This week’s chart of the week compares business spending (represented by non-defense capital goods orders) to employment (represented by total nonfarm employees) in the United States. As the chart illustrates, both employment and business spending have been steadily rising since the economic recovery began back in 2009. However, the growth of business spending, which contributed significantly to economic growth in the early stages of the recovery (increasing by an average of approximately $640 million per month from May 2009 through December 2011) has slowed as of late (increasing by an average of approximately $34 million per month from January 2012 through December 2013).

Employment growth, on the other hand, has been fairly steady over the past several years (increasing by an average of approximately 180,000 jobs per month each of the past three calendar years). With the ongoing strength in employment growth, the United States is approaching a new all-time high in total employment (i.e., peak employment). At the current rate of employment growth, the United States should reach a new peak employment this summer. This is a significant development because reaching new peak employment has historically led to significant growth in business spending, as businesses have to purchase new technology, equipment, and space to accommodate a larger workforce.

It will be important to monitor how businesses react once the economy reaches new peak employment. If business spending increases as it has in the past, it will provide another tailwind to an already strengthening economic recovery.

In this week’s Chart of the Week, we track the real median household income in the United States over the last twenty-five years. The movement in this economic variable illustrates how the purchasing power of the typical American household has changed over time. This is an important statistic because it underpins the American ideal that every generation will do better than the previous.

Currently, real household income is sitting near a twenty-year low and has declined every year since 2007. In fact, since peaking in 1999, real household income has decreased in ten of the last thirteen years. Given the importance of consumption to GDP growth — about two-thirds of total GDP growth is driven by consumption — this downward trend in real income for the median household would appear to pose (another) notable headwind to stronger economic growth in the near future and adds to the murky outlook for 2014 GDP expansion.

This week’s chart of the week compares the total household mortgage liability (i.e., outstanding mortgage balances) to the total owners’ equity in household real estate (i.e., home equity) for all households in the United States. As the chart indicates, in 3Q 2013 the total owners’ equity in household real estate exceeded the total household mortgage liability for the first time since the 2007/2008 financial crisis. This recent turnaround was driven primarily by the rebound in housing prices over the past few years (causing an increase in owners’ equity) and the large number of foreclosures on underwater homeowners over the past several years (causing both a decrease in outstanding mortgage balances and an increase in owners’ equity).

This development is significant because it may signal that household deleveraging, which has been a drag on economic activity for the past several years, is finally starting to come to an end. While still too early to determine if this data point is part of a larger economic trend, further readings of a positive gap between equity and liability should translate to stronger economic growth in the coming years.

This week we examine when the unemployment rate may hit the Fed’s 6.5% target, courtesy of the Federal Reserve Bank of Atlanta’s Jobs Calculator™. The chart above shows the average monthly change in payroll employment needed for the unemployment rate to hit 6.5% at the listed months. For example, if the average monthly change is 190,000, we can expect to hit the Fed’s target around October 2014. These calculations assume the current labor participation rate of 63.2% remains constant.

Over the last 24 months the average number of new net jobs created each month in the U.S. has been 181,750. If that number persists, the Fed’s target of 6.5% will be reached in December of 2014 at which point investors may prepare for an increase in the Fed Funds rate. However, the unemployment rate does not exclusively capture labor market conditions and the Fed will undoubtedly look to other metrics including the labor force participation rate. Since 2008 the participation rate has fallen from 66.2% to 63.2%, a 35 year low. This unparalleled drop has unfortunately been a major driver in the unemployment rate’s downward movement and clouded labor market conditions. For this reason among others, economists have begun questioning whether the Fed will lower its target for unemployment and investors would be wise to not solely rely on the headline number to determine the health of the labor market.