Market Update Through 6/30/2014

as of June 30, 2014
Total Return
Index 12 months YTD QTD June
Stocks
Russell 3000 25.22% 6.94% 4.87% 2.51%
S&P 500 24.61% 7.14% 5.23% 2.07%
DJ Industrial Average 15.56% 2.68% 2.83% 0.75%
Nasdaq Composite 31.17% 6.18% 5.31% 3.99%
Russell 2000 23.64% 3.19% 2.00% 5.32%
MSCI EAFE Index 23.57% 4.78% 4.09% 0.96%
MSCI Emerging Markets 14.31% 6.14% 6.60% 2.66%
Bonds
Barclays US Aggregate 4.37% 3.93% 2.04% 0.05%
Barclays Intermediate US Gov/Credit 2.86% 2.25% 1.23% -0.07%
Barclays Municipal 6.14% 6.00% 2.59% 0.09%
Current Prior
Commodity/Currency Level Level
Crude Oil  $105.37  $102.71
Natural Gas  $4.46  $4.54
Gold  $1,322.00  $1,246.00
Euro  $1.36  $1.36

Mark A. Lewis

Director of Operations

??????????

Share this:

One Down, One to Go

There was much rejoicing among analysts, economic forecasters and financial market participants on June 6 when the BLS told us that total nonfarm payroll employment on a seasonally adjusted basis set a new record in May 2014 with 138,463,000 such jobs then. The old record of 138,350,000 such jobs on a seasonally adjusted basis was set in January 2008, which was the first full month of the 18-month long recession that began in December 2007 and ended in June 2009.

The chart shows the pattern of this widely followed economic series since January 1978. It is quite obvious that instead of the fairly quick recovery in such jobs that followed every recession from 1945 to the 1981-1982 one, the length of time to return to previous levels has gotten longer and longer with every recession beginning with the 1990-1991 event.

Capture

While many reports on this new record contained statements claiming that all the jobs lost in the recession had been made up, that is not technically true. What IS true is that the total number of jobs has now been matched. But tens of millions of actual jobs that disappeared in 2008-2010 will never come back. They have just been replaced by other jobs.

In addition to that, the total population and the labor force have grown a lot over this time frame. Some estimates are that we might need as many as five million more jobs today just to be even with how well off we were in January 2008 in terms of payroll employment.

It turns out that the pattern of nonfarm payroll jobs today is vastly different from what it was back in January 2008. Here are some of the comparisons.

By far the largest number of net new nonfarm payroll jobs over that period is found in the “health care and social assistance” category, which has risen by 2,150,000 such jobs. Next is “Accommodations and food services” with an increase of 941,000. “Professional and technical services” jobs have grown by 512,000. “Education services “has gained 425,000 jobs and “Temporary help services” has added 307,000 jobs since January 2008.

Not very surprisingly, the biggest loser is jobs in manufacturing. There were 1,650,000 fewer of those in May 2014 than in January 2008. This is hardly a new story. The peak was 19,553,000 jobs back in June 1979. The recent trough counted 11,453,000 such jobs, which was the lowest number since March 1941, well before the US became involved in World War II. The May 2014 level of 12,099,000 is still lower than in June 1941, both on a seasonally adjusted basis. No one expects to see a new record here for many years, if ever. It is a fact that total manufacturing output has soared since then. The Industrial Production manufacturing index was 10.5 (2007=100) then and 99.5 in May 2014. That shows how huge the labor productivity increases have been in manufacturing. The US has the highest levels of labor productivity in manufacturing in the world and also the highest average annual rate of increase in this critically important measure over the past 70 years.

The construction sector was still down 1,496,000 jobs in May 2014 from January 2008. The government sector lost 507,000 jobs over that period, but almost all of these were at the state and local level.

Consistent with this shift in the type of nonfarm payroll jobs over the past 6-1/2 years, it should not surprise you to learn that the number of nonfarm payroll jobs held by women has been above the old peak set in February 2008 every month since September 2013. There were 68,393,000 nonfarm payroll jobs held by women in May 2014 or 49.4 percent of all such jobs.

As a corollary to the still-missing millions of construction and manufacturing jobs, the total number of nonfarm payroll jobs held by men is still below the old peak. It will take several more months to see a new record for men holding nonfarm payroll jobs.

Of course, there are two different measures of employment. In addition to nonfarm payroll employment, we have total civilian employment, which includes the self-employed and agricultural workers. This measure counts each person only once, whereas the payroll survey does not adjust for people who have more than one payroll job.

