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An economy like flat Champagne

By Mark Hamrick ·
Monday, May 5, 2014
Posted: 6 am ET

Woman drinking © Piotr Marcinski/

You could practically hear the Champagne corks popping in the rapid reaction after the Labor Department reported that 288,000 jobs were added by employers in April and that unemployment had fallen to 6.3 percent, the lowest level since September 2008.

Then in some quarters, Friday's fizz seemed to go flat when it became clear that a big part of the drop in the unemployment rate was fueled by falling labor force participation -- in other words, fewer people were looking for work. The government also says the civilian labor force declined by more than 800,000 in April.

Can't we just get one jobs report that is universally positive? Not just yet, apparently.

Where's the party?

In the weeks (and months) to come, we'll be watching for signs of broad improvement in the economy.

We know growth was a first-quarter no-show. Is it catch-up time? We'll see if there's something like a coming out party for the economy. Here's what is on tap for economic reports this week:

  • The Commerce Department reports on the nation's trade balance for March, Tuesday at 8:30 a.m. (all times Eastern).
  • The Labor Department reports on first-quarter productivity, Wednesday at 8:30 a.m.
  • The Federal Reserve reports on consumer credit for March, Wednesday at 3 p.m.
  • Federal Reserve Chair Janet Yellen testifies to the Joint Economic Committee of Congress on the economic outlook, Wednesday at 10 a.m.
  • Yellen appears before the Senate Budget Committee, Thursday at 9:30 a.m.

Bankrate Audio

Getting a good financial start

Congratulations to the Class of 2014! Now get out there and start earning and saving, using these tips.

Mark Hamrick

Washington Bureau Chief,

Amanda Rowe


Gene Natali

Author, "The Missing Semester"

Adam Zoll

Assistant Site Editor,


From, This is "Your Money This Week."
We connect the dots between what's happening in the world and your wallet.
I'm Mark Hamrick reporting from Washington.

Our focus this week is on transitions, mostly for young people.
How to begin to get serious about managing your financial life?
Whether one is a new college graduate, or has just made a decision to do a better job watching income and spending, what should you be thinking and doing?

We chat with author Gene Natali, who wrote an award-winning book titled, "The Missing Semester." He offers a succinct lesson on how to make better decisions and ultimately attain financial freedom

And, returning for a second week, Adam Zoll with Morningstar also has some terrific advice for starting down the path to financial fitness.

All of that and more coming up on "Your Money This Week."
(music transition)

In our first segment, we begin with one of the great overlooked areas of the American education system: Personal finance. Whether in high school, or college, or just listening to Mom and Dad, how many of us have had any kind of training helping us to manage our own money? I think you'd have to agree that for most of us, the answer is that we had very little.

But rising to the occasion, is Gene Natali, author of the book, "The Missing Semester." And to begin, I asked him about the intriguing title of his book and why he chose it.

Gene Natali: The intriguing title "The Missing Semester" -- I think the subtitle is a little bit of a hint. The subtitle being: "Your financial choices have consequences. Will you choose wisely?"

It's just my opinion, but I believe this subject, we can call it Money 101, is arguably the most under-taught in our country. Just to put some numbers around that: The graduating class of 2014, it's 3.3 million graduating high school, 1.6 million graduating college. The common denominator is that all, 100 percent of these graduates, will make decisions about money.

Mark Hamrick: So, this is an opportunity for financial professionals and also for those of us here at I'll ask you Gene, what's the No. 1 thing that you think people need to know, whether they're young, they're just getting out of college, maybe they're a few years out of college, or maybe they're even in retirement. What do they need to know that maybe they don't?

Gene Natali: I'm going to kind of give a two-part answer to that. The first is that our choices have consequences. When you recognize that I think it helps make some decisions a little bit easier. The second is that we as individuals have a great deal more control over those choices than we might think.

I think particularly for the younger audience, the soon-to-be and the recent graduates, where peer pressure is pretty impactful, to take control of your financial future is very empowering.

