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Paso Robles Past & Present

by Carolyn M. Runyon

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Evolving Beauty

by Ronda Swaney

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Fatigue Fighters

by Ashley Gartland

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Opes Advisors Weekly Economic Update

by Samia S. Morgan

Welcome Back Job Seekers

A firming labor market and increased consumer spending are expected to drive growth in 2015. We’ll focus on the labor market in this update.

Job Growth is Accelerating

Employers added 257,000 position in January. The Labor Department also revised gains up in November to 423,000 and December to 329,000 for a combined gain of 147,000 additional jobs. These are blockbuster numbers – the best 3-month run in 17 years. Queue the Prince reference – the US economy is creating jobs like its 1999.  Once economist even suggests that we may soon run into a labor shortage.

Workforce Participation is Expanding

The unemployment rate in January actually clicked up to 5.7% from 5.6%; however, this was due to 700,000 Americans entering the job market.  Total US labor force participation rose to 62.9 percent from 62.7 percent as discouraged job seekers return to the market. This is very good news for economic growth in 2015. One example: Employment among 25-34-year-olds was at 76.6% in January, up from 75.8% at this time last year and the highest rate since the end of 2008.  This is the prime cohort for housing demand, so we may finally see a housing recovery.

Pay is Increasing

Average hourly earnings rebounded 0.5%, following the surprise disappointment of a 0.2% drop in December. The average workweek held steady at 34.6 hours. Two qualifiers: First, part of the boost in wages resulted from minimum wage hikes in some areas. Second, the December number might just be a false reading.  So what we are likely experiencing is a lower, steady lift in wages. Over the last 12 months average hourly earnings increased 2.2%, comfortably above inflation, which registered at 1.6%. Combine this with lower gas prices and we have a scenario for a boost in consumer demand.

Looking forward from this super strong jobs report, the strength of the labor market in recent months makes it more likely the Federal Reserve will boost short-term rates, possibly as early as June.

What’s Next for Greece?

Last Wednesday, the European Central Bank (ECB) cutoff direct access to its liquidity lines for Greek banks. They had been securing euros at an interest rate of .05%.  Now those billions of euros in liquidity will come from the central bank in Athens at a cost 1.55%. And the ECB has the power to cut off all support Greek banks, which would trigger the collapse of the Greek financial system.  The stock market in Athens declined 10%, borrowing costs hiked 20%, and capital flight picked up as Greeks move to safeguard their savings. In January, 7.7% of all deposits fled the country.

A debt deal with Greece’s new government was anticipated once election fever wore off and cooler heads prevailed, but now analysts aren’t as certain. Greek Finance Minister Yanis Varoufakis left his meeting with the German Finance Minister sniping that, "We didn't even agree to disagree."  Failure to reach an agreement and a subsequent Greek exit from the euro would flatten the Greek economy in the short-run and reduce investor confidence in weaker euro countries such as Portugal and Spain. An extreme, though unlikely, outcome is a deep global recession as banks pull back from lending to safeguard their capital and consumers pull back from spending out of fear of losing their jobs.  A youthful, inexperienced government in a peripheral euro zone economy is now one of the biggest dangers to the global financial system.

In The Week Ahead

This week is very quiet on the economic calendar. On Thursday, February 12th, we have the usual Jobless Claims followed by Retail Sales data.

While Opes Advisors, Inc. uses all reasonable efforts to ensure that the information contained in this email is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Opes Advisors, Inc., therefore, cannot be held liable for any loss arising directly or indirectly from the use of, or any action taken in reliance on, any information appearing in this email.

Andy Block

Mortgage Advisor ǀ Personal Finance Advisor

NMLS 293174

 

Reverse Mortgage Specialist

 

411 Borel Avenue, Suite 320, San Mateo, CA 94402

650.931.0605 D | 650.533.0756 C | 650.931.0601 F

ablock@opesadvisors.com

The Right Plant in the Right Place

by Robyn Roehm Cannon

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Displaying blog entries 1-5 of 5

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