If a broken record gets tired of hearing itself repeat, we can relate. This week was another bag of mixed news, though slightly over weighted on the sorry side with a dash of peculiarity. Like a good nurse, we’ll rip the Band-Aid off and start with the worst of the worst.
The price of porcine is going up! Yep, your daily dose of morning pig is going up in price because a virus that has already killed over 7 million pigs since June 2013 is rapidly spreading. We refuse to adopt bacon alternatives. Tofu and turkey don’t compliment Bloody Marys nearly as well as good old fashion bacon.
It was reported by the National Association of Realtors on Monday that the index of pending home sales increased 3.4 percent from February to March. Residential construction spending in the first quarter was up 16 percent from $65.29 billion in 2013 to $75.73 billion in the first quarter or 2014. This, of course, is good news, but much like Johnny Depp movies, we must take the good with the bad. Year-over-year (March to March) pending home sales were down 7.9 percent. This is in addition to the fall of home ownership to 19 year lows that has pushed rent price through the roof. It turns out; the rent is too damn high.
Jobless claims rose again last week by 14,000 to 344,000. Since Old Man Winter can no longer be blamed, the media now blames another “unexpected” report on the Easter Bunny and drunk college students. It’s at a point that we need to put a Republican in the White House if for no other reason than reasonable scrutiny will be applied to the poor jobs numbers. Real change won’t occur as long as we live in Make Believe. The good news is that jobless claims are not rising as quickly as they did in the not-so-distant past.
The news that makes us as happy as a pig in a blanket is that private-sector hiring increased in April to a five month high. Private company growth increased to an annual rate of 8 percent while net profit margins rose 7.8 percent. It was, also, reported that the employment cost index, which includes wages and insurance expenses, rose 0.3 percent in the first quarter and suggests labor force expansion.
The peculiar news is that it was reported on Thursday that incomes increased 0.5 percent, while consumer spending increased 0.9 percent. This was on the heels of Tuesday’s consumer confidence report that showed a drop from 83.9 in March to 82.3 in April. So, while consumers aren’t confident, they’re spending has increased more than their wages increased. This could be for a number of reasons, but none of them likely good.
Rounding out the week on a positive note, it was reported on Wednesday that the Institute of Supply Management-Chicago index was up to 63 in April from 55.9 in March. To add further strength to signs of improving business activity, U.S. manufacturing increased for the third month in a row in April. The Institute of Supply Management (ISM) index of national factory activity increased from 53.7 in March to 54.9 in April and beat expectations.
March factory orders increased 1.1 percent in March, which is good, but estimates suggested a 1.5 percent increase. Payrolls in April increased the most in two years with an increase of 288,000 jobs, up from 203,000 in March. This put the official unemployment rate, not the true unemployment rate, at 6.3 percent. Much of the drop is due to the the participation rate, which fell from 63.2 percent in March to 62.8 percent in April. Average hourly wages held at $24.31.
With the average retiree retiring with an average retirement balance of $25,000 in their retirement account, we would say the answer to the question “Are we under-saving for retirement?” is an affirmative no. Retirees taping equity in their homes have not turned out to be an amazingly positive experience. Our advice, much like Vanguard’s CEO, is to invest as much as you can as often as you can and avoid unnecessary fees. Of course, we don’t have a low-cost investment product to sell, so you can be assured our advice is unbiased.
You know things are going bad with the war on poverty when you lose the New York Times who proclaimed this week that 50 years into this war, progress has been marginal, at best. Social wars often address the symptom and not the disease and often make some people very rich. Throughout history, wars have always made some people very rich.
Ultimately, the way to pull people out of poverty is to help them pull themselves out of poverty with jobs. No other attempt to end poverty has done nearly as well. Of course, war on poverty initiatives would put many in Washington D.C. out of work. And, of course, creating jobs that offer a decent wage is easier said than done. Colleges aren’t providing a high enough level of education that employers are seeking. So, that’s as helpful as your fiancé secretly recording your private conversations.
That’s our recap of this week’s economic and personal finance news. Come back every Friday for the Debt Free Guys’ #MoneyConscious Mash Up where we attempt to make finance a little less boring.