Total civilian employment peaked in November 2007 with 146,595,000 people employed on a seasonally adjusted basis. In May 2014 there were 145,814,000 people employed, so there are still 781,000 fewer people employed than at the peak. There were 9,799,000 people who were unemployed and looking for work in May for an unemployment rate of 6.3 percent. We should see a new record in the next two or three months. Then we can celebrate the fact that we are in uncharted territory by both measures.

The June 10, BLS report on “Job Openings and Labor Turnover” (the JOLTS report) told us that on April 30 on a seasonally adjusted basis there were 4,455,000 unfilled job openings in the US. That was the highest since September 2007, before the recession began.

The report also said that there were 55.1 million hires in the twelve months ending in April 2014. There were 52.8 million job separations in the same period.

Thus, we had 107.9 million people changing jobs over 12 months in order to get a net employment gain of 2.2 million people. The US economy remains the most incredible “jobs machine” every seen.

 

Dr. James F. Smith

Chief Economist

?????????

Share this:

College Savings for the Kids, or Retirement?

Many a financial advisor has been asked how to balance saving for retirement while also funding a child’s college education. Which brings up the question: Is it a parent’s responsibility to pay for their child’s education? And is it possible to do both? As with most difficult questions, there are no black and white answers.

While I’m not a parent myself, I’ve heard passionate positions on both sides of the argument. Some parents didn’t receive any college financial support and feel pride in having paid their own way, working and going to school part time in order to earn their four-year degree. Others, myself included, felt fortunate enough to receive monetary support from their parents, and the gift of graduating with a four-year degree debt-free. In a perfect world, most parents would choose to provide for their children’s education but unfortunately not everyone has the income to do it. In that case, what is the best course of action?

Before tackling that question, there is some good news. A recent Gallup Poll shows that expensive, prestigious colleges don’t necessarily produce happier people who lead more fulfilling lives. Specifically, graduates of colleges in the bottom-ranked U.S. News & World Report schools faired just as well as graduates from top-ranked colleges in terms of overall well being. The poll looked at several quality of life factors, including income level and “engagement” in graduates’ careers. See the article here. Of particular note, high college debt loads had a meaningfully negative impact on graduates. Sadly, 70% of students who borrow have a national average debt balance of $29,400.

I would tend to agree with these findings. As a state university graduate (go Gators!) I received a great education, learned and worked with some world-renowned scholars, and feel pretty darn satisfied in my life and career today. All-in, college cost my parents about $12,000 a year. Granted, that was seventeen years ago. Today, attending the University of Florida costs about $21,000 a year, including room and board; still a pretty attractive price tag considering sky-high tuitions at some of the top private colleges and universities. Don’t get me wrong, if money had been no option and my grades were a little better back in high school, I would have jumped at the chance to attend an Ivy League school. Such were not my cards. The point, however, is that state schools often offer a phenomenal education at a fraction of the cost of many private schools which can make the dilemma of whether to save for your retirement or your child’s secondary education a little less challenging.

However, different students have different needs and may be searching for what those more expensive colleges offer – whether that’s a smaller setting, specific academic programs or special facilities. So if your child is interested in what the pricier schools have to offer, consider applying even if you don’t have all the funds available to pay. Some of the most expensive schools have a tremendous amount of scholarship money available for qualified students in need. It’s a great reason for your child to stay motivated with grades and extracurricular activities throughout high school.

But back to our main question: should you save for your retirement or your child’s college education? Ideally, everyone would do both, but given a median US income of about $51,000, this isn’t always possible. Taking an economic perspective, the classic airplane analogy comes to mind: when the oxygen masks come down due to a drop in air pressure, air regulations require parents to first secure their own oxygen mask before helping their child. Why? Because we can’t take care of someone else, children included, until we’ve first tended to our own needs. I believe the same holds true regarding retirement savings and a child’s college education. Funding your child’s college education at the expense of your retirement savings plan implicitly shifts the financial burden of retirement from parent to child. Essentially, parents who first try to support their child at the expense of their own retirement are making the bet that their child will earn more than them, or at least enough to provide for them in their twilight years. While parents may have good intentions, this dynamic can ultimately prove unhealthy for all parties involved. As with the oxygen mask analogy, a sound strategy would suggest first meeting your own retirement savings needs and then, as you’re able, contributing to a child’s college fund. In the end, you’ll have peace of mind regarding your own financial security and likely be in a better position to further support your child – who may just be thriving on her own.

