Markets Remain Bullish – Weekly Update for August 7, 2017

Another week of economic performance brought more news that the markets continue their bullish streak. After eight consecutive record-high closings, the Dow rose above 22,000 for the first time ever and finished the week up 1.20%. The S&P 500 was up 0.19% for the week, and the NASDAQ slightly fell by 0.36%. Meanwhile, the MSCI EAFE closed with a 0.82% increase.

The positive news continued with other upbeat reports. Manufacturing and employment each posted impressive numbers, suggesting a favorable Q3 start. And investors are looking ahead to possible Fed action on unwinding its balance sheet and bumping interest rates up again in December.

Here are key market developments that emerged last week:

Manufacturing Is On the Rise

Manufacturing is gaining speed as a key economic factor for Q3 and Q4. In June, new factory orders rose to almost a 10% annual increase, the best rate in the last 3 years. Unfilled orders also jumped 1.3% on rising demand for transportation equipment and capital goods. In addition, business confidence is at a 6-month high and inventories are up, though inflationary pressure remains soft. As a result, factory payrolls jumped 16,000 in July on top of June’s 12,000 increase.

Jobs Reports Remain Robust

Last Friday’s Employment Situation report marks the 5th time this year that payroll growth surpassed 200,000. While analysts predicted payrolls would grow by an additional 178,000, the actual number came in at 209,000. The solid employment increase helped lower the unemployment rate to 4.3%—the best rate since 2001.

Average hourly earnings also rose last week. The welcomed 0.34% increase on the month was the highest increase since October. Analysts hoped that low unemployment numbers would push yearly wage growth to over 3%, but year-to-date numbers continue to hover around growth of 2.5%.

Federal Reserve Weighs Options

Expect the Fed to raise interest rates in December by an additional ¼ point, though Fed Chair Janet Yellen has indicated that low inflation remains a concern for the economy. Despite robust financial markets, low unemployment, and a flourishing job market, inflation sits below the targeted 2% increase, with modest increases in both wage growth and consumer spending. Some analysts think that soft inflation could give pause to a year-end Fed rate hike.

Many observers believe the Federal Reserve will begin in September to shrink its $4.5 trillion balance sheet. The Fed balance sheet consists primarily of U.S. treasury bonds and mortgage-backed securities. To reduce this position, the Fed can either sell those securities, or it can opt not to reinvest securities as they mature.

What Is Ahead

Domestically

Widespread positive indicators are at the heart of a solid start to Q3. In addition to rebounding manufacturing activity and robust employment data, other aspects of the economy are brightening:

Internationally

In addition, economies around the world are moving in the right direction. The euro economies are showing continued strength, while emerging economies are expanding at their fastest rate since 2014.

As always, we encourage you to continue focusing on your long-term goals. Should you have any questions about the economy or your financial life, we are here for the conversation.

Economic Calendar

Tuesday: Job Openings and Labor Turnover Survey (JOLTS)
Thursday: Jobless Claims
Friday: Consumer Price Index

Strong Stocks and a Falling Dollar – Weekly Update for July 24, 2017

Last week, the Dow, S&P 500, and NASDAQ again hit record highs. The midweek peaks fell by Friday, though market performance remained strong. By week’s end, the Dow dropped 0.27%, and the S&P 500 and NASDAQ dipped on Friday but closed up 0.54% and 1.19%, respectively. The MSCI EAFE finished with a 0.46% increase.

Corporate Earnings Drive Growth

Analysts noted that stocks were particularly “strong” last week due to generally robust Q2 corporate earnings reports. With roughly 20% of S&P 500 companies reporting, corporate earnings should remain solid through the quarter. So far, 73% of reporting companies beat their estimated earnings per share, and 77% have higher-than-expected sales against a 5-year average.

