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.
Monday: Labor Market Conditions Index
Tuesday: International Trade
Wednesday: EIA Petroleum Status Report
Friday: Import and Export Prices, Consumer Sentiment
|Data as of 2/3/2017||1-Week||Since 1/1/17||1-Year||5-Year||10-Year|
|Standard & Poor’s 500||0.12%||2.62%||20.12%||14.16%||5.86%|
|U.S. Corporate Bond Index||0.00%||0.16%||5.08%||3.90%||6.76%|
|Data as of 2/3/2017||1 mo.||6 mo.||1 yr.||5 yr.||10 yr.|
|Treasury Yields (CMT)||0.50%||0.62%||0.81%||1.94%||2.47%|
Know If You Can Claim Exemptions and Dependents
Minimizing tax liabilities is common practice as Americans prepare to file and optimize their tax returns. The exemptions and dependents you claim can help increase your deductions. For the 2016 tax year, each exemption typically allows you to deduct $4,050 on your return. However, taxpayers earning above a certain income bracket will lose all or part of that deduction, so you’ll need to be aware of how your income affects your deductions.
As you prepare your taxes, here are some points to pay attention to about listing dependents and exemptions:
1. Personal Exemptions: If you are married and file your taxes jointly, then you can typically exempt items on your return. However, if you are married but file separate returns, your options are limited. You can only claim an exemption for your spouse if your partner:
• Did not receive gross income
• Will not file a tax return
• Was not another taxpayer’s dependent
2. Exemptions for Dependents: If you live with a child or relative who is financially dependent on you, than you can often claim them as tax exemptions. You will need to provide each dependent’s Social Security number, so be sure to have that information available.
3. Dependents’ Exemption Limits on Return: Any person that you claim as a dependent on your tax return cannot claim their own personal exemption on their tax return. The dependent cannot claim their personal exemption even if no one claims them on a return.
4. Dependent Filing Requirements: Just because you claim someone as your dependent does not mean they are free from having to file their own taxes. Details such as their total income, marriage status, and taxes owed will guide whether they should file.
You can learn more about the rules surrounding claims on exemptions and dependents on the IRS website.
Tip courtesy of IRS.gov
Simply Delicious Roast Chicken
A hearty classic from famed chef, Thomas Keller
Serves 2 – 4
2 – 3 lb chicken
Black pepper, freshly ground
2 teaspoons thyme, minced (optional)
1. Preheat your oven to 450 degrees.
2. Rinse the chicken and use paper towels to dry it very well inside and out.
3. Add salt and pepper to the bird’s cavity.
4. Truss the chicken by tying up its wings and legs.
5. Cover the skin with salt and add pepper to taste.
6. Place the chicken in a sauté or roasting pan.
7. Put the chicken in the preheated oven.
8. Roast the chicken for 50 – 60 minutes, until fully cooked.
9. Add thyme to the pan’s juices and baste the chicken with this liquid.
10. Carve chicken and slather meat with butter.
11. Serve and enjoy!
Recipe adapted from Epicurious.com