Monthly Archives: October 2012

Unemployment Numbers Released

Unemployment, New Jobs, and Jobless Claims Statistics:*

Positive: Unemployment DECREASED in September to 7.8% from 8.1% in August: Is this a good indication of improvement? Any indication of positive change is good, and this is lowest rate since January 2009. However, this ‘Official Unemployment’ rate only tracks those who are without jobs and have actively sought work within the past 4 weeks. Since this statistic does not track all people who are not working, some websites report that the ‘Real Unemployment’ rate is about 15% when all able-bodied people of working age are considered. For a historical perspective: The unemployment rate during the Great Recession peaked at 10.10% in October 2010. In 2012 it has varied in the range of 8.10% – 8.30%, so we are not seeing a lot of change this year. It could be worse when you consider that during the Great Depression it peaked at about 25% in 1933.

Positive: Monthly change in non-farm payrolls INCREASED: 114,000  jobs were added in September, compared to 96,000 new jobs in August, and 141,000 in July.

Negative: Initial Jobless Claims for Unemployment Insurance UNCHANGED: AT 375,000 4 week rolling average. Looking back 12 weeks, the average was 376,000; 6 weeks ago it was 371,000, so we will need more weeks of decreases to reverse the year’s increasing trend. This number is much better than it was in 2009 when it peaked at over 650,000. In 2010 we saw a decrease from nearly 500,000 early in the year to the low 400,000′s. In 2011 the claims were in the low to mid 400,000′s, but since October of 2011 they have been below 400,000. The lowest we have seen this rate in 10 years is 282,000 in January of 2006, and the earlier part of the last decade we saw the average similar to what we are seeing now. During the Great Depression from 1929 – 1941 there was not the same level of unemployment insurance that we have today, although unions may have had some. It wasn’t until the Social Security act encouraged it in 1935. Today we have the Federal Unemployment Tax Act (FUTA) tax to fund state agencies.

*Unemployment statistics are an important indicator of how our economy is doing; more people employed points to stronger business growth and to fewer people receiving government entitlements. However, this is a little difficult to track, since the government doesn’t really publish a combined statistic that truly indicates what is happening. Most people who study this issue follow these three indicators: percentage of people unemployed, monthly change in non-farm payrolls, and jobless claims for unemployment insurance. The most discussed statistic is the unemployment rate; reading the explanation above illustrates how this number falls short.

As Stocks Head Higher So Do Risks

The stock market is up 16.4% this year, as reported in the Wall Street Journal today’s article “As stocks head higher so do risks.” Therefore, there might be some rationale for reducing one’s portfolio exposure to stocks, contends Daniel Roe of Budros, Ruhlin and Roe, the largest financial planning firm in my hometown (Columbus, Ohio).

The Journal article is excellent reading for investors, not only because of the insight it gives about re-positioning portfolios given market conditions, but also because it gives a look at some of the mutual funds used in portfolios for clients. Most financial planning firms don’t use individual stocks and bonds, but they use mutual funds that they select after doing intensive research of a fund’s return, management, expenses, risk and investment style and philosophy.

What is rare, though, is that most financial planning firms don’t make public some of the funds they select, nor do they publish them in the newspaper. This article makes good reading for those researching possible funds to consider.

Rules for Tax Deductions to Charities and Political Groups

There are many regulations regarding the reporting requirements, privacy and income tax deductability of cash donations to organizations. Here is a brief list of some of the rules for cash gifts:

  • Non-Profit charities 501(c)(3) institutions include schools, churches, universities, hospitals and politically titled groups with a main emphasis of education. Deductions for contributions are limited to 50% of the donor’s adjusted gross income (AGI). There are usually no limits on donations for individuals.
  • Donations of cash gifts to Private Foundations organized as 501(c)(3) for religious, charitable, scientific, literary, or educational purposes, are deductible up to 30% of AGI.
  • Social welfare non-profits 501(c)(4) contributions are not deductible, but if they are $5,000 or larger, they must be reported. These groups primarily promote social welfare; they can lobby and participate in campaigns, but they can’t contribute to candidates.
  • Donations to Super PACs are not deductible, and there are no limits or reporting requirements to the IRS. Information about the donors are not private, but the information might not indicate the actual person who made the donation, since it can be routed through a private company.
  • Individual’s donations to political parties, campaigns, and some super PACs are limited to $2,500 per election or campaign, $5,000 to a PAC, and up to $30,800 to a national political party committee. Donations of $200 or more must be reported to the Federal Election Commission (not the IRS) by individuals; they are not deductible and the information is made public.
  • Membership dues to 501(c)(6) organizations are deductible, except for the portion used for political causes.

In addition, there are many other rules, sometimes complex, for donations of cash and non-cash gifts such as property, partial interests in property, property that earns income, life insurance, annuities, artwork, IRAs and qualified assets, securities, and assets in charitable trusts. This is just a brief review. Individuals should seek the advice of professional tax advisers.

Are we headed into another recession in 2013?

What is a recession?

Technically a recession occurs when business cycles retract, evidenced by down consecutive quarters of GDP, or a 12 month 1.5% or more rise in unemployment.

When did the US recession end?

The most recent recession officially started December 2007 and ended June of 2009.

Did the US recession really end yet, what about a global recession?

