Market Update: May 15, 2017

MarketUpdate_header

  • Overnight in Asia most indexes were up fractionally while Japan pulled back slightly. G-7 discussions focused on protectionist threats, which weighed on sentiment. North Korea also fired a new missile over the weekend, adding to tensions on the peninsula.
  • WTI crude oil prices are up ~3.0%, to $49.25/barrel, after energy ministers from Saudi Arabia and Russia agreed that extension to oil production cuts for an additional nine months, through March 2018, is needed.
  • European markets were mixed on either side of flat. Investors were positive on Christian Democrats state victory supporting Merkel’s hold on power, while oil move was also welcomed.
  • U.S. markets are moving higher, boosted by news on potential oil production cuts. Meanwhile, concerns over cyberattacks and Trump/Comey drama may dampen enthusiasm as trading progresses.

MacroView_header

Key Insights

  • The economy remains on track for Q2 gross domestic product (GDP) growth of 2.0% to 2.5% despite mixed inflation readings and retail sales below forecast.
  • The Consumer Price Index (CPI) rose +0.2% month over month and up from the drop of -0.3% in March, however both year over year CPI (+2.2%) and year over year core CPI (+1.9%) were below expectations, triggering the rally in safe havens last Friday.
  • Retail sales (+0.4%) were also below expectations, but up from the prior month. When considering the improvement in consumer sentiment, it is important to remember that this data point (retail sales) and the performance of retail stocks, should not be viewed as an indictment of the U.S. consumer. Rather than a changing consumer, it is a change in consumer buying habits, which is combining to alter not only retail sales figures, but also pricing measures. Consumers are spending: 1) more online, 2) on experiences over goods, and 3) comparison shopping using mobile technology. Consequently, it is very difficult for the department store model to continue charging premium, retail prices.
  • Considering the unemployment rate of 4.4%, wage growth of +2.5% year over year, riding confidence and delayed tax refunds, the near-term (Q2) and longer-term (2017) GDP trajectory appears favorable. Clarity on tax reform could take these numbers even higher.

Macro Notes

  • Excellent earnings season but bar will soon be raised. First quarter earnings season has been excellent by almost any measure. Results beat expectations by more than usual, the overall growth rate is very strong, and guidance has provided above-average support for analysts’ estimates for the balance of 2017. But at the risk of raining on the earnings parade, we would note that comparisons will get tougher as we anniversary the earnings recession trough of 2016, while the risk that the corporate tax reform timetable gets pushed into 2018 has increased. Market participants generally expect fiscal policy to begin to provide an earnings boost by year end, an expectation that has become increasingly tenuous.

 

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  • Chinese industrial production growth weaker than expected. Chinese industrial production growth came in at 6.5% vs. expectations of 7% and down from period month of 7.6%. On an absolute basis, the economy is still on track to meet its growth goals, though it looks like growth may have peaked for the year at the end of the first quarter. The government continues to crack down on excess leverage in the financial system; today’s numbers are unlikely to move them off that path.
  • Japan domestic demand, and prices, rise in April. We normally think of Japan as an export oriented economy, but domestic demand increased over 4% on a year-over-year basis, with the impact felt most strongly in demand for raw materials. Producer prices rose modestly last month against declining expectations and are running at 2.1% annually.
  • Bank of Japan. Just like the Federal Reserve (Fed) and the European Central Bank (ECB), the Bank of Japan (BOJ) is under some public pressure to outline how it intends to unwind both its zero-interest rate policy and the massive expansion of its balance sheet to 93% of the country’s GDP. Recent statements from BOJ Governor Kuroda suggests such policy announcements may be coming. The more good news that comes out of the Japanese economy, the more pressure the BOJ is under.
  • Win streak snapped, but lack of volatility remains. The S&P 500 snapped its 3-week win streak last week, with a modest 0.3% drop. One thing continued though and that was the incredibly small daily ranges and lack of overall volatility. On the week, the S&P 500 traded in less than a one-percent range (from high to low) for the second consecutive week ( only the third time since 1995). Additionally, the intraday range on Friday was 0.22% – the smallest daily range on a full day of trading in nearly three years.
  • Checking in on small caps. The lack of volatility isn’t just in the blue chips, as the Russell 2000 has traded in a range of only 6.8% over the past 20 weeks. That is the tightest 20-week range since at least 1990. After a big jump in the fourth-quarter, small caps have lagged large caps this year, as they continue to consolidate the late 2016 gains.

MonitoringWeek_header

Tuesday

  • Italy: GDP (Q1)
  • UK: CPI & PPI (Apr)
  • Eurozone: GDP (Q1)

Wednesday

  • Russia: GDP (Q1)
  • Japan: GDP (Q1)

Thursday

  • LEI (Apr)
  • ECB: Draghi

 

 

 

 

 

Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

29 Biggest Tax Problems For Married Couples

Preparing your annual income tax return is a chore. It’s even more complex when you’re married. You might have two sets of income, assets, debts and deductions. Further, if you were separated, widowed or divorced during the year, you might have a thorny tax situation.

A qualified accountant can advise you on the basic tax problems that married couples face. For a brief introduction, read through to see 29 of the most significant tax problems married people might encounter. Understanding these challenges can help you get more tax breaks this year.

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1. YOU’RE NOT SURE OF THE YOUR MARITAL STATUS FOR THE TAX YEAR

When preparing taxes, you first need to determine your marital status. It might seem like a straightforward task. However, life is not always so simple.

The IRS considers you to be married if you were lawfully wed on the last day of the tax year. For example, if you tied the knot at any time in the past and were still married on Dec. 31, 2016, you were married to your spouse for the entire year in the eyes of the IRS. The laws of the state where you live determine whether you were married or legally separated for the tax year.

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2. YOU’RE NOT SURE OF YOUR MARITAL STATUS IN A SAME-SEX RELATIONSHIP

Married, same-sex couples are treated the same as married, heterosexual couples for federal tax purposes. However, same-sex couples in a registered domestic partnership or civil union cannot choose to file as married couples, as state law doesn’t consider those types of couples to be married.

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3. YOU DON’T KNOW WHICH FILING STATUS TO CHOOSE

If you weren’t married on Dec. 31 of the tax year, the IRS considers you to be single, head of household or a qualified widow(er) for that year.

If you were married, there are three filing possibilities:

  • Married filing jointly
  • Married filing separately
  • Head of household

If more than one category might apply to you, the IRS permits you to pick the one that lets you pay the least amount in taxes.

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4. YOU CAN’T DECIDE WHETHER TO FILE JOINTLY OR SEPARATELY

If you’re married and don’t qualify to file as head of household, you typically have two choices: filing jointly or separately. It’s best to choose the one that allows you to pay the least amount in taxes, which all comes down to your particular circumstances.

Sometimes it makes sense to file separately, said Josh Zimmelman, owner of Westwood Tax & Consulting, a New York-based accounting firm. “A joint return means that your finances are linked, so you’re both liable for each other’s debts, penalties and liabilities,” he said. “So if either of you has some financial issues or baggage, then filing separately will better protect your spouse from your bad record, or vice versa.”

If you file jointly, you can’t later uncouple yourselves to file married filing separately. “On the other hand, if you file separate returns and then realize you should have filed jointly, you can amend your returns to file jointly, within three years,” Zimmelman said.

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5. YOU ASSUME MARRIED FILING JOINTLY IS ALWAYS THE BEST OPTION

Even if married filing jointly has been your best choice in the past, don’t assume it will always be that way. Do the calculations each year to determine whether filing singly or jointly will give you the best tax result.

Changes in your personal circumstances or new tax laws might make a new filing status more desirable. What was once a marriage tax break might turn into a reason to file separately, or vice versa.

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6. YOU’RE NOT CLEAR ABOUT HEALTHCARE REQUIREMENTS

The Patient Protection and Affordable Care Act — more commonly known as “Obamacare” — requires that you and your dependents have qualifying health care coverage throughout the year, unless you qualify for an exemption or make a shared responsibility payment.

Even if you lose your health insurance coverage because of divorce, you still need continued coverage for you and your dependents during the entire tax year.

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7. YOU CHANGED YOUR LAST NAME

If you want to change your last name after a marriage or divorce, you must officially inform the federal government. Your first stop is the Social Security Administration. Your name on your tax return must match your name in the SSA records. Otherwise, your tax refund might be delayed due to the mismatched records. Also, don’t forget to update the changed names of any dependents.

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8. YOUR SPOUSE DIED DURING THE TAX YEAR

If your spouse died during the year, you’ll need to figure out your filing status. If you didn’t marry someone else the same year, you may file with your deceased spouse as married filing jointly.

If you did remarry during that tax year, you and your new spouse may file jointly. However, in that case, you and your deceased spouse must file separately for the last tax year of the spouse’s life.

In addition, if you didn’t remarry during the tax year of your spouse’s death, you might be able to file as qualifying widow(er) with dependent child for the following two years if you meet certain conditions. This entitles you to use joint return tax rates and the highest standard deduction amount.

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9. YOU FILE JOINTLY AND YOU’RE BOTH LIABLE

If you use the status married filing jointly, each spouse is jointly and severally liable for all the tax on your combined income, said Gail Rosen, a Martinsville, N.J.-based certified public accountant. “This means that the IRS can come after either one of you to collect the full amount of the tax,” she said.

“If you are worried about your spouse and being responsible for their share of their taxes — including interest and penalties — then you might consider filing separately,’ she said.

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10. YOU FILE SEPARATELY AND LOSE TAX BENEFITS

Although filing separately might protect you from joint and several liabilities for your spouse’s mistakes, it does have some disadvantages.

For example, people who choose the married filing separately status might lose their ability to deduct student loan interest entirely. In addition, they’re not eligible to claim the Earned Income Tax Credit and they might also lose the ability to claim the Child and Dependent Care Credit or Adoption Tax Credit, said Eric Nisall, an accountant and founder of AccountLancer, which provides accounting services to freelancers.

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11. YOU DON’T MEET THE MEDICAL EXPENSE DEDUCTION THRESHOLD

To include non-reimbursed medical and dental expenses in itemized deductions, the expenses must meet a threshold of exceeding 10 percent of your adjusted gross income. However, when you file jointly — and thus report a larger combined income — it can make it more difficult for you to qualify.

A temporary exception to the 10 percent threshold for filers ages 65 or older ran through Dec. 31, 2016. Under this rule, individuals only need to exceed a lower 7.5 percent threshold before they are eligible for the deduction. The exception applies to married couples even if only one person in the marriage is 65 or older.

Starting Jan. 1, 2017, all filers must meet the 10 percent threshold for itemizing medical deductions, regardless of age.

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12. YOU DON’T TAKE ADVANTAGE OF THE MARRIAGE BONUS

Many people complain about the marriage tax penalty. “Married filing jointly may result in a higher tax bill for the couple versus when each spouse was filing single, especially if both spouses make roughly the same amount of income,” said Andrew Oswalt, a certified public accountant and tax analyst for TaxAct, a tax-preparation software company.

However, you might have an opportunity to pay less total tax — a marriage tax break — if one spouse earns significantly less. “When couples file jointly with largely differing income levels, this may result in a ‘marriage tax benefit,’ potentially resulting in less tax owed than when the spouses filed with a single filing status,” Oswalt said.

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13. YOU’RE DIVORCED BUT STILL NEED TO FILE A FINAL MARRIED RETURN

If your divorce became official during the tax year, you need to agree with your ex-spouse on your filing status for the prior year when you were still married. As to whether you should file your final return jointly or separately, there is no single correct answer. It partially depends on your relationship with your ex-spouse and whether you can agree on such potentially major financial decisions.

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14. YOU HAVE TO DETERMINE THE STATUS OF DEPENDENTS AFTER A DIVORCE

Tax laws about who qualifies as a dependent are quite complex. Divorcing parents might need to determine which parent gets to claim the exemption for dependent children.

Normally, the custodial parent takes the deduction, Zimmelman said. “So if your child lives with you more than half the year and you’re paying at least 50 percent of their support, then you should claim them as your dependent,” he said.

In cases of shared custody and support, you have a few options. “You might consider alternating every other year who gets to claim them,” said Zimmelman. Or if you have two children, each parent can decide to claim one child, he said.

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15. YOU DEDUCT VOLUNTARY ALIMONY PAYMENTS

If you want to deduct alimony payments you made to a former spouse, it must be in accordance with a legal divorce or separation decree. You can’t deduct payments you made on a voluntary basis.

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16. YOU DEDUCT CHILD SUPPORT PAYMENTS

Even if you don’t take the standard deduction and instead itemize your deductions, you can’t claim child support payments you paid to a custodial parent.

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17. YOU CLAIM CHILD SUPPORT PAYMENTS AS INCOME

Do not report court-ordered child support payments as part of your taxable income. You don’t need to report it anywhere on your tax return. On the other hand, you must report alimony you receive as income on line 11 of your Form 1040.

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18. YOU DON’T CLAIM ALIMONY YOU PAID AS A DEDUCTION

Unlike child support that isn’t tax deductible, you are permitted to deduct court-ordered alimony you paid to a former spouse. It’s a deduction you can take even if you don’t itemize your deductions.

Make sure you include your ex-spouse’s Social Security number or individual taxpayer identification number on line 31b of your own Form 1040. Otherwise, you might have to pay a $50 penalty and your deduction might be disallowed.

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19. YOUR SPOUSE DOESN’T WORK AND MISSES TAX SAVINGS

Saving for retirement is important. Contribute to a 401k plan and you will both save money for your golden years and lower your taxable income now. If your employer offers a 401k plan, you can contribute money on a pretax basis, subject to certain limits.

However, nonworking spouses can’t contribute to a 401k because they don’t have wages from an employer.

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20. YOU MISS QUARTERLY TAX PAYMENTS

Single or married, you might have to pay quarterly tax payments to the IRS, especially if you are self-employed. Make sure you know how to calculate estimated taxes. If you are required to make such payments but do not do so, you might have to pay an underpayment penalty, Rosen said.

All taxpayers must pay in taxes during the year equal to the lower of 90 percent of the tax owed for the current year, or 100 percent — 110 percent for higher-income taxpayers — of the tax shown on your tax return for the prior year, Rosen said. “The problem for married couples is that often they do not realize they owe more taxes due to the combining of the two incomes,” she said.

You should be proactive each year. “To avoid owing the underpayment penalty, make sure to do a projection of your potential tax for 2017 when you finish preparing your 2016 taxes,” she said, adding that you should make sure to comply with the payment rules outlined above.

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21. YOU PHASE OUT OF PASSIVE LOSSES

Crystal Stranger — a Los Angeles-based enrolled agent, president of 1st Tax and author of “The Small Business Tax Guide” — said she sees a lot of married couples who have issues with passive loss limitation rules.

“With these rules, if you have a passive loss from rental real estate or other investments, you are allowed to take up to $25,000 of passive losses against your other income,” she said. “But this amount phases out starting at $100,000 (of) adjusted gross income, and is fully lost by $150,000 (of) adjusted gross income.”

Married filers lose out, as the phaseout amount is the same for a single taxpayer as for a married couple. “This is a big marriage penalty existing in the tax code,” Stranger said. “It gets even worse if a married couple files separately. The phaseout then starts at $12,500, meaning almost no (married filing separately) filers will qualify.”

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22. YOU CLAIM A CHILD AS A DEPENDENT, BUT YOUR INCOME IS HIGH

You are not obligated to claim your kids as dependents on your own tax return. In fact, it might be beneficial not to claim them.

“High earners lose the personal exemption after crossing certain income thresholds,” said Nisall. So in some cases, it might make more sense to let working children claim the exemption for themselves on their own return, he said.

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23. YOU MISS OUT ON THE CHILD TAX CREDIT

Married couples might be able to claim the Child Tax Credit up to a limit of $1,000 for each qualifying child.

“The Child Tax Credit phases out starting at $55,000 for couples electing to use the married filing separately filing status, and (at) $110,000 for those choosing the married filing jointly status,” said Oswalt. “But married couples receive twice the standard deduction that individuals receive, so the phaseout limitations may not negatively impact a married couple’s return if they choose to file jointly.”

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24. YOU NEGLECT THE TAX BREAK FROM A HOME SALE

The IRS provides a tax break when you sell your home, subject to certain conditions. Generally, you must meet a minimum residency period by owning and living in the house for two of the five years previous to the sale.

A single person who owns a home that has increased in value can qualify to exclude up to $250,000 in gains from income, said Oswalt. However, married people can exclude up to $500,000 in gains. This rule can become tricky if one person in the couple purchased the house prior to marriage.

“If you are married when you sell the house, only one of you needs to meet the ownership test for the $250,000 exclusion,” Oswalt said. “You both must meet the residency period to exclude up to the full $500,000 of gain from your income, however.”

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25. YOU DON’T CLAIM THE CHILD AND DEPENDENT CARE CREDIT

Married tax filers might be eligible for the Child and Dependent Care Credit if they paid expenses for the care of a qualifying individual so that they could work or look for work. The rules for who can be a dependent and who can be a care provider are strict. This credit is not available if you file separately.

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26. YOU CAN’T DEDUCT STUDENT LOAN INTEREST

If you’re paying back student loans, you might be looking forward to taking the student loan interest deduction. However, if you’re married, it might not be so easy to do that.

“For a single filer, the deduction begins to phase out when the taxpayer’s adjusted gross income is greater than $65,000,” said Oswalt. “This amount is doubled to $130,000 when filing jointly.”

“So if both spouses are making $65,000 or less, then their deduction will not be affected by the phaseout,” he explained. “However, if one is making $60,000 and the other $75,000, the deduction begins to phase out, which will ultimately result in a larger tax bill.”

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27. YOU INCORRECTLY ACCOUNT FOR GAMBLING WINS AND LOSSES

Imagine a married couple where both spouses like to gamble in Las Vegas. He’s not so lucky and has losses, while she has winnings. If they file a joint return, they might have to report the gambling winnings as taxable income. Meanwhile, the losses might be deductible if the couple itemizes their deductions instead of taking the standard deduction.

However, they can’t take the amount of gambling winnings, subtract the losses and claim the net amount as winnings. Instead, they must report the entire amount of gambling winnings as income, whereas the losses are reported as an itemized deduction up to the amount of the winnings. The IRS requires you to keep accurate records of your winnings and losses.

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28. YOU BECAME A VICTIM OF TAX IDENTITY THEFT

Identify theft is a financial nightmare, no matter how it happens. Tax identity theft happens when someone files a tax return using one or both of the spouse’s Social Security numbers in hopes of scooping up your legitimate refund. If this happens to you, “contact the IRS immediately and fill out an identity-theft affidavit,” said Zimmelman. “You should also file a complaint with the Federal Trade Commission, contact your banks and credit card companies, and put a fraud alert on your and your spouse’s credit reports.”

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29. YOU CAN’T GET YOUR 2015 RETURN

The IRS and state tax agencies work to develop safeguards to avoid identity theft related to tax returns. In 2017, they will be particularly concerned about the implications of taxpayers who file using tax software.

The IRS has alerted taxpayers that they might need to have their 2015 adjusted gross income handy if they are changing software products this year. This number might be required to submit your return electronically.

Getting your 2015 adjusted gross income might be difficult if you are a member of a divorced couple that is not on positive terms, or that hasn’t even been in contact the past few years.

However, you still have options. You might be able to get the information if you go to the IRS website and use the Get Transcript service.

 

 

Written By: Valerie Rind
Source: GOBankingRates

Market Update: March 6, 2017

MarketUpdate_header

  • Equities move lower to begin week. U.S. stocks are moving lower in early trading, following their European counterparts on little news. The major averages all managed to squeak out slight gains on Friday; the S&P 500’s 0.1% gain was led by financials and healthcare, which both closed up 0.4%. Overnight in Asia, stocks finished mostly higher with the exception of Japan’s Nikkei (-0.5%) as the yen strengthened; the STOXX Europe 600 is lower by 0.5% in afternoon trading. Meanwhile, the yield on the 10-year Treasury is near flat at 2.48% as market-implied expectations of a Fed rate hike in March are near 86%, WTI crude oil ($53.25/barrel) is slightly lower, and COMEX gold ($1231/oz.) is climbing 0.4%.

MacroView_header

  • Brexit, EU summit, China forecasts, Fed “quiet period”, and February jobs report highlight week ahead. Other than the February employment report (due out this Friday, March 10)  it’s a relatively quiet week for U.S. economic data. It’s also the unofficial quiet period for the Federal Reserve ahead of the March 14-15 FOMC meeting. The overseas calendar is chock full of potentially market-moving events, including the EU leaders summit, a potential House of Lords vote on Brexit, the European Central Bank meeting, and a few key reports on China’s economy in February.
  • Beige Book. This week, we’ll examine the Fed’s latest Beige Book, looking for signs of any impact from the new Trump administration, an overheating labor market, rising wages, and inflation ahead of next week’s FOMC meeting.
  • Corporate sentiment improved again in our latest Corporate Beige Book. Sentiment improved among corporate executives based on our analysis of fourth quarter earnings conference call transcripts. Not surprisingly, policy was a popular topic, as corporate tax reform, infrastructure and regulation saw big jumps in the number of mentions. Currency and China also continued to garner a lot of attention, while energy and Brexit faded. The solid fourth quarter results coupled with improved sentiment from corporate executives support our expectation of mid-to-high single digit earnings growth for the S&P 500 in 2017.
  • The Chinese National People’s Congress began its annual meeting on Sunday. Nothing shocking has come out of the meeting so far, though little was expected. Official economic growth forecasts have been cut to 6.5%. The focus of the meeting has been on economic stability, including a reduction in monetary growth targets and efforts to reduce China’s bad debt problem. The most notable change in language related to calls for further currency liberalization. A more market-oriented currency policy suggests potential weakening of the yuan, which would run counter to China’s long-term political goals, as well as increase the likelihood of China being labeled a “currency manipulator” by the Trump administration.
  • Make that six in a row. The S&P 500 was up 0.7% for the second consecutive week, and managed to close at a new weekly all-time high. In the process, it closed higher for the sixth consecutive week for the first time since a six-week win streak off of the February 2016 lows. The last time it was up seven weeks in a row was late 2014. Here’s the catch, the S&P 500 was up only 4.9% the past six weeks – making this one of the weakest six-week win streaks ever. Given the historically small daily trading ranges recently, this shouldn’t come as a big surprise. You have to go back to late 2013 for the last time there was a smaller return during a six-week win streak.

MonitoringWeek_header

Monday

  • Kashkari (Dove)

 Tuesday

  • China: Imports and Exports (Feb)
  • Japan: Economy Watchers Survey

 Wednesday

  • ADP Employment (Feb)
  • China: CPI (Feb)

Thursday

  • Initial Claims (3/5)
  • Challenger Job Cut Announcements (Feb)
  • Household Net Worth and Flow of Funds (Q4)
  • European Union leaders Summit in Brussels Begins
  • Eurozone: European Central Bank Meeting (No Change Expected)

Friday

  • Employment Report (Feb)
  • European Union leaders Summit in Brussels Continues

 

 

 

 

 

Important Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

What Does California’s New Minimum wage Buy? A Long Commute and a Room

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Spending more than three hours in a car each day is not unusual for Daniel Gretz. Gretz works as a security guard in Milpitas, which is in the southern part of California’s Bay Area. Each morning, he gets in the car and drives about 97 miles up Route 101 from Greenfield where he lives with his brother’s family.

Gretz had grown up in nearby Cupertino and has over the years seen housing and rental prices sky rocket.

“There are more and more people moving outside the Bay and then commuting to work,” says Gretz. Five years ago, when he first moved to Greenfield, his commute was “an hour and 15 minutes max. Now, on a good day, it’s an hour 45 minutes. On Friday, I leave work at 4:30 and not get home until 7 o’clock.”

Trying to survive on hourly pay of $15 an hour, Gretz feels he has no choice but to make the daily trek up and down the 101. Moving closer to Milpitas and San Jose would mean renting a place that would swallow up majority of his monthly paycheck.

As California becomes the first state to approve a proposal for $15 minimum wage, the question becomes: Is $15 an hour enough?

On Monday, California governor Jerry Brown signed a bill that will gradually increase California’s minimum wage over the next six years until it reaches $15 an hour by 2022. Thanks to a 2014 ballot initiative, San Francisco will have a $15 minimum wage by July 2018. And while $15 an hour will benefit many of California’s low-wage workers, in the Bay Area it is barely enough to live on. Stagnant wages have not kept up with the rents, which have gone up by more than 10% each year.

In search of lower rents, Bay Area residents have moved further away from their jobs — often traveling from one Bay Area city to another for work. According to the U.S. census, for most workers in the Bay Area their commute to work is about 30 minutes long. For those earning $15 and less, however, it can sometimes be as long as one to two hours each way.

The Bay Area consists of 101 cities, nine counties and spans about 7,000 square miles. It is home to more than seven million people. To picture how sprawling the Bay Area is, consider this: New York City — home to more than eight million people — is just 304.6 square miles. The Bay Area is about 23 times as large.

‘Moving day sux’

Above a bar on Mission street in San Francisco, is an open space where the neighborhood youth gather most days. The space belongs to Homies Organizing the Mission to Empower Youth (Homey), a community organization focused on helping at-risk youth. Near the staircase on the second floor is a whiteboard. On it, written in red marker is: “Moving day sux.”

The organization renting the space above Homey was recently evicted and had just moved out, says Carlos Gutierrez, director of operations of Homey, when asked about the note. Homey was able to extend its lease, but its rent has almost doubled. Most of the people working at Homey have grown up in the Mission, but in the recent years have had to move to places like Oakland and Stockton after being either evicted or having their rents hiked too far. A drive from Stockton to San Francisco is about two hours each way.

“People born in San Francisco can’t afford to live in San Francisco,” says Gutierrez, 36, who has moved to Oakland with his teenage son. As a result, he says, San Francisco has become a commuter city.

San Francisco, Oakland and San Jose — all cities in the Bay Area — are among the 10 most expensive cities to rent a one-bedroom apartment, according to Zumper, a startup that connects people with houses and apartments for rent. In December, median rent for a one-bedroom apartment in San Francisco was $3,500, highest in the nation. At $2,190, Oakland was the fourth most expensive city and San Jose was sixth, with median rents for one-bedroom apartments reaching $2,130.

In Oakland, where Gutierrez lives, the rent for one-bedroom apartments increased by 19% in 2015. Rent of two-bedroom apartments increased by 13.3%, reaching $2,550. In the U.S., affordable housing is defined as housing that costs about 30% of one’s monthly take home pay. For a $2,190 one-bedroom apartment to be affordable, one would have to make about $7,300 a month, which is equivalent to about $87,600. The annual salary for someone earning $15 an hour? A little more than $31,200.

Working at Homey, Gutierrez earns between $30,000 to $35,000 a year. His rent in Oakland is $1,200. After taxes, his rent is more than half of his take-home pay, he says. His daily train rides to and from work add up as well. He also has more than $40,000 in student loans. Despite all that, he can’t imagine leaving San Francisco area and the community that he has grown up in and cares about.

“We are here to stay. They can’t get rid of us. The lot of us, we are not going anywhere,” he says.

“We are the cockroach people,” jokes Robert Eligio Alfaro, executive director of Homey, who sits at a desk across from Gutierrez.

“We find a way to stay here, be here,” Gutierrez continues.

It was the ethnically diverse communities that made San Francisco what it is today, says Alfaro. “And in no way do these people feel that they are going to leave their communities or give it to up to someone who has more money,” he says.

Organizations like Homey have been working with other organizations that tackle issues like affordable and low-income housing. According to Alfaro and Gutierrez, the two objectives are closely related as homelessness, moving from place to place and feeling insecure about housing can contribute to a rise in at-risk youth.

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Like some of Homey’s employees, Gretz did not always have such a long commute to work.

Back in 2011, during the recession, the security company Gretz worked for was acquired. Afterward, he was told that his pay would be reduced: from $24 to $14 an hour.

“They basically said: ‘Start putting your resume together.’ They didn’t think I was going to stay, but it was better to have a paycheck than nothing at all,” says Gretz. At the time, the U.S. unemployment rate was still between 8% to 9%. “Everybody was kind of feeling the pinch — it was not the best time to find something else.”

Back when he earned $24 an hour, Gretz rented a studio for $1,100 a month. When his rent went up and his pay was slashed, keeping a place on his own was not financially feasible.

“When you get the rug taken out from underneath you and are making $10 less an hour, you have to make some serious financial adjustments,” he says. In the months that followed, he refinanced his car, leaned on his credit cards too much and moved in with his disabled brother, who had just recently bought a house for his family. And while his brother’s house was 97 miles away from Gretz’s workplace, he says that if he were to accept jobs closer, the pay would be lower.

Gretz, who has been actively trying to unionize security guards in the Bay Area, has recently received a $1 raise and now makes $15 an hour. He says it is “mind boggling” to him how people earning minimum wage make ends meet. California’s current minimum wage is $10 an hour. In San Francisco, the minimum wage is $12.25.

“If I am struggling [on $15 an hour], what must they be going through?” he says.

Protesters rally and close down a McDonald&rsquo;s restaurant in downtown Oakland in May 2014. Photograph: Kim Kulish/Corbis<br /></dt><dd class=

‘Just one room. It’s all I can afford’

One of the people feeling the pinch is Ernestina “Tina” Sandoval, 40, who lives just outside of San Francisco in Richmond, California. Sandoval works overnight 10 p.m. to 6 a.m. shifts at a McDonald’s and is paid $11.52 an hour.

Mother of two — a 17-year-old daughter and a 10-year-old son — she often struggles to make ends meet. To save money, she often walks to and from work, which takes about 30 minutes each way.

“If it’s between my daughter and myself, I’d rather have my daughter have those $5. She is a teenager. Have some change for lunch,” says Sandoval.

For Sandoval, the difference between earning $11.52 an hour and $15 an hour would be continuing to rent a room for the three of them in a relative’s home and moving into a one-bedroom place of their own.

“At the moment, I rent a room in a house. Just one room. It’s all I can afford,” she says. Still, the one room is more than what her family had a few years ago, when they lost their home during the recession.

“I walked into the police department and said: ‘I am homeless and I don’t know what to do,'” says Sandoval. The police helped place her into a family shelter in Richmond — right across the street from the McDonald’s, where she applied for a job. For the next eight months, Sandoval continued to live in the shelter and work at the McDonald’s where she still works.

Today, she continues to fight for $15 an hour — a wage that she says McDonald’s, a multimillion dollar company, can afford.

“Those $15, it would make a big difference,” she says.

Written by Jana Kasperdevic of The Guardian

(Source: MSN)

Idled Workers Return to U.S. Labor Force

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Michael Mulvey of USA Today

Hundreds of thousands of Americans are streaming back into an improving labor market as employers raise wages and hire less skilled job candidates to cope with an intensifying worker shortage.

The portion of the U.S. population working or looking for jobs — known as the labor force participation rate — has risen to 62.9% from 62.4% since September, Labor Department figures show. The rate had been falling since 2008, mostly because of baby boomer retirements, and that’s still expected to be the long-term trend.

Yet part of the decline was caused by a bruising post-recession job market that prompted discouraged workers to drop out of the labor force and many other unemployed Americans to retire, go on disability or return to school.

At least some of those idled workers are returning to work or looking again now that the jobless rate has fallen to 4.9%, a level many economists consider full employment. They’ve been drawn back by employers who are raising pay or becoming less selective..

“We’re just hearing a lot more openness” from employers, says Tim Gates, of staffing firm Adecco.

Wells Fargo said recently the rebound appears to be driven by the less educated, including discouraged workers who had been on the sidelines. Since September, the participation rate for college graduates with at least a Bachelors degree has dropped to 73.8% from 74.4%. The rate for other groups, including high school graduates and those with less than a high school diploma, has climbed at least half a percentage point.

Even so, their unemployment rate has declined, indicating that many of those returning are landing jobs despite increased competition from their peers.

Other groups are also coming bac, including retirees, the disabled and people in school, according to a Goldman Sachs analysis. Many are enticed by rising wages. Although average wage growth across the economy has been tepid at about 2% nationally, average earnings for private-sector employees in the same job at least 12 months jumped 4.1% in the fourth quarter, according to payroll processor ADP.

Companies are also getting creative. Adecco’s Gates says some manufacturers unable to find experienced workers are splitting jobs into two positions and hiring less skilled candidates for the simpler tasks. Others are bringing on unskilled workers and training them, a strategy rarely deployed when unemployment was elevated after the recession, says Becca Dernberger, of Manpower’s Northeast division.

Written by Paul Davidson of USA Today

(Source: USA Today)

How Sunday Stopped Being Special for the American Worker

Sometimes it's harder to come to work than other times.
Gilbert R. Boucher II/Daily Herald via AP

This month, workers who have been with Walmart for at least five years received a one-time bump in their pay checks. A couple hundred extra dollars is usually welcome, but this time, it actually symbolizes a loss: No longer will those workers receive premium pay for their Sunday shifts, as the idea of compensating people for toiling on what some consider a day of rest fades from American business.

Walmart discontinued Sunday premium pay, which had been $1 extra per hour, for new hires back in 2011. Those who had continued to receive it will receive a lump sum equal to half the amount of Sunday pay they received last year, according to a company release in January outlining a handful of adjustments that Walmart explained were a way of “simplifying its pay structure” — and reducing the overall cost of increasing base wages to $10 an hour across the board.

That hasn’t worked worked out so well for more experienced employees like 8-year Walmart veteran Nancy Reynolds, a 69-year-old cashier in Cape Canaveral, Fla., who works Thursday through Tuesday. Her base pay was already slightly above $10 an hour, so she didn’t get much of a raise, and the loss of a few extra Sunday dollars a week will hurt. “The younger people, the ones who haven’t been there that long, they got it, and I’m glad for them,” Reynolds says. “But they did it at the expense of me and everybody who’s been there a long time.”

In cutting Sunday pay, Walmart is actually behind most of the retail industry, which made that change as legal requirements to pay more on Sundays were stricken from state laws across the country. So-called “blue laws” once prohibited Sunday commerce altogether in 34 states in the 1960s. They were often weakened through compromise, with higher pay mandated in exchange for shopping being legalized. Even with no mandate, premium pay was often what the labor market demanded.

“To get people to work, when they’d never worked before, they started to pay Sunday pay,” says Craig Rowley, a retail compensation consultant with Korn Ferry who has done work for Walmart.

That changed over time as women entered the workforce, pushing more shopping from weekdays to the weekend. The labor market also loosened up, meaning workers couldn’t pick and choose which days they wanted to work; Sunday shifts are now expected rather than optional. And meanwhile, the importance of Sunday as a universal day of rest started to recede from the American psyche.

“When I was growing up, Sundays were kind of family day, church day,” Rowley says. “As we’ve gotten to be a more secular society, staying at home on Sunday is not necessarily expected. ‘We’re all going to be here all day Sunday’ is not as strong a cultural norm.”

Rhode Island and Massachusetts are now two of the last states to require retailers to pay time and a half on Sundays, and the retail industry is pushing hard to get the requirement rolled back in Massachusetts. “Sundays in retail have become unaffordable in our state,” wrote William Rennie, vice president of the Retailers Association of Massachusetts, in a Boston Globe op-ed.

Sunday premium pay hasn’t disappeared as quickly from other sectors, such as manufacturing and transportation, which have held on to a more traditional five or six-day work schedule. Most federal employees are still entitled to time and a half on Sundays. But more and more of their neighbors in the private sector won’t be so lucky.

Written by Lydia DePillis of The Washington Post 

(Source: The Washington Post)

 

Women Still Shorted on Wages and Good Jobs

If you’re a woman, maybe now is a good time to consider getting into data entry keying.

That’s one of the precious few jobs in which women can expect to earn a median wage about $50 a week more than their male counterparts.

Of course, it’s not a great job. According to the Bureau of Labor Statistics, a data entry keyer operates a keyboard to enter data, and she (it’s “she” 75 percent of the time) earns a little less $30,000 a year.

Tuesday is International Women’s Day, a good time to review the data on how women fare in the U.S. labor market. Last year, the average full-time female employee made a median of $726 a week. That’s 81 cents for every dollar made by the median man, and it’s actually a bigger gap than the 83 cents per dollar the median woman made in 2014.

In the U.S., certain jobs (like data entry keying) are far more likely to be held by women than men (and vice versa). Here’s how our labor market breaks down by gender, with blue indicating occupations that have a higher percentage of women workers than five years ago:

Women make up about 95 percent of all child care workers, earning a median wage of $475 a week (for personal care and service occupations). Men, on the other hand, still make up more than 80 percent of aerospace engineers, chemical engineers and software developers, who make about four times as much.

In the last five years, those gender lines haven’t shifted much at all. Women are now less likely to be models and religious directors (red dots) and slightly more likely (blue dots) to be tailors, clerks and financial analysts.

Men also tend to make more within occupational categories. That’s true for nearly every profession with weekly wage data available, except for retail and wholesale buyers, data entry keyers and accounting clerks. As you can see, the gap between men and women is wider the higher up the pay scale you go.

Written by Mark Fahey of CNBC

(Source: CNBC)

Study: Wages are growing faster than believed

The entry Into the workforce of new employees earning below the median wage has held down earnings growth, a study says.
Ted S. Warren/AP

Wages aren’t growing so slowly, after all.

A new study by the Federal Reserve Bank of San Francisco found growth in the median weekly pay of workers continuously employed in full-time jobs picked up sharply in 2015 to nearly 4% on an annual basis.

By contrast, the 12-month rise in average hourly earnings reported by the Labor Department has hovered around 2% for most of the nearly seven-year-old recovery. Annual wage growth accelerated to 2.5% in January but slipped back to 2.2% last month.

The report blames the sluggish aggregate gains on changes in the makeup of the labor force, particularly the entry of low-wage workers as the recovery gained steam and the retirement of higher-paid baby boomers.

“While high-wage baby boomers have been retiring, lower wage workers sidelined during the recession have been taking new full-time jobs,” study authors Mary Daly, Bart Hoblin and Benjamin Pyle wrote.

USA Today reported similar findings last fall based on data from payroll processor ADP, but this marks the first formal report of the trend by a government agency.

The tepid overall pay increases have puzzled economists because the sharp drop in unemployment to 4.9% from 10% in 2009 should have led to faster pay hikes as employers competed for a shrinking pool of available workers. From 1983 to 2015, the study notes, yearly wage gains averaged 3 ¼%. With monthly job growth averaging well over 200,000 the past couple of years, the failure of worker paychecks to swell more rapidly has been considered the chief missing element of the labor market’s recovery.

The report separated the median weekly wage growth of full-time workers who stayed employed from changes in earnings due to movements into and out of the labor force. The median pay gains of the full-time workers spiked from about 2% in 2010 to 4% in 2012, then edged down to about 3% in 2014 before gradually rising to nearly 4% by the end of 2015, the study shows.

By contrast, many other Americans enter or exit the labor force each month. Those outside the labor force — including many in school as well as laid-off workers who stopped looking because they grew discouraged — have returned in greater numbers as the labor market has improved. About 80% of those new full-time employees started “at below-median wages,” the study says.

Similarly, the number of part-time workers switching to full-time jobs has increased as well, with about 80% doing so at below-median wages.

At the same, several million Baby Boomers have been retiring each year. The departure of those older, higher-paid workers also has held down wage growth.

During the recession, the study says, the opposite dynamic occurred. Employers fired low-wage workers first and kept those with higher skills and earnings, tempering the decline in average wages.

The study concludes that the impact of its wage-growth findings on inflation are unclear. Even though raises have been more robust than believed, employers’ ability to keep their overall wage bills low “by replacing or expanding staff with lower paid workers” still could keep a lid on inflation. The Fed, which raised its benchmark interest rate for the first time in nine years, is looking for inflation to pick up to move ahead with further hikes.

Written by Paul Davidson of USA Today

(Source: USA Today)

Want a Back Rub? Tech Doles Out Perks for Talent

Provided by CNBC

Pity Silicon Valley job recruits.

In the battle for top talent in the technology sector, the allure of perks such as free massages and unlimited vacation has lost some of its luster, by some accounts.

Job sweeteners have become almost a necessity, even in an uncertain economy, as top talent is no longer seeing the value of switching jobs.

“They’ve seen too many of their friends take jobs at companies that fail, or sign on with entrepreneurs who don’t know how to manage,” Ryan Armbrust, managing director at ff Venture Capital, told CNBC recently. That means job seekers are looking for benefits that are both quantitative and qualitative, he said.

“When options don’t seem to have present value and every company looks the same at face value, companies are forced to resort to incentives, like offering SoulCycle classes and Warby Parker sunglasses,” Ambrust added.

According to Silicon Valley watchers, the list of possible perks are virtually endless. Future tech pioneers can expect activities like ping pong, personal trainers, afternoon meditation sessions, group fitness, and beverages on tap. For veterans, trips to Puerto Rico are no foreign concept, and some of the more adventurous firms let employees bring their pets to work — or even let you sleep on the job.

Still, some argue that on-the-job bonuses don’t necessarily move the pendulum for many workers.

“The perks typically play a marginal influence on the decision making process because most companies are offering the same benefits,” said David Saad, co-founder of SpringSprout, a New York-based recruiting firm. “The main factors that engineers consider now include depth of technical challenge, caliber of the team, personal interest in product, compensation, and more recently, if the company offers a social good element.”

Firms are also more open to accepting engineers from “bootcamp” programs, instead of candidates with years of industry experience. “The cost of lost productivity from not having enough engineers heavily outweighs the cost of any barriers to getting engineers on-board,” Saad said.

According to the firm, more influential factors are a company’s willingness to relocate potential recruits, or sponsor them for foreign visas. According to data from SingleSprout, they’ve seen a 30 percent increase in relocation offers to bring people to New York City.

Back rubs, out-of-town trips and other things “are nice to haves, but they are not swaying people anymore,” Natan Fisher, SpringSprout’s other co-founder added.

Yet in the war for talent, tech companies like Google  (GOOGL), Apple  (AAPL)and Facebook  (FB), have a separate battle to wage. Silicon Valley giants have repeatedly come under fire for the anemic ranks of women and people of color among their work force. In 2015, female engineers made up an average of just 7 percent of tech teams they’ve worked with, a small increase from 5 percent in the previous year.

SingleSprout’s founders told CNBC they are more frequently asked to dedicate more resources for targeting programs and companies that employ minority engineers, as the tech industry scrambles to improve its diversity.

Armbrust, of ff Venture Capital, noted more coding schools are attracting more and more women, who will now be entering the work force.

While he expects to see this growth continue, he cautioned it will take time.

“Educators are doing a better and better job supporting women within these fields, but we will need continued focus here in the future to create a balanced workforce,” Armbrust said.

Written by Uptin Saiidi of CNBC

(Source: MSN)

Three Financial Facts of the Week: January 13, 2016

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Chris Potter/Flickr

Fact #1
47.2% of the jobs added by the U.S. economy in 2015 came from low-paying sectors including retail, professional services and food services, leading to wage growth to rise at a slower pace than the overall jobs number would indicate.
Source: CNBC

Fact #2
According to a report by the Institute of International Finance, from 2008 to mid-2015, corporate debt in the BRIC countries (Brazil, Russia, India, and China) jumped from $8.9 trillion to $24.5 trillion.
Source: Investor’s Business Daily

Fact #3
The Labor Department announced that the number of job openings and hires both rose in November, indicating the highest worker confidence in the jobs market since the start of the recession.
Source: MarketWatch