Weakened Dollar Continues

The dollar continued its downward trend, dropping 1.3% during the week. So far, our currency has fallen 8.1% since the start of 2017. A weakening dollar will boost companies with exports or overseas business. As such, the U.S. consumer will take a hit, since a falling dollar causes price increases on imported goods. The latest fall started last week after the Fed expressed concerns over low inflation.

By and large, European markets reacted negatively to the falling U.S. dollar, and uneven EU corporate earnings reports did not help either. With the euro’s value against the dollar rising to its highest point since January 2015, the value of EU company exports and overseas earnings measured in dollars will fall.

Other Key Market Developments

Here are some other key developments in fundamentals from last week:

  • Housing Tensions Relax: Housing starts jumped to a 1.215 million annual rate, the first gain in three months. Similarly, housing permits increased to a 1.254 million rate, the strongest numbers since March. Homebuilders are cautious, however, with the Housing Market Index and Components falling 3 points in July. The rising cost in lumber—due to tariffs on Canadian softwood—has builders concerned, as homebuyers will ultimately pay higher prices.
  • Jobless Claims Fall: July’s employment numbers look hopeful as the initial jobless claims for the week of July 15 dropped to 233,000, far below the consensus estimate of 246,000. The numbers should help lower July’s overall unemployment rate and suggest that—despite low wages and productivity—labor demand remains high.
  • Oil Prices Drop: Oil prices fell over 2% on July 21, after reaching a 6-week high earlier in the week. The drop followed news that OPEC increased July production by 145,000 barrels daily while U.S. stockpiles largely decreased, contributing to the temporary price hikes.

A Busy Week Ahead

This week will be busy. More housing news starts the week, and expect Wednesday’s Fed meeting to get some attention, though interest rates should not increase. Further, Friday’s Gross Domestic Product (GDP) Price Index and Consumer Sentiment Index will be of interest to markets.

Though the news from Washington can dominate the headlines, remaining focused on key drivers of market performance is key. Contact us if you have questions as to how the past week’s markets may influence your portfolio. We are always happy to help.

ECONOMIC CALENDAR

Monday: Existing Home Sales
Tuesday: FHFA House Price Index, Consumer Confidence Index
Wednesday: New Home Sales
Thursday: Durable Goods Orders, International Trade In Goods, Jobless Claims, Chicago Fed National Activity Index
Friday: GDP, Employment Cost Index, Consumer Sentiment

 

Q2 Coming into Focus – Weekly Update for July 17, 2017

Last Friday, stocks closed on more record highs. The S&P 500 rose 1.41% and the Dow climbed 1.04%—both closing at new peaks. The NASDAQ reported a 2.58% gain and the MSCI EAFE posted a 2.38% increase. Despite continuing headlines from Washington, the markets remain productive and strong. New Q2 numbers also rolled in last week, giving us a clearer picture of what happened from April through June.

Q2 Coming Into Focus

Over the second quarter, the S&P 500 rose 2.57%, the Dow gained 3.32%, and the NASDAQ jumped 3.87%. Meanwhile, the MSCI EAFE improved by 5.0%. Analysts are now predicting that Q2 Gross Domestic Product (GDP) will grow to 2.4%—stronger than Q1’s soft 1.4% increase.

While we wait for more numbers and reports, here are some highlights so far:

  • Corporate Earnings: Corporate Earnings should remain strong for Q2, with an expected S&P 500 earnings growth of 6.5%. As of July 14, only 6% of S&P 500 companies have reported earnings.
  • Core Consumer Pricing: Core Consumer Pricing, which measures the price of consumer goods excluding food and energy, remained at 60-year historically low June’s numbers increased by only 0.1%—the third month in a row for low rates.
  • Retail Sales: Retail sales were soft, declining unexpectedly by 0.2% following May’s 0.1% drop and April’s 0.3% rise.
  • Labor Market: Employers hired at a record increase of 8.3% in May, filling 5.5 million jobs. Consequently, job openings fell in May to 5.7 million from April’s strong 6.0 million. The strong labor market further reflected in June’s low unemployment rate of 4.4%.

