Economic Update

As a service to friends and valued long-term clients, Retirement Portfolio Management provides periodic economic updates to keep the public informed and help many to make sound business and personal decisions.

As of the 2nd week of February, 2018

The U.S. economy added 200,000 jobs in January, and wages grew at the fastest pace in eight years. Wages were up 2.9% compared with a year earlier, which is at the best pace since June 2009. Several states also raised their minimum wage at the start of the year, which helped overall wages grow.

Since December 2017, the unemployment rate stayed at 4.1%, the lowest since 2000. Since the Great Recession, (ended late 2009 with unemployment at 10-11%), the economy has added jobs for 88 consecutive months. This is the longest streak on record.

For years, employers have increasingly said they can’t find skilled workers for highly technical, scientific and other careers requiring extensive education and training, which has changed only slightly over the past 5 years. Therefore, the consensus is that much of these numbers, mentioned above (4.1% unemployment rate and 200,000 jobs added in January), are unskilled workers,

Some economists anticipate that the Republican tax law will continue to boost wages, because large corporations are giving their workers raises. One-time bonuses, which many other companies have given out, are not counted in the wage growth calculation. Tax cuts passed by Congress will provide an additional boost to the US economy this year.

I project GDP to rise by 2.8 percent in 2018 compared to 2.3 percent for 2017. The increase in disposable income though, will be partially offset by the continuance of rising home prices. Because of the new tax law, repatriation of business profits will raise dividend payments, some of which will also end up as consumption because of increased investor income.

For the final 3 quarters of 2018, the Federal Reserve plans to continue raising rates at a modest pace, perhaps three times this year, which of course will trigger faster inflation. American investors certainly see more rate increases on the horizon. The yield on the 10-year U.S. bond shot up to 2.84% after the jobs report, reflecting higher expectations of more rate hikes.

Some economist feel that economic growth is expected to decline by the 2nd quarter as a result of slowing construction activity and slowly rising interest rates, …which spill over to higher priced consumer goods and services (inflationary).

My fears still continue regarding the 8th straight year of stock market growth. I must say we are well overdue for a stock market drop to the tune of over 45%.

Since the end of 2017, Crude Oil has increased in prices almost $10 per barrel to $65.50. During the same period of time (past 45 days), Gold bullion has increased in per ounce price from $1250 to $1340 (7%).
Lastly, the most popular cryptocurrency ‘BitCoin’ ended 2017 at over $19,000 per coin, but by mid-February 2018, crashed by over 50% to below $9,000. Many confused and frustrated small investors have since left the market. Most experts however project a return to over $19K per coin by the end of 2018.