The affects of that recession are still being felt, because it impacted so many people, and it is taking them a lot longer to get on their feet. Within the past year some European countries experienced recession, or a double dip recession. When you consider that we really have a global economy, you could say we are in reality in 4 year global recession that started in 2008.

Are we headed for another recession in 2013?

This concerns economists and watchers like myself, when we look at several months of stagnating employment numbers, decreasing GDP and manufacturing output:

  • The Official Unemployment rate that tracks only those who are without jobs and have actively sought work within the past 4 weeks, shows stagnating numbers, although we are far from the peak of 10.10% we saw in October 2010, for 2012 it has varied in the range of 8.10% – 8.30%, so we are not seeing a lot of improvement.
  • Initial Jobless Claims for Unemployment Insurance is another number to watch to see trends. We are far away from the bad days of 2009 when it peaked at over 650,000 for the average claims for unemployment benefits. In 2011 the claims were in the low to mid 400,000′s, and since October of 2011 they have been below 400,000. This number is important to keep an eye on, because it indicates how many people who got laid off and are seeking benefits. This year we aren’t getting any worse or better, just stagnating a little under 400,000
  • Manufacturing output is a good indication of how industry is doing, and was modestly increasing this past winter, leading to some guarded optimism, but for almost the last 6 months it has decreased to Spring 2009 levels.
  • Gross Domestic Product (GDP) tracks the size of our economy by calculating the total dollar value of all goods and services produced over a specific time period in comparison to the previous quarter. GDP growth was at 4.1% about 9 months ago, this year slumping to 2% in the first quarter, and 1.3% for the second quarter of 2012.

In conclusion:

These things, and other factors seem to indicate to me that it is quite possible we are heading into another recession in 2013. Are there any optimistic economic indicators? Housing seems to rebounding and could provide some of the seed for a recovery. Home values in some areas are increasing and new construction is on the rise, if this increases at a high rate, it might help fuel a recovery. Lastly, some people may believe a presidential candidate offers compelling story for an economic turnaround. However at the end of the day, we have some control over our personal economy (our careers and finances), and we can rest assured that when we are in God’s economy we don’t have to be as worried as most people.

God is the Center of Our Stewardship, Matthew 7:7-11

Jesus Money Monday: God is at the center of our stewardship

This week’s money and stewardship devotional from the Four Gospels is from Matthew 7:7-11.* It is about making requests to God and about how God responds. Although these verses don’t mention money, finances definitely come to play here since dollars are often involved in some of the transactions for the things we need and want.

“Ask and it will be given to you; seek and you will find; knock and the door will be opened to you. For everyone who asks receives; the one who seeks finds; and to the one who knocks, the door will be opened.“Which of you, if your son asks for bread, will give him a stone? Or if he asks for a fish, will give him a snake? If you, then, though you are evil, know how to give good gifts to your children, how much more will your Father in heaven give good gifts to those who ask him!

There are many things we could glean from these verses. Here are 5 take-aways for our finances today:

  1. God is the source of things. Before the time of Jesus’ arrival there was a multitude of sources for finding things people held to be true. Judaism taught that blessing followed those who were wise and who diligently followed religious law. Those with pagan beliefs placed their hope in the actions of many gods to convey curses or blessings. Others looked to the financial level they were born into, politics, or economic forces to provide what they needed. Jesus the radical here broke new ground in religion and conventional society by declaring that his father is the one we should ask for things, that he is the one for whom we are working, and he that will give.
  2. God is generous. If we reflect upon the many blessings God has given us from the day of birth until the day of death, from personal things to all things in creation, salvation, life itself, then we know he is generous. This is a tough one for many people. We have a hard time believing that God will bless us with all the things we want when we want them. This causes us to live hypocritical and dualistic lives, which often leads us into debt. Following God is a character-enhancing walk of faith and contentment. The truth is that God enjoys giving and blessing us.
  3. God wants relationship with us. Why should I pray when the all knowing God already knows what I need? God doesn’t want us to take him for granted, but he desires relationship with his kids. If we didn’t need to ask God for what we need and want, I wonder what our prayer life would be like. Going deeper, he chooses to co-create with us; it is his plan that we work together, as evidenced by every chapter of the Bible.
  4. God gives good things. This is a promise that should make our load light today. God promises that if we pray for things, he won’t curse us with snakes and scorpions–things that will end up biting us back. He might not always give us what we want; he doesn’t want us hurt by things that he knows are bad for us, but he will supply us with our needs. Even many benign things we want could indeed end up being a curse, maybe if only for the time  and expense to maintain them.
  5. God wants us to go deep in our asking. We aren’t to just ask and sit around waiting for a blessing. He has us searching out, knocking on doors, talking to wise counselors, and considering several alternatives. He wants us to use our minds and to work for what we want and need. Even more, he wants us to talk to him, converse with him about all alternatives and possibilities. Lastly, he wants us to have an open heart towards him, to deeply consider our emotions and motives.

Many Christians struggle with contentment and believing these things because of the bad things that have happened to them, or maybe because they are impatient, but once again we see how intertwined finances and stewardship are in our daily faith walk with Jesus.

*A chronological examination of any verse that involves money and stewardship, attempting to see the new light that Jesus shines on money in his selfless, grace filled, Holy Spirit empowered, and Kingdom oriented positions. This is the ninth post in this series.