On the international front, global economic growth is set to post a predicted 3.0% increase for Q2. Emerging and advanced economies both should record positive results based on strong global trade growth and favorable economic indicators. Both China and Japan are expected to post strong economic growth.

News From Last Week and Looking Ahead

For Q3 and Q4, the economy should continue to produce strong job data and decent housing markets—along with growing investments in businesses. For the year, the economy is expected to expand at an estimated 2.2% in 2017. With that said, consumer sentiment fell to 93.1 in July—much lower than expected. Because consumer spending makes up more than two-thirds of the economy, the markets will continue to follow consumer attitudes and spending. Given current global economic trends, some analysts expect the global economy to grow by 3.0% for 2017.

Finally, Fed Chair Janet Yellen testified before Congress last week. She confirmed that the Fed’s reduction in its $4.5 trillion balance sheet—known as “tapering”—will start later this year. She also suggested that interest rate hikes might continue for a couple of more years. With inflation hovering at 1.4%, however, the Fed may be losing confidence in reaching its targeted goal of an annual 2% increase. Meanwhile, The Bank of Canada has followed the Fed’s lead by raising its interest rates 25 basis points to 0.75%—its first raise since 2010.

As always, we are here to help you navigate the often-complex economic environment. Contact us if you have any questions about how this information may impact your financial life. 

ECONOMIC CALENDAR

Monday: Empire State Manufacturing Survey
Tuesday: Import and Export Prices, Housing Market Index
Wednesday: Housing Starts
Thursday: Jobless Claims, Philadelphia Fed Business Survey Outlook, Fed Balance Sheet

 

Mixed Worldwide Markets – Weekly Update for June 12, 2017

Markets were mixed last week with leading tech stocks falling dramatically as some investors pulled profits. The NASDAQ took the biggest hit, finishing 1.55% down on the week—its worst week of the year. Meanwhile, the Dow rose 0.31% for the week, notching another record close on Friday. The S&P 500 fell 0.30%, and the MSCI EAFE closed the week down 1.22%.

The S&P tech sector dropped 3.3% on Friday; however, it remained up 18% for the year. Major tech stocks account for almost 13% of the total number of stocks in the S&P 500, while comprising nearly 40% of the S&P 500 increase for the year.

Internationally, Asian markets were mixed while European markets closed the week generally higher. The European equities markets took last week’s UK election in stride, though the pound dropped in response to the Conservatives losing their majority.

Domestically, monthly job openings exceeded 6 million in April. Hiring, however, has slowed to only 5 million per month, suggesting workers’ skills may not match job needs. Moreover, the economy continues to show signs of softening.

Indications of a Softer Economy

  • Wholesale and Retail Inventories Down: Revised wholesale inventories shrunk 0.5% in April, the largest contraction in more than 12 months. In addition, retail inventories fell in April as sales weakened.
  • Inflation Slows: As noted last week, consumer prices remain weak. Inflation slowed in April to an annual rate increase of 1.7% year-over-year, down from the 1.9% recorded in March and 2.1% in February. Falling oil prices, excessive auto inventories, and increasing apartment rental inventories will all create headwinds to reaching the Fed’s target rate of 2.0%.
  • Factory Orders Down: Factory orders fell 0.2% in April. While motor vehicles rose 0.6% and computers gained 1.6%, durable goods orders fell 0.8%.
  • Oil Prices Drop: Though summer driving season is here, U.S. gasoline demand dropped by nearly a half-million barrels a day. While the need for fuel fell—and despite beliefs that oil would fall by 3.5 million barrels—stockpiles rose by 3.3 million barrels. As a result, oil dropped by 4%, ending the week at $45.86 per barrel.

What Comes Next

The Fed will hold a meeting this week to determine whether to raise interest rates. Expectations are that the Federal Open Market Committee (FOMC) will raise the fed funds rate 0.25% to 1.25% despite the soft economic news, which the Fed characterized as “transitory.” The FOMC meeting will also address quarterly forecasts for the remainder of the year. The markets expect both Japan and Britain’s central banks to also address the issue of interest rates.

