Welcome to Pension Attention, the best show for first responders who want to take control of their finances.
After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]
Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are. At whatever stage in your career, you are in, in order to provide my nearly 15 years of experience working with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors here at One Capital Management are dedicated to ensuring you take control of your finances and build the life you deserve. And before we get started on this week's episode, to find out more about me or my team here at One Capital Management, you go to our website at PensionAttention.com or give us a call. You can call us at (805) 409-8150. And if you like the show, tell someone you like, I guess if you don't like the show, tell someone you don't like. But I'm excited for this week's episode and here's why. [01:20.7]
We're still in January. We're still in the new year, that whole new you, new year thing. And I'm calling this week's episode perspective because the more reviews I do with clients, the more discussions we have internally with our investment management team and just across our firm as a whole, I think it's time for us to all take a perspective here and look at all the stuff that's going on around us. Let's be honest, COVID 19, right? The gift that just keeps giving. I mean this latest variant Omicron has cased a new wave of distractions for the global economy. So, think about it with thousands of flight cancellations during the holiday season, in particular to the slowdowns in manufacturing and basically general disruption of all kinds. You may have read where 4.5 million workers in the U.S. quit their jobs in November. This is equal to 3% of all workers employed in the U.S. That was a record. [02:23.9]
In the U.S, there are between 10 and 12 million job openings as of the end of the year, couple weeks ago. Workers quit jobs in these numbers for a number of reasons. Most of the recent job movers have been the lower earners working in retail services or the hospital industry. With the continuing pandemic that we've been seeing and with this latest omicron variant employers are finding it basically hard to fill their job openings and have resorted to offering higher and higher wages. You can see where I'm going with this, right? This has led to wage increases averaging over 10% in 2021. There is more happening than just lower paid workers, jumping to higher paying jobs. In the U.S, unemployment is now running at 3.9% also at or below 2019 levels, to be fair. If unemployment levels are so low, my question is this. Why are companies having such a hard time filling jobs? [03:27.8]
Looking below the surface as a perspective here this week, as I was writing this a more complicated picture emerges. And there's a reason why I'm sharing this with you today. While the unemployment rate of 3.9% looks low, what's not captured is that over 2.6 million people that were working in the U.S, in 2019 have not returned to the workforce. So, they just simply retired. Now others reevaluated the lifestyles and decided to scale back. Another factor has been the changes forced by the pandemic and really government's responses to it. The closing of schools and remote learning has forced many to adjust their family lies, to accommodate children at home. For whatever reason work life has changed, we've seen it and companies are having a hard time fighting enough people to fill the jobs available. [04:23.8]
All right, let's get to the matter at hand here. Why am I bringing this up today on the show and why should we be paying attention to the employment statistics? And why does it seem to matter? With this pandemic and even before there have been some changes occurring. Population growth has slowed and immigration has been greatly curtailed. The economy continues to need more and more workers, but fewer and fewer are available, it's kind of a trend. Now, as we look to finally put COVID in the rear-view mirror and behind us and build back our economies and government's balance sheets at that point, we will need to grow. So, what does the country need to grow? For a country to grow their economy, it boils down to two main components, increasing the workforce, more workers and or increasing each worker's productivity, more output per hour worked. If a country does have additional workers, then growth must come from getting more out of each employee. [05:30.4]
This last year saw very positive returns and a feeling that all is moving towards a rebounding global economy. And it is, that's biggest perspective I wanna share, it is. Now in spite of the variants that continue to pop up, we are beginning to come to grips with this virus. Vaccines are being administered, drugs to fight the virus are being developed and approved. We are becoming better at identifying and protecting the most vulnerable among us, which is important and we aren't done. But there is light at the end of the tunnel. One of the perspectives I wanna share heading into 2022 and something I firmly believe in that if we share a common hope that there is light at the end of the tunnel. We will all be better for it. [06:22.5]
Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the DROP program? Go to www.pensionattention.com to find out how we can help. [06:38.1]
