fbpx Skip to main navigation Skip to content

Job Market Update: The U.S. economy gained 517,000 jobs in January, far exceeding economists’ expectations. The unemployment rate fell to 3.4 percent, the lowest figure since 1953. The labor market continues to defy economists’ predictions that we will likely have a recession in 2023. However, the campaign against inflation seems to be working somewhat. Last month, the Bureau of Labor Statistics announced that prices rose 6.5 percent in the year ending December 2022. Big rate hikes often lead to job losses, and in the second half of 2022, the labor market seemed to be softening. The pace of job growth steadily declined. January’s gain of 517,000 jobs was far above historical norms, suggesting the job market is getting tighter as the Fed raises interest rates. The chart below shows just how impressive the 517,000-job figure is. And keep in mind that the economy gained about 600,000 jobs per month, on average, in 2021. Last month’s growth doesn’t look unusual compared to the previous couple of years. But we must remember that job gains in 2021 came after an unprecedented 22 million layoffs. Job growth today is mostly not pandemic rebound hiring. So when we compare our 517,000 figure to pre-pandemic years, we see that between 1990 and 2019, there was only one month when the economy gained more than 500,000 jobs (it was May 2010: 530,000 jobs).

Planning for Tough Times: Struggling with higher prices and short on cash, more Americans are tapping their 401(k) for financial emergencies. The company said that a record 2.8% of the five million people in 401(k) plans run by Vanguard Group tapped their retirement savings in 2022 to cope with hardships such as medical bills, evictions, or foreclosure. In December, Americans saved 3.4% of their monthly income, down from 7.5% a year earlier. People who take money out for hardships are restricted to the amount they need. In addition, they must pay income tax on withdrawals from traditional accounts, plus often a 10% penalty if they’re younger than 59 ½ years. While recent laws have affected some of those restrictions, the changes underscore a growing acceptance among lawmakers, employers, and workers of the idea that 401(k) and individual retirement accounts do double duty as emergency funds.

As these habits may become more mainstream, we don’t generally advocate for this type of reaction to financial hardship. We understand that it may be necessary at times. Still, we work hard with our clients toward creating the right-sized emergency cash reserves, especially in a climate where that capital can yield income above 4%.

Business Briefing

  • Smaller Interest Rate Hike: The Federal Reserve said Wednesday it was raising its benchmark short-term interest rate a quarter percentage point. The change, which was widely expected, marked a slowdown in the Fed’s aggressive campaign to raise borrowing costs to cool the economy and fight persistent high inflation. Recent data indicate that inflation is slowing but remains far above the Fed’s 2 percent target. Although there remains a lot of data watching to come, this was well received by the markets mid-week. (The New York Times)
  • Higher Wages: Employers raised wages in the fourth quarter by 1 percent in December, slightly below the 1.1 percent economists expected, reported CNN last week. Wages were up by 5.1 percent for the year ending in December. The hikes come as companies continued to push to recruit and retain staff in a tight labor market, although the raises marked a slowdown from the previous quarter’s 1.3 percent increase. (CNN)
  • The End of the 747: On Tuesday, Boeing delivered its last 747, ending the 53-year run of the aircraft maker’s original Jumbo Jet, which helped revolutionize air travel. The jet was the first with twin aisles and its upper deck gave its easily recognized appearance, plus room for luxury club space for high-end travelers. Only forty-four 747 passenger jets remain in use. (Reuters, CNN)

Good Week for Selfies: A black bear in Boulder, Colorado, made sure that a wildlife camera caught his good side—about 400 times. Boulder Open Space and Mountain Parks (OSMP) operates nine motion-activated wildlife cameras across its 46,000 acres of land. In late January, OSMP tweeted that an inquisitive bear triggered one of the cameras and “of the 580 photos captured, about 400 were bear selfies. This behavior is eerily similar to that of a toddler! Check out the images here.