In addressing the federal debt, the Treasury Secretary assured last week that the U.S. will not default on its debt. Congress must address the debt limit this summer or fall, but markets may react negatively if delays occur. Meanwhile, Congress continues to wrestle with policy questions around tax reform, an infrastructure program, and healthcare reform. How the government addresses these important initiatives could alter market dynamics in the future.

If you have questions on where you stand as these events unfold, do not hesitate to contact us. We are here to support your financial life with clarity and sound perspectives.

ECONOMIC CALENDAR

Wednesday: Consumer Price Index, Retail Sales, Business Inventories, FOMC Meeting Announcement
Thursday: Industrial Production, Housing Market Index
Friday: Housing Starts, Consumer Sentiment

Economic Volatility: Where Are The Markets In Response? – Weekly Update for June 5, 2017

Last week, the S&P 500, Dow, and NASDAQ closed at all-time record highs. The S&P 500 rose 0.96%, the Dow gained 0.6%, and the NASDAQ grew by 1.54%. Meanwhile, the MSCI EAFE gained 1.64% for the week.

Despite strong equity markets, bond yields dropped to their lowest point in the year. The drop in yield caused by rising bond prices, combined with soft employment numbers and low wage growth, could suggest a slowing economy or a tightening labor market.

While the U.S. equity markets advanced to new highs and bond prices rose, other markets were mixed for the week. Pending home sales dropped 1.3% in April, a second straight month of decline. Oil fell to $47.66 a barrel, the dollar dropped to a seven-month low against the euro, and gold gained 0.8% closing at $1,280.20.

Additionally, soft employment numbers and flat wages could lead to a disappointing Q2 Gross Domestic Product (GDP). With an eye on dropping inflation, the Fed will have to decide whether to still raise interest rates.

Mixed Job Numbers and Slow Wage Growth

May’s job growth reported an anemic 138,000, well below the expected 185,000. At the same time, average hourly wages increased on a year-over-year basis by only 2.5%. Moreover, the revisions to March and April’s payroll numbers fell by 66,000 jobs. The economy is currently averaging 162,000 new jobs per month for the year—again, well below 2016’s 187,000 average.

Despite the unemployment rate falling to 4.3%, the lowest it’s been in over 15 years, the employment-to-population ratio also fell. Still, the data confirms that demand for experienced and skilled workers exists, while the supply is falling.

Fed Will Discuss Raising Interest Rates

On June 14, the Fed FOMC will meet to determine if an interest rate increase is in order. Despite the soft employment numbers and an inflation rate below the Fed’s target of 2%, traders still believe there is a nearly 88% chance that the Fed will raise rates in June. However, the market consensus currently suggests only a roughly 50/50 chance for another rate increase before the end of the year.

International News and Looking Ahead

Manufacturing in China has posted strong returns. Both the manufacturing and non-manufacturing PMIs reported gains above 50. The numbers suggest that China is on track to reach its targeted 6.5% growth for the year. This matters because China is the world’s second largest economy at $11 trillion GDP for 2017.

Other developments in the international arena could influence markets going forward. Reaction to President Trump’s decision to leave the Paris Climate Accord could adversely affect American products in the international markets. The landmark decision also runs the risk of hurting U.S. tech and alternative energy companies.

We will continue to follow developing international and national news as they move the markets. As always, if you have questions about how these events may affect your finances, please contact us. We are here to help you remain informed and in control of your financial future.

Economic Calendar

Monday: Factory Orders, ISM Non-Manufacturing Index
Tuesday: JOLTS (Job Openings and Labor Turnover Survey)
Thursday: Jobless Claims

Mixed Signals, Positive Performance – Weekly Update for May 8, 2017

Last week, stocks rose but floated within a narrow trading range. By Friday, however, both the S&P 500 and the NASDAQ reached record highs. For the week, the S&P 500 gained 0.63%, the Dow finished up 0.32%, and the NASDAQ rose 0.88%. The MSCI EAFE added 1.7%.