Carrie A. Tallman, CFA
Director of Research

Share this:

Market Update Through 5/15/2014

as of May 15, 2014
                                                                           Total Return
Index 12 months YTD QTD MTD
Stocks
Russell 3000 15.33% 1.39% -0.57% -0.69%
S&P 500 15.17% 2.02% 0.21% -0.53%
DJ Industrial Average 10.25% 0.15% 0.30% -0.57%
Nasdaq Composite 18.72% -2.09% -2.90% -0.95%
Russell 2000 12.33% -5.40% -6.45% -2.67%
MSCI EAFE Index 7.81% 1.65% 1.83% 0.94%
MSCI Emerging Markets 4.45% 2.11% 2.58% 2.72%
 
Bonds
Barclays US Aggregate 1.43% 3.58% 1.71% 0.85%
Barclays Intermediate US Gov/Credit 0.80% 2.12% 1.11% 0.59%
Barclays Municipal 1.94% 5.71% 2.32% 1.10%
 
  Current Prior
Commodity/Currency Level Level
Crude Oil $101.50 $99.74
Natural Gas $4.47 $4.82
Gold $1,293.60 $1,295.90
Euro $1.37 $1.39

Mark A. Lewis

Share this:

Market Update Through 4/30/2014

as of April 30, 2014
Total Return
Index 12 months YTD QTD April
Stocks
Russell 3000 20.78% 2.10% 0.12% 0.12%
S&P 500 20.44% 2.56% 0.74% 0.74%
DJ Industrial Average 14.44% 0.72% 0.87% 0.87%
Nasdaq Composite 25.20% -1.15% -1.96% -1.96%
Russell 2000 20.50% -2.80% -3.88% -3.88%
EAFE Index 11.80% 0.70% 0.87% 0.87%
 
Bonds
Barclays US Aggregate -0.26% 2.70% 0.84% 0.84%
Barclays Intermediate US Gov/Credit -0.24% 1.52% 0.51% 0.51%
Barclays Municipal 0.50% 4.56% 1.20% 1.20%
 
  Current Prior
Commodity/Currency Level Level
 
Crude Oil $99.74 $103.75
Natural Gas $4.82 $4.57
Gold $1,295.90 $1,300.30
Euro $1.38 $1.38

Mark A. Lewis

Director of Operations

Share this:

Market Update Through 4/15/2014

as of April 15, 2014
Total Return
Index 12 months YTD QTD MTD
Stocks
Russell 3000 22.03% -0.02% -1.96% -1.96%
S&P 500 21.25% 0.29% -1.49% -1.49%
DJ Industrial Average 14.10% -1.27% -1.12% -1.12%
Nasdaq Composite 27.05% -3.10% -3.89% -3.89%
Russell 2000 25.03% -3.46% -4.53% -4.53%
EAFE Index 11.56% -2.21% -2.04% -2.04%
Bonds
Barclays US Aggregate -0.22% 2.58% 0.73% 0.73%
Barclays Intermediate US Gov/Credit -0.08% 1.51% 0.50% 0.50%
Barclays Municipal 0.65% 4.32% 0.97% 0.97%
Current Prior
Commodity/Currency Level Level
Crude Oil $103.75 $101.58
Natural Gas $4.57 $4.37
Gold $1,300.30 $1,283.80
Euro $1.38 $1.37

Mark A. Lewis

Director of Operations

Share this:

Market Update Through 3/31/2014

as of March 31, 2014
                                                              Total Return
Index 12 months YTD QTD March
Stocks
Russell 3000 22.61% 1.97% 1.97% 0.53%
S&P 500 21.86% 1.81% 1.81% 0.84%
DJ Industrial Average 15.66% -0.15% -0.15% 0.93%
Nasdaq Composite 30.18% 0.83% 0.83% -2.45%
Russell 2000 24.90% 1.12% 1.12% -0.68%
EAFE Index 15.88% -0.18% -0.18% -0.43%
 
Bonds
Barclays US Aggregate -0.10% 1.84% 1.84% -0.17%
Barclays Intermediate US Gov/Credit -0.13% 1.00% 1.00% -0.30%
Barclays Municipal 0.39% 3.32% 3.32% 0.17%
 
  Current Prior
Commodity/Currency Level Level
 
Crude Oil $101.58 $98.89
Natural Gas $4.37 $4.43
Gold $1,283.80 $1,379.00
Euro $1.37 $1.39

Mark A. Lewis

Director of Operations

Share this:

Consumers Ride to the Rescue Again

Despite recurring unpleasant experiences with ice, sleet, snow, exceptionally low temperatures, wind and rain so far in 2014, consumers have kept on spending. On March 13, the Census Bureau gave us our first look at retail and food services sales for February.