Now while the equity markets did well last year with companies continuing to bounce back and further their growth and their earnings, there's still a long way to go. The hospitality industries, including hotels, restaurants, travel, and leisure, they're all still far from recovered, we all probably can have see that. They're probably needing another two years or so to fully recover, assuming no further government intervention. Now think of all the jobs needed to be filled in just the travel industry alone, when we start booking trips to our favorite or dream vacations. How many more people will be needed as small businesses once again, begin to open? The healthcare industry has been basically pushed to the brink and many workers quit because of the stress placed on them. There are a lot of job openings there as well. [07:31.9]
This brings us to the beginning of the discussion I wanted to have today about the labor force and really why it's important for an episode around perspective. With fewer workers available, what does it mean for the economy? We haven't used the I word yet, but here it goes. Inflation, you were probably waiting for it. As you heard me earlier, say it, it's the number one thing talked about right now, inflation. Inflation will be higher than expected, not runaway, but persistent and will last longer. And a quick caveat here on perspective and a number that just came out a week or so ago around 2021’s 7% or so inflation increase. A perspective here is really important is the year over year gains in inflation. If really look at it have been amplified by declines in prices a year ago. Supply chains are still an issue and a big problem, but when you compare year over year again, you see a larger gain in inflation because you're comparing it to the previous year’s decline in prices. So, you have to look at that on both sides. [08:39.5]
Now we are seeing wage inflation as well right now. And you look at any restaurant or retail store or small business in your neighborhood. You'll see it there'll be a sign out there that says help wanted, their signs are everywhere. And they're offering again, as I mentioned earlier, higher starting wages. It's not just the low paying jobs, either. Microsoft in particular has lost over a hundred highly paid programmers to other tech companies, looking for talent to grow their offerings. So, it's not uncommon to see companies now offering bonuses just to stay, which is unprecedented. So, this employee shortage is being felt pretty much everywhere. The rising cost of labor is being passed on in higher prices for almost everything we consume. That's where we're seeing inflation. No wonder by the way, central banks are looking to begin raising interest rates this year. The U.S federal reserve is expected to raise short term rates at least three times this year and more in 2023. This will bring some anxiety and probably some market volatility as well. But as I shared with you before volatility in the markets can be a good friend if you know what you're looking at. [09:56.5]
And we feel here at One Capital Management, we do not all the time in terms of future expectations, but we run the numbers. We look at the fundamentals, we take stock of where we are at and we manage your portfolio. That's what a good active manager should be doing. And as we look to our invest events going forward, we will be following these trends closely. Technology will continue to be deployed to help increase productivity of the workers that are available. Now, some examples of this real quickly are in how we order and pay for food at “fast food” restaurants, automated Kiosks and electronic payment methods are just some examples. I mean, ordering and paying online or by phones, and then just pick it up is the go-to for Starbucks as an example. So, anyone traveling by the way will recognize the changes and fewer and fewer actual bodies, human bodies to help. The entire technology industry is dedicated to this very endeavor. And as you've heard me say before on this show, and this podcast is, ‘technology is a disruptor.’ Whether you look at it as good or bad, I mean, just try to Google blockbuster on your Blackberry and you'll see my point, right? [11:10.6]
And another positive to look for is the job participation rate, as I mentioned earlier. This is the percentage okay of people that could work if they chose to. This is different, by the way than the unemployment rate that looks at who is actively seeking employment. In the U.S, this rate has hovered right around 63%, but is currently around 61%. If we return to historic norm, the U.S, would add more than 3 million additional workers. So, in short, on this week's episode, it's a short one. It's a quick one and I want it to be very concise with this. Before we end the first month of the year around perspective. The post pandemic world will be different. We're already seeing it, let's be honest, but there is much to be excited about. If we, as a whole have hope aligned, we'll all be better off for it. Companies are adjusting and adapting to continue to thrive. Our investment will too. [12:17.4]
I wanna thank you for listening to pension attention before acting upon anything discussed today. Remember to speak with a financial advisor near you about your specific situation, or again, if you'd like our help, you can reach out to us at PensionAttention.com or give us to call (805) 409-8150. And until next week stay safe. [12:39.5]
The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.
To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [13:03.0]
