There is a bit of good news but it’s not always easy to find it. Let’s start with this morning’s jobs report which includes the interesting data point that the total of non-farm employees is now at about 151 million. The interesting part is that the number equals what we had prior to Covid-19 and its destruction of jobs (and the economy in general). Americans are going back to work – in droves. My guess is that the drivers for this are primarily two-fold: the funds to pay people to stay home are drying up and the folks who did not want to go to a work environment that required mask-wearing have been relieved of that obstacle.
A positive side effect is the trend to higher paying jobs. And yes, while that may contribute to inflation in the medium and long term, the near-term effect will be increased purchasing power for a lot of workers / consumers.
I am a bit surprised that the markets are not reacting more favorably to the jobs news, but it could be that there is some misunderstanding of the top line data. The 431,000 jobs added in the March report did show a decrease from both January and February. However, if you zoom out a bit, you will see that March added more jobs than all but one month in the decade-long expansion of the 2010s. And note that the unemployment rate sits at 3.6%. Not at all terrible.
Another news item worth watching is the House of Representatives passed (with bipartisan support) the Secure 2.0 bill. This is a substantial juggling of things to do with retirement accounts. As such, it will be getting a lot of attention from us.
A partial list of things the bill addresses includes:
- Increases the startup credits for small employer pension plan credit to cover 100% of the cost to small employers to implement a plan for the first three years.
• Creates an additional credit to encourage small employers to make direct contributions to their 401(k) plans that can offset up to $1,000 of employer contributions for each participating employee.
• Broadens the SECURE Act’s pooled employer or open multiple employer plans (MEP) to allow unrelated public education and other non-profit employers to join a single 403(b) plan.
• Increases the saver’s credit for low= and moderate=income workers who save in retirement plans by raising the match from the federal government by 50% starting in 2025.
Our early response is that while there are some truly useful elements of this bill, it also seems unnecessarily complex. We will study it carefully and watch its acceptance level (and scrutiny) as it gets to the Senate.
Ron’s Market Minute – Cheaper Oil?
In case you missed it, Wednesday the administration announced the largest ever release of oil from the US Strategic Petroleum Reserve –– around 180 million barrels. There have been releases in the past but only two came even close to this scale. Thursday and Friday saw slightly lower prices at the gas pumps, but of interest – when this was done in the past, releases have temporarily sent oil prices lower and are then followed by higher prices as the market prices in insufficient supply. Josh Young CIO of Bison Interests says, ‘It is likely that oil prices rise after an initial temporary pullback and that the SPR (Strategic Petroleum Reserve) may have to be refilled at even higher prices.’
The SPR currently holds 568.3 million barrels of oil, its lowest level since May 2002.
So, before we get too excited about cheaper oil, have a look at this chart of XLE which generally follows petroleum prices. Note that the price of this equity was about $55 a share at the beginning of the year. Yesterday’s closing price was $76. In other words, traditional energy prices have returned over 35% to investors so far this year.
I believe that we have a supply and demand situation. The world will (for the foreseeable future) need more traditional energy. If the supply is reduced (no matter the reason), the prices will increase. Note that our clients have overweighted holdings in traditional energy investments at this time.
Ronald P. Denk, CFP®
Denk Strategic Wealth Partners
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