fbpx Skip to main navigation Skip to content


There were no big moves in the markets this week, but until Friday stock prices struggled. One of the main issues continued to be the impact of tariffs on various U.S. companies. There is concern that tariffs will drive up costs for some manufacturers, and erode profits. There remains general optimism regarding the overall condition of the economy with a strong labor market and a still subdued inflation environment. The year-to-date rise in the stock market remains decent, but the way we got here has contained a good bit of drama. The drama will likely continue.


The Congressional Budget Office (CBO) just published a paper on the Labor Force Participation Rates. The Labor Force Participation Rate is the the percentage of people in the potential working population (all citizens ages 16 and older) who are working, or trying to work. This rate dramatically increased from the mid-60s (when it was in the 58-60% range) until the 1990s. This was largely due to women entering the job market in much higher percentages. It topped out at 67.3% in 2001. It started falling after that, and fell quickly after the Great Recession, and now stands at 63.0%.

This CBO paper projects that this rate will decline by another 2.7% in the next decade.

To what does the CBO attribute the fall in this rate?

  • The aging of the U.S. population as baby boomers retire in droves.
  • Members of younger birth cohorts (after baby boomers) are participating at lower rates.
  • The share of people receiving disability insurance benefits has and will continue to rise, and people receiving such benefits tend not to participate in the labor force.
  • The marriage rate has declined and is projected to continue to decrease and unmarried men participate in the labor force at a lesser rate than married men.
  • Elements of fiscal policy, including some provisions of the Affordable Care Act, have increased effective marginal tax rates and reduced incentives for people to supply labor.

The CBO stated that cyclical weakness in the economy also contributed, but many of those discouraged workers seem to be coming back into the labor force.


As the Great Recession gets further and further in the rear view mirror, one of the most common symptoms of that era is shrinking, but not gone. Houses with mortgages that are bigger than the value of the home (negative equity or “under water” homes) live on. As of the fourth quarter of 2017, there remained 2.5 million homes (or 4.9% of all mortgaged properties) with negative equity. A year earlier that figure was 3.2 million homes (6.3% of all mortgaged homes). It continues to go in the right direction, but this horrible symptom lives on. I just met with new clients last week who recently sold a home, and received less than one thousand dollars at closing. At least that mortgage albatross is behind them. May that trend continue for those 2.5 million people.


While our inflation rate hovers in the 2% range, Europe continues to hover just above 1%. Last month, the Eurozone’s inflation reading was 1.1%, coming down from 1.3%. This is the lowest reading in nearly two years.


For individuals who are beginning a professional career of some sort, or who are high earners and have flexibility in where they will live, state income taxes can become a significant issue. For a couple earning $250,000, filing jointly and making the standard deduction, Oregon turns out to be the highest taxing state as it would require $21,006 in taxes, an 8.4% effective rate. Hawaii and the District of Colombia come in right behind Oregon with effective tax rates of above 7%. If you make more than $250,000, eleven states have additional tiers of tax brackets which would trigger even higher effective tax rates. Seven states have no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.



LABOR FORCE PARTICIPATION RATE: https://www.cbo.gov/system/files/115th-congress-2017-2018/workingpaper/53616-wp-laborforceparticipation.pdf
IRISH IMMIGRATION: https://www.loc.gov/teachers/classroommaterials/presentationsandactivities/presentations/immigration/irish2.html; https://www.irish-genealogy-toolkit.com/Irish-immigration-to-America.html
UNDER WATER: http://www.calculatedriskblog.com/2018/03/corelogic-25-million-homes-still-in.html
STATE INCOME TAXES: https://www.whitecoatinvestor.com/if-doctors-chose-job-based-state-income-taxes/