Market News – Week of October 9th, 2017

IRMA AND HARVEY HALT THE STREAK:

In September, the U.S. economy lost 33,000 jobs. This was the first negative monthly jobs report in 83 months. This report is preliminary and could be revised upward (which happened after Katrina), so the streak may yet stay intact. Irma made landfall in Florida on September 10. Harvey made landfall in Texas on August 25. These two events clearly affected the monthly results. However, the year-over-year change in jobs as of September now stands at 1.777 million jobs, the lowest year-over-year job growth since mid 2011. The good news is that wage growth now stands at 2.9% since September of a year ago. This statistic has been trending upwards.

…AND THE UNEMPLOYMENT RATE IMPROVES?:

Last month, the unemployment rate was 4.4%. Now, after shedding 33,000 jobs, it improved to 4.2%. How can that be? The monthly employment report (discussed above) is based on a survey of businesses. Many businesses reported reduced payrolls. Businesses must count it as a drop in employment if a person does not work and is not paid during the survey week. Thus, weather related disruptions to businesses will affect the monthly employment report negatively, as it did in September. However, the unemployment rate is based on a survey of households. The household survey counts a person as employed as long as he/she still has a job, even if he/she did not work that particular week. The household survey indicated that about 1.5 million people couldn’t show up to work due to severe weather. However, the household survey indicates that about 906,000 more people were employed in September than the prior month, thus lowering the unemployment rate.

This is also consistent with the fact that the Labor Force Participation Rate increased to 63.1%, a high for the year. There are now 154,345,000 Americans employed, a record. The number of unemployed Americans, 6,801,000, has not been this low since May 2007.

U.S. MANUFACTURING IS ON A ROLL:

According to the Institute for Supply Management, U.S. manufacturing activity grew at it fastest pace in more than 13 years in September. The index came in at 60.8 compared to 58.8 last month and the highest level since January 2004. Readings above 50 indicate growth.

…AND U.S. CONSTRUCTION ISN’T DOING BADLY EITHER:

Last week, the U.S. Commerce Department released a report showing that construction spending rose 0.5% in September to $1.21 trillion. Construction spending now is 2.5% ahead of a year ago.

RECORD HIGHS AGAIN:

The fourth quarter of 2017 started strong for U.S. stocks. Stocks hit record highs on Monday, and kept going until a slight pull back on Friday. Good economic data (see above) and some measure of optimism that a tax deal might be struck fueled much of the rise.

FINANCIAL MILESTONES ALONG THE WAY:

The primary goal of many financial plans is retirement or financial independence. This is a legitimate goal or target. However, it can be very helpful to have milestones along the way to work toward and to celebrate. These milestones can include:

Becoming worthless. What? Well, many, especially after graduating from college or graduate school have a seriously negative net worth. They have school loans and virtually no assets. Many who find themselves in this category don’t even want to look. But look, review, and work toward getting to zero.
Buy a home.
Reach a net worth of $100,000. It is a nice round number.
Student loans paid off. Until these are paid off, you still have a mortgage on your brain.
Retirement portfolio of $100,000. You need a lot more, but the first $100,000 is the hardest.
$500,000 net worth. Half a million is a big deal.
Buy your first new car with cash. Not everyone aspires to this, but some have it as a goal.
$1 Million Net Worth. This is another big one. Being a millionaire is not what is used to be, but it still means something. Figure out what restaurant in your city costs the most and go there when you reach this milestone.
Retirement portfolio worth $1 million.
Be done with saving for retirement. Once you have “enough”, the rest is money you can use to add some level of additional security, but also to spend time thinking about how to utilize, gifts, trips, charities, etc.
Pay off the mortgage.
[Add your specific ones here]

References:

IRMA AND HARVEY HALT THE STREAK: http://www.calculatedriskblog.com/2017/10/september-employment-report-33000-jobs.html; http://www.calculatedriskblog.com/2017/10/comment-hurricane-impacted-employment.html
FINANCIAL MILESTONES ALONG THE WAY: https://www.whitecoatinvestor.com/14-financial-milestones-worth-celebrating/
…AND THE UNEMPLOYMENT RATE IMPROVES?: https://www.wsj.com/articles/hurricane-battered-u-s-shed-33-000-jobs-in-september-1507293088; https://www.cnsnews.com/news/article/susan-jones/631-participation-rate-reaches-trump-era-high-record-number-emp
U.S. MANUFACTURING IS ON A ROLL: https://www.ft.com/content/e0017a5e-9921-3eed-b9ea-bc7c8ddc39eb
…AND U.S. CONSTRUCTION ISN’T DOING BADLY EITHER: https://www.cnbc.com/2017/10/02/september-ism-manufacturing-index-august-construction-spending.html
RECORD HIGHS AGAIN: https://www.reuters.com/article/us-usa-stocks/wall-street-starts-quarter-higher-data-signals-strength-idUSKCN1C71O5