Overall, we experienced another week of generally positive, but somewhat mixed, economic signals. Soft auto sales and tumbling oil prices offset increased job creation and the lowest unemployment recorded in a decade.

POSITIVE MARKET NEWS

  • Increased Job Creation and Low Unemployment
    In April, U.S. payrolls added 211,000 jobs, exceeding the 190,000 predicted and showing a significant bounce back from March’s 79,000 increase. The jobless rate also dropped to 4.4%—the lowest it has been since May 2007. The economy added jobs in several industries:

    • Leisure and hospitality: +55,000 jobs
    • Health care: +20,000 jobs
    • Mining: +9,000 jobs
    • Professional and business services: +39,000 jobs
    • Government: +17,000 jobs
  • Strong Corporate Earnings
    First quarter earnings season continued last week, and U.S. companies once again reported strong results. So far, companies with majority overseas profits are reporting an average revenue growth of 19.9%, outperforming S&P 500 companies with domestic earnings only. This difference helps explain how corporations are reporting strong Q1 earnings despite sluggish economic growth in the U.S. during the same period.

MIXED SIGNALS

  • Auto Sales Below Expectations
    U.S. motor vehicle sales bounced up to an annualized rate of 16.9 million. Though April’s report falls below the predicted 17.2 million, it improves on March’s 16.6 million annualized rate.
  • Oil Prices Tumble
    Oil prices tumbled last week. Both June West Texas Intermediate (WTI) crude and July Brent crude finished the week down. WTI closed at $46.22 a barrel, falling approximately 6.3% below last week’s close. Brent crude fell by about 5.6% for the week to $49.10 a barrel.

LOOKING AHEAD

On Wednesday, May 3, the Federal Open Market Committee (FOMC) announced it would keep the federal funds target range at 0.75% to 1.00%. Nonetheless, the Fed remains encouraged that the second-quarter GDP will rebound, because they believe consumer fundamentals remain solid. This sentiment may indicate the FOMC will raise rates in their June meeting.
On Sunday, Emmanuel Macron won the French presidential election, as expected. Macron’s win should ease European Market concerns, as he is a centrist who supports global trade, the euro, and France’s continuing membership in the EU.

As we look ahead to this week, our analysis will include a variety of international and domestic focuses. In particular, consumer prices, retail sales, and business inventories will highlight economic reports for the week while oil prices also should remain in focus for investors.

ECONOMIC CALENDAR

Tuesday: JOLTS (tracks monthly changes in job openings)
Thursday: Jobless Report, Producer Price Index
Friday: Consumer Price Index, Retail Sales, Business Inventories, Consumer Sentiment

How Rising Interest Rates Can Inspire Your Portfolio – Weekly Update for March 20, 2017

For the fifth time in six weeks, domestic stock indexes ended last week in positive territory. The S&P 500 gained 0.24%, the NASDAQ added 0.67%, and the Dow eked out a 0.06% increase. International equities in the MSCI EAFE grew by a sizable 1.99%.

Over the week, we received a series of economic updates that gave a mostly positive view of the economy’s progression, including the following data for February:

In addition, the most recent data indicated that fewer people filed for unemployment benefits the week of March 11. We have now experienced 106 straight weeks of unemployment claims staying below 300,000 people, which is a healthy labor market indicator.

Given this information—and the wealth of economic data released recently—the markets expected the Federal Reserve’s March 15 decision to raise benchmark interest rates. Last week’s 0.25% increase is only the third jump since the Great Recession, and the pace of hikes is quickening. The Fed has now raised rates in December 2015, December 2016, and March 2017 and expects at least two more increases this year.

Like with all economic data, understanding the context is critical. While interest rates are on the rise, they are still low, as you can see in the chart below.