Mark Hamrick: I do see something. I make no secret of the fact that I have a college graduate son now. I'm not in the younger demographic any longer. One thing that I am impressed by, at least around the Washington, D.C., area is that there does seem to be some appreciation for the value of thrift among people who are in their 20s and 30s. I see more people riding bicycles to work, not wanting to own a car, not wanting to live in the suburbs, rather wanting to live downtown, where maybe urban design helps their finances a little bit.

I'm wondering, do you think that's translating to the fact or to the idea that they're actually doing a better job with their finances, or are they just choosing not to spend on other things?

Gene Natali: I think you could find students in both subsets without a doubt. But I think that your intuition is correct there.

I have a great deal of interaction in high school and college classrooms, both here in Pennsylvania and across the country. You would think that the No. 1 question I would get asked would be about the student debt crisis or about credit cards, some of the scary stuff. The No. 1 question I get asked in the classroom is about the Roth IRA and how I can start saving.

Mark Hamrick: So what is the takeaway from that?

Gene Natali: I think the takeaway is these kids get excited. I'm old enough that I can say kids as well. I think these college students, these recent graduates, get excited when they see opportunities. When you're just getting beat down with the negatives -- a credit card, a student loan debt, it's tough to get a job -- it's sometimes hard to get out of bed or get excited.

When you look at the opportunities, you get excited. When you get excited, you're taking ownership of your financial future. You're taking a job that maybe you wouldn't have otherwise taken, but you're going to take it while you wait for your dream job. I think there's a lot to be said for getting people excited about an idea.

Mark Hamrick: There's some evidence that suggests, Gene, and maybe you see it in the wild, so to speak, that people who are in their 20s and 30s are also less likely to take the risk that they associate with, essentially, the stock market or equities. They're maybe under-invested in the stock market to the degree that the traditional model says they should take on that "risk" and not necessarily just allow their money to languish in something that doesn't pay them much return.

Do you see that, that they don't take on risk in the stock market? If so, how do you counsel them otherwise?

Gene Natali: The national statistics are: 52 percent of Americans invest in the stock market. I agree with you. It should be a heck of a lot higher than that.

One of the questions I always ask in both high school and college classrooms is: Who has a Roth IRA? Who has an investment account? Sometimes, it's actually zero. But other times -- I was in a classroom yesterday morning that had 15 students. Three of the students had a Roth IRA, and five were investing in some capacity. This was a college classroom. That's lower than 50 percent, but these kids absolutely -- and that's where the education -- that's not an education that I necessarily specialize in or provide. But there needs to be a great deal of education teaching these students about how valuable it is to start investing in, let's say, an index fund, an S&P 500 Index fund at the age of 22 or 25.

Mark Hamrick: Well, congratulations. As I said before we came on the air here, my friend and colleague Greg McBride, Bankrate's chief analyst, recommended the book. I have since purchased it for my own son who I mentioned earlier. I think it's doing a lot of good, and we hope it does more people more good. Gene, congratulations and thank you so much for your time.

Gene Natali: Mark, thank you. It's an absolute pleasure talking to you.

Gene Natali Jr. He's author of "The Missing Semester" and senior vice president at C.S. McKee, an investment firm. He spoke with us from his office in Pittsburgh.


Our next segment flows very nicely from the first.

We continue with Adam Zoll, assistant site editor for

I asked Adam: For younger workers just starting out, and thinking about beginning to save for retirement, where's a good place to begin?

Adam: Well I think it really depends, in part, on their employment situation and their overall income situation. If they are a recent college grad, for example, and fortunate enough to have employment and their employer offers a 401(k), that's a very obvious place to start. Or, if someone is a little further along in their career, a 401(k) is a great savings vehicle because of, I would say, the convenience factor and the fact that a portion of your income is taken out of your paycheck every pay period and devoted to your retirement in a tax-advantaged way. The money never makes it into your pocket, therefore, you're never tempted to spend it, and it sort of sets a good habit that persists, hopefully throughout your working career. And often there is an employer match that also comes along with that 401(k) contribution, so that your retirement savings grows even faster.

