not always shed light on the more nuanced story about the economic uncertainty that many Americans face.  For example, how can today’s leaders reconcile concerns about the financial health of American families and the nation’s economy with the fact that unemployment continues to drop and wage and GDP growth are rising?  Through our ground-breaking research analyzing de-identified customer transactions across a range of bank products and services, the JPMorgan Chase Institute can provide some relevant insights.
First, job transitions are common, with forty percent of individuals gaining, losing, or switching jobs in any given year. Even for those with a steady job, individual income is still volatile. Indeed, 86 percent of the month-to-month income volatility experienced by US consumers comes from variations in paycheck amount or paycheck frequency.  Volatility affects low-income families more than others, but we find that it is prevalent across all income groups, and all but those in the very top quintile do not have readily available financial resources to withstand the volatility to which they could be exposed in any given year. This financial vulnerability could help explain why Americans still feel financially unstable despite the lowest unemployment rate in years and wage growth in the past year.
Further evidence of this instability can be found in the growing online platform or “gig” economy, especially in the growing numbers of people earning income on these platforms. Lauded by some as the “Future of Work”, this relatively new marketplace for labor is a supplementary source of income for most participants, and is often used to smooth dips in income from more traditional jobs. Moreover, participation on these platforms has very high turnover, and relies heavily on new entrants—particularly individuals between jobs—for continued growth. As unemployment rates decline, growth in participation in the online platform economy has slowed.
Second, while GDP continues to increase, that may be cold comfort to communities across the country with declining or even negative spending growth at local businesses.  To an increasing degree, online commerce is displacing local commerce, and it creates a ripple effect: traditional retail and services establishments drive construction and related economic activity to a much greater degree than online sales, which the incremental warehouse activity related to online distribution does not fully offset.  Online sales require less construction and finished space, and are associated with less ancillary spending at nearby businesses such as coffee shops and restaurants. When growth in one sector of local consumer commerce decreases, it has an impact on the broader community of local businesses.
Finally, while spending at US small businesses outpaced spending at their larger counterparts for much of the early part of 2016, many small businesses are less than a month away from being in the red if their revenues were interrupted.  Small restaurants hold the fewest cash buffer days on average (only 16 days), while small businesses in the real estate industry hold the most but not much more than a month and a half (47 days).  With almost half of employees working for small businesses in the US, many Americans may feel like they are on shaky ground if their source of employment is vulnerable.
Real, granular data provide a clearer, more nuanced and, most importantly, accurate picture of our economy. Whether leaders are developing interventions for households or business owners, it is absolutely critical that at all levels of business and government they use hard facts and data to understand the nuanced state of our country.  Its success and future prosperity depend upon smart, data-driven policies that will expand and extend current growth while addressing the economic volatility and instability that permeates the lives of many Americans.

Diana Farrell is the founding President and Chief Executive Officer of the JPMorgan Chase Institute. Previously, she was Global Head of the McKinsey Center for Government and the McKinsey Global Institute. She served in the White House as Deputy Director of the National Economic Council and Deputy Assistant to the President on Economic Policy. She spoke at Techonomy 2016.
Small businesses in the United States are in a precarious financial condition, generally, contributing to the national sense of economic uncertainty. (source: JP Morgan Chase Institute)