How will rising rates affect your financial life?

When the Fed raises rates, they are demonstrating a belief in the economy’s strength. As with all changes to monetary policy, the outcomes can be complex and interconnected. While no one can predict the future, here are a few places where interest rates may affect your finances:

  1. Stocks

Stocks rose following the Fed’s announcement, with the S&P 500 gaining 0.84% on Wednesday. A strong economy is good for stocks; but anticipating exactly what lies ahead is impossible because so many outside forces impact equities. Right now, however, the markets are performing well and responding positively to increasing rates.

  1. Bonds

Generally speaking, as interest rates rise, bond yields go up and their prices go down—with long-term bonds suffering the most. However, those are not hard-and-fast rules for how to move forward. Your specific needs and strategies will determine the best way to move forward with bonds in a rising interest rate environment.

  1. Revolving Debt

If you have revolving debt—credit cards, home equity line of credit, etc.—and your interest rates are variable, you will likely see a difference in your payments very soon. In fact, a 0.25% increase like we experienced last week may cost consumers an additional $1.6 billion in credit-card finance charges in 2017 alone.

  1. Cash

When revolving debt interest rates go up, banks may quickly adjust the interest rates they charge, but they often wait to increase the interest rates they pay. Right now, the average savings account pays 0.11% interest, but some institutions offer rates up to 1.25%. Finding opportunities to capture a larger return on your cash is possible.

If you have questions about why the Fed is raising rates and how their choices may affect your life, we are always here to talk. Our goal is to give you the insight you need to feel informed and in control of your financial future.

ECONOMIC CALENDAR
Wednesday: Existing Home Sales
Thursday: New Home Sales
Friday: Durable Goods Orders

Bull Market’s 8th Anniversary – Weekly Update for March 13, 2017

After at least four consecutive weeks of growth, the three major domestic indexes all lost ground this week. The S&P 500 was down 0.44%, the Dow lost 0.49%, and the NASDAQ declined 0.15%. Meanwhile, international stocks in the MSCI EAFE grew by 0.38%.

This week, the Fed meets to determine whether or not to raise benchmark interest rates for the first time in 2017. Right now, the market gives a 93% chance of a rate hike.

In this update, rather than analyzing what lies ahead or what happened last week, we would like to acknowledge just how far the U.S. economy has come since 2009.

On March 9, we marked the 8-year anniversary of when markets during the Great Recession hit the bottom on their lowest day. At that point in the economic meltdown, the Dow and S&P 500 had both lost more than 50% of their value since October 2007. Every investor likely remembers the fear that gripped the U.S. and global economies, as questions lingered of how low we could go.

Today, we can see just how far the markets and economy have come since March 2009—and the growth investors could have missed if they avoided the markets. Take, for instance, the S&P 500.

On March 9, 2009, the index fell to 676.53. Eight years later it rebounded to 2364.87.  With reinvested dividends, that growth represents an average annual increase of 19.45%. And the fundamental data tells a very similar story.

Four Economic Measures: From March 2009 to Today

  1. Gross Domestic Product
  • March 2009: We learned the economy had fallen by a 6.3% annual rate during the fourth quarter of 2008—its largest decline in 26 years.
  • Today: GDP recovery has been more plodding than many people might prefer, but nonetheless, nearly every quarter has shown growth since 2009. And over the past two years, GDP has increased at a 3.2% annual rate.
  1. Home Prices
  1. Unemployment
  1. Total Employment

Throughout this economic recovery, people have seemed concerned the bull market was about to end. When discussing the bottom of the market 5 years ago, in the March 12, 2012 Weekly Update, we wrote about many analysts’ worries that a pullback was imminent. Even last year, one MarketWatch columnist wrote an article titled “Happy Birthday Bull Market—Now Write Your Will,” warning that the markets would not reach new peaks in the near future. The S&P 500 has gained around 19% in the months since then.

Of course, no one can predict exactly when this bull market will begin to decline. And at 8 years old, only one recovery has lasted longer since World War II.

As always, we will continue to offer the advice we believe suits your best interests in every market environment: Focus on your long-term goals and personal needs, not headlines and emotions. We have come a long way in 8 years, and we will continue to guide you through the market’s changing times and inevitable fluctuations. If you have questions about where you stand today or how to prepare for tomorrow, we are here to talk.

ECONOMIC CALENDAR

Tuesday: FOMC Meeting Begins
Wednesday: Consumer Price Index, Retail Sales, Housing Market Index, FOMC Meeting Announcement
Thursday: Housing Starts
Friday: Consumer Sentiment

March 2017 Market Update Video

Since February was a record-breaking month for the economy, Josh and I decided we wanted to try to break a record of our own. Watch our video to find out how we did!

Also in this month’s video, we’ll discuss some of the major headlines that influenced markets in February — and provide insight into what these developments could mean for you as an investor.

If you have any questions about your portfolio after viewing this video, please give us a call at 419-425-2400, or send us an email. We would love to talk with you.

January Jobs Jump – Weekly Update for February 6, 2017

Political headlines continued to fill the news last week, and while domestic markets declined during mid-week trading, they rebounded on Friday, February 3. Overall, the week showed only modest movement, as the S&P 500 added 0.12%, the NASDAQ was up 0.11% to end at a record high, and the MSCI EAFE grew by 0.01%. The Dow was down by 0.11% but still managed to end above 20,000 after dipping below this benchmark between Tuesday and Thursday.

So, why did domestic markets perform well on Friday? A better-than-expected jobs report.

The January Jobs Report

Depending on which survey you look at, economic experts predicted the economy would add an average of between 175,000 and 180,000 jobs in January. Instead, on Friday, the Bureau of Labor Statistics’ report showed the economy added 227,000 jobs last month—far higher than predicted. This increase means job growth has continued for 76 months in a row.

You gain a much clearer picture, however, when you look beyond the big headlines and see what other data tells us. Here’s a quick rundown of what we found:

Hourly Earnings Increased, but by a Very Small Margin

Average hourly earnings grew by only 3 cents in January—and showed a 2.5% increase over last year. This monthly growth is less than a third of what we saw in December 2016. However, one industry in particular may have caused these slower gains, as a 1% decrease in financial industry earnings depressed overall wage growth.

Unemployment Increased, but for a Potentially Positive Reason

When you hear that unemployment increased from 4.7% in December to 4.8% in January, this may sound like bad news. However, a major reason for this increase is that labor force participation grew by 0.2% in January, the first increase in months. In other words, after sitting on the sidelines, more people are now rejoining the labor force and creating additional opportunities for economic growth.

Jobs Are Available, but Workers May Need Training or Relocation

While labor force participation increased last month, its 62.9% rate is still near the lowest level in decades. According to Glassdoor Chief Economist Andrew Chamberlain, approximately 5.5 million jobs remain open in the U.S.—close to a record number. Some of these jobs, such as retail and food service, don’t require much training, but they aren’t always located near where unemployed workers live. Other jobs in the hot fields of healthcare and technology require training and skills that many workers simply do not have right now. As a result, closing the gap between open jobs and willing workers is a complex challenge for employers and job-searchers alike.

The Bottom Line

The labor market is continuing to improve, but the pace remains slower than what most people would prefer. Nonetheless, the Bureau of Labor Statistics’ latest revisions show that private-sector payrolls have increased for 83 straight months, the longest growth streak since the 1920s.

How any potential new pro-growth policies affect the labor market remains to be seen, as does how to fill the millions of open jobs available right now. In the meantime, people are working more hours for higher pay than they were this time last year, and job participation is growing.

ECONOMIC CALENDAR:
Monday: Labor Market Conditions Index
Tuesday: International Trade
Wednesday: EIA Petroleum Status Report
Friday: Import and Export Prices, Consumer Sentiment