The chart shows this story. After a 0.6 percent decline in January from December, total retail and food services sales posted a 0.3 percent increase in February from January. The total of $427.2 billion is the best February ever and 1.5 percent above February 2013.

untitledhttps://research.stlouisfed.org/fred2/series/RSAFS

It is the fourth-best month ever, behind only October, November and December (in descending order) of 2013. In what is undoubtedly at least partially due to the unusually bad weather endured by so many parts of the nation, by far the best increase (6.3 percent) above February 2013 was racked up by nonstore retailers. So long as people had electricity they could order over the Internet or by telephone.

The second biggest increase was posted by “Health and personal care stores,” where sales rose by 5.5 percent above a year before. “Building materials and garden equipment supplies dealers” were next with a 3.2 percent year-over-year rise.

Gasoline stations had sales 4.6 percent lower than a year earlier. That was the result of slightly lower crude oil prices and less demand.

No matter the weather, people kept eating. Sales at “Food and beverage stores” were up 2.8 percent from a year earlier with the grocery stores part up 2.4 percent. “Food services and drinking places” (aka bars and restaurants) saw sales rise by 2.6 percent.

Consumers remain reasonably optimistic about the economic future for good reasons. The demand for labor is rising, which means that jobs are easier to find while wages and salaries are also growing.

With rising incomes, consumers have more money to spend on goods and services. This causes increases in retail sales and new orders from retailers to restock shelves keep industrial production growing. That in turn leads to more employment and more income. Economists call this lovely situation a virtuous cycle.

While the period since the end of the recession in June 2009 is still the weakest expansion in over 100 years in the US, we are finally entering a virtuous cycle. This year should be the first year with real GDP growth above 3.0 percent since 2005. That would be very good news indeed. The weather will improve and most of the output lost in the first quarter will be made up in April, May and June.

There will be some impact on the monthly profile of retail sales in 2014 because Easter is several weeks later this year than last. This year it will be on April 20 and last year it fell on March 31. Thus, we may have to wait for May to get a clear picture of exactly how robust retail sales are.

The Census Bureau will release revised data on retail and food services sales for the period from January 2012-March 2014 on April 30. Those data may change our understanding of consumer spending patterns somewhat. They will undoubtedly reaffirm the vital contribution of consumer spending to US economic growth.

Dr. James F. Smith
Chief Economist

 

Share this:

Market Update Through 3/14/2014

as of March 14, 2014        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 21.45% 0.57% 0.57% -0.85%
S&P 500 20.28% 0.07% 0.07% -0.88%
DJ Industrial Average 13.21% -2.53% -2.53% -1.47%
Nasdaq Composite 31.98% 1.90% 1.90% -1.41%
Russell 2000 25.60% 1.75% 1.75% -0.06%
EAFE Index 10.26% -3.54% -3.54% -3.78%
         
Bonds        
Barclays US Aggregate 0.56% 2.01% 2.01% -0.01%
Barclays Intermediate US Gov/Credit 0.60% 1.31% 1.31% 0.00%
Barclays Municipal  0.76% 3.34% 3.34% 0.19%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $98.89    $102.59
Natural Gas    $4.43    $4.61
Gold    $1,379.00    $1,321.60
Euro    $1.39    $1.38

Mark A. Lewis

Director of Operations

Share this:

Market Update Through 2/28/2014

as of February 28, 2014        
  Total Return
Index 12 months YTD QTD Feb
Stocks        
Russell 3000 26.74% 1.43% 1.43% 4.74%
S&P 500 25.37% 0.96% 0.96% 4.57%
DJ Industrial Average 19.01% -1.07% -1.07% 4.34%
Nasdaq Composite 38.10% 3.36% 3.36% 5.15%
Russell 2000 31.56% 1.81% 1.81% 4.71%
EAFE Index 18.48% 0.26% 0.26% 3.74%
         
Bonds        
Barclays US Aggregate 0.15% 2.02% 2.02% 0.53%
Barclays Intermediate US Gov/Credit 0.31% 1.31% 1.31% 0.38%
Barclays Municipal  -0.21% 3.14% 3.14% 1.17%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $102.59    $100.30
Natural Gas    $4.61    $5.21
Gold    $1,321.60    $1,318.60
Euro    $1.38    $1.36

Mark A. Lewis

Director of Operations

Share this: