Bob’s Journal for 10/14

To learn the details of the changes for estates, trusts and taxes that are being considered in Congress via the Build Back Better Act, visit the new Art of Legacy Planning podcast. It is produced by David Phillips’ Estate Planning Specialists with the aid of the Durfee Law Group.

Misreading the Employment Reports

Last Friday’s Employment Situation reports were described as disappointing in many media reports, and that’s a misreading of the data.

The headline number was that only 194,000 people were added to payrolls in September. Most economists were predicting a much larger increase. The shortfall was interpreted by many as a sign of a weakening economy.

Another fact that gave rise to pessimism was that the unemployment rate, despite a significant drop in this report, still is 4.8%, much higher than the 3.5% before the pandemic-driven recession. Another disappointment was that, after the strong recovery from the pandemic lows, there still are four million fewer people employed than before the emergence of COVID-19.

A deeper dive into the data shows that the economy is strong, and the labor market is tight.

Fewer people are employed now, partly because the size of the work force decreased. Many people who lost or left jobs during the pandemic aren’t seeking new jobs, and most reported in the surveys that they don’t want to return to work.

Also, the number of job openings (positions employers want to fill but haven’t been able to do so) as a percentage of the labor force is at its historic high and is about twice the 20-year average. Surveys of businesses back this up, with many businesses reporting that their top problem is finding qualified workers for the jobs they have available.

Sizeable compensation increases are also evidence of a tight labor market and a strong economy.

Compensation is increasing at the highest rate since the early 1980s. Because of the rise in inflation, wage increases are barely keeping up with price hikes. That means even higher wage increases will be needed for employers to fill those job openings.

The wage increases have enabled households to maintain their spending. That means the demand that businesses are facing will continue, so they’ll still try to fill those job openings. They also will probably have more job openings.

These are a few of the reasons why I expect both economic growth and inflation to be with us for a while.

How Good is Your HSA?

Morningstar recently issued its annual evaluation of health savings account (HSA) plans. You might want to see how yours compares.

The report covers HSAs available to individuals who select and maintain their own accounts. It doesn’t cover employer-provided HSAs, though you can use the report to evaluate the quality of an HSA available through your employer.

The report divides HSAs into two categories. One category evaluates HSAs as spending accounts for people who will primarily use the accounts to pay for their medical expenses during the year. The other category evaluates HSAs as investment accounts for people who primarily want to put money into the accounts and accumulate it to be used in retirement.

The report evaluates 11 large HSA providers.

Fidelity and Lively received the top rankings for spending accounts. Fidelity, Associated Bank and Bank of America received top rankings for investment accounts. Obviously, Fidelity is the only provider that was top ranked in both categories.

Of course, Morningstar’s ideas of the important features for each category might not be the features that are important to you. Review the details before deciding which HSA is best for you.

Beware of the Top Pandemic Scams

The pandemic has been good to scammers. It provided new cons for them, as well as fresh twists on old cons.

These are the top pandemic scams, according to the Adult Protective Services Technical Assistance Resource Center.

COVID Products: Con artists claim to sell masks, test kits, sophisticated air filtration systems and other items. Some of the cons sell items that are overpriced or don’t work. Other cons aren’t selling any real products. The crooks simply make promises and collect money.

COVID-19 services: Scammers also offer to perform contact tracing, provide an incentive if you complete a COVID-19 survey or offer other services. They just want to obtain your personal information so that they can steal your identity.

Government imposters: These are new twists on old scams. The crooks pretend to be government agencies offering information, assistance or services. Sometimes, they want to obtain your personal information. Other times, they ask you to make a payment in a specific way, such as using a gift card, to obtain assistance.

Helpers or charities: Again, these are new twists on long-existing scams. Some crooks pretend to be businesses or local agencies that run errands for a fee, so you won’t have to expose yourself to COVID-19. They ask for payment over the phone or internet but never perform services. Others claim to operate charities that will help people who have been hurt by the pandemic. However, they are taking the money for themselves.

Vaccines and treatment: There are a range of scams here. Some offer false information about COVID-19, tests, vaccines and treatments. Others offer various treatments, cures and preventive products, none of which have been proven to work. Some crooks offer false vaccination cards or negative test results.

The pandemic scams are avoided the same ways other scams are avoided.

Be suspicious of anyone who initiates contact with you, especially via telephone, text message or email. Government agencies, in particular, won’t initiate contact in those ways. Don’t click on links in emails, on websites or on social media. Go directly to the established website of a government agency or charity yourself if something interests you.

Don’t trust anyone who pressures you to take action in a hurry. Also don’t trust anyone who insists on a specific, unconventional form of payment that isn’t traceable, such as using gift cards.

As always, to protect yourself from scams, take your time before acting and discuss proposed actions with people you know and trust.

The Data

The Consumer Price Index increased 0.4% in September, following a 0.3% increase in August.

Over 12 months, the CPI increased 5.4%, up from 5.3% in August. This is the data that will be used to determine the 2022 cost of living adjustment (COLA) for Social Security benefits.

The core CPI, excluding food and energy, increased 0.2% in September and 4.0% over 12 months.

New unemployment claims declined by 38,000 to 326,000 in the latest week. That brings the new claims close to the pandemic low of 312,000 reached in early September and reverses several weeks of higher new claims.

Continuing claims declined significantly to about 4.17 million.

Consumer credit use increased in August at an annual rate of 4.0%. That’s down from the 4.8% rate in July and 10.7% rate in June.

Revolving credit, which is primarily credit card use, increased at an annual rate of 3.6% in August, down from 7.0% in July and 22.4% in June.

Nonrevolving credit growth (primarily student and vehicle loans) held steady at a 4.1% annual rate in both August and July.

In Friday’s Employment Situation reports, only 194,000 payroll jobs were added in September. That’s the lowest level of 2021 and down from 366,000 added in August.

But the number of payrolls added in August was revised substantially higher to 366,000 from the 235,000 reported initially.

Average hourly earnings increased 0.6% in September, following a revised 0.4% rise in August. Over 12 months, average hourly earnings jumped 4.6%.

That’s the highest rate since the early 1980s and was eclipsed only during the 1970s.

The average workweek also increased to 34.8 hours.

In September, small business owners lost all the optimism they gained in August, plus a little more. The Small Business Optimism Index from NFIB declined to 99.1 in September from 100.1 in August.

Business owners say they still are unable to hire the workers they want and face supply problems. There were record highs (the survey has been done for 48 years) in the percentages of owners saying they have job openings that can’t be filled and had to raise compensation.

Another new high was the percentage of owners who say they plan to raise compensation in the next three months.

The JOLTS (Job Openings and Labor Turnover Survey) report didn’t find a lot of changes in the labor market in August.

The number of job openings declined a little from the historic high reported in July. The number of hires also declined, while total separations didn’t change much. But the percentage of workers voluntarily leaving jobs increased to a record high.

The Markets

The S&P 500 rose 0.12% for the week ended with Tuesday’s close. The Dow Jones Industrial Average gained 0.19%. The Russell 2000 increased 0.23%. The All-Country World Index (excluding U.S. stocks) added 0.40%. Emerging market equities are 1.04% higher.

Long-term treasuries rose 0.25% for the week. Investment-grade bonds lost 0.43%. Treasury Inflation-Protected Securities (TIPS) added 0.01%. High-yield bonds fell 0.47%.

In the currency arena, the U.S. dollar gained 0.55%.

Energy-based commodities increased 0.17%. Broader-based commodities fell 1.49%. Gold rose 0.06%.

Bob’s News & Updates

My latest book is “Where’s My Money: Secrets to Getting the Most out of Your Social Security.” It tells you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on amazon.com or Regnery.com.

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