Even for people who don't have access to a 401(k), there are other options: An IRA, as you mentioned, would be one. Oftentimes with younger investors, in particular, you hear the complaint that they simply don't have the extra disposable income to devote to retirement. But I would really stress that the younger you are, the more advantageous it is to invest, especially investing in stocks because your growth potential is that much greater over time. When you consider the powerful impact of compounding over time, in fact being a younger investor, you have a much longer time frame and a much more opportunity for that money to grow. Therefore, I think, investing something for retirement, even at a young age is really essential.

Mark: Yes that's great advice, and I can speak personally to that, myself, as one who has been several decades in the workforce. I remember even though back in the day, a former employer provided, essentially, a pension. When the 401(k) came around, I was reticent about doing that. I actually did it, though, and I can tell you all these years later I am very thankful that I did, just because of that benefit of compounding over these many years.

Adam: Right, as I said, the earlier you start, even if you are not fully funding a 401(k) or an IRA, the better position you are going to be in later on. Even starting at age 25 versus age 35 can have a dramatic effect, long-term, on the amount of retirement savings you have when you do stop working. Even though retirement may seem way off in the future, one of the last things on the minds of younger workers and younger investors -- think of it this way, the more you have saved up, the earlier you can stop working eventually one day and start the retirement portion of your life. I know that it may seem like a very remote goal, but it's a really important one, especially in these times.

Mark: Adam, we often hear that people who are younger, let's say in their twenties are a more risk-adverse, meaning that they might be liable to try to stay away from equities, when in fact their position in life suggests that they are in a better position to weather some kind of a market pull-back over time. What does your experience tell you about how young people are investing? Are they doing a good job?

Adam: Well, I think you hit the nail on the head. A lot of younger investors -- and think about this new generation of investors -- they lived through this dramatic financial crisis in 2008. They have also -- some of the older ones -- may remember better the tech bubble bursting in the year 2000-2001. So their memory of the stock market is not all rosy.

Investors with a little bit of a longer time frame and more of a track record can maybe understand the ups and downs from more of a historical perspective. But for younger investors who are very skittish about stocks, unfortunately, I think that many of them are trading one form of risk for another. They want the safety of staying in cash or maybe even bonds of one type of another and to avoid stocks. They want to save, but they want to avoid stocks.

So they are avoiding that equity risk, but unfortunately they are adding a different kind of risk. One is that their savings simply are not going to grow fast enough to provide them with enough income in retirement. So, there is a form of longevity risk in that they could outlive their money, ultimately.

Also, there is inflation risk here, because let's say you have money in a plain old vanilla savings or money market account right now. Maybe, if you are lucky, you are getting 1 percent on that. Meanwhile, inflation is eroding the spending value of the money you are saving. So, I think it's wrong to think of avoiding stocks as avoiding risks, because really you are just swapping out one form for another.

Mark: Very good. Adam, this is all terrific advice. Thank you very much.

Adam: My pleasure.

Adam Zoll, with He spoke with us from his office in Chicago.

Another great place to begin is by checking out some of our content on You can read advisor columns and stories and plug in your own numbers with our terrific retirement or savings calculators, and give yourself a kind of new financial head start.


We refer to them, without even given it another thought, as "smartphones."
But can they help us to be smarter about managing our money?
Bankrate's Amanda Rowe tells us more.

Whether it's an Android or Apple device, your smartphone can help you make smarter spending decisions. I'm Amanda Rowe with your Personal Finance Minute.

If you want to get the most bang for your buck, try using a free price comparison app such as RedLaser, which compares prices from thousands of in-store and online retailers and helps you find the best deals.

Do you enjoy couponing? RetailMeNot is an app that allows you to share coupon codes. The app can also notify you when you're near any deals that are worth checking out.

Many grocery stores and retailers have loyalty rewards programs, and your wallet may be overflowing with plastic cards. Cut down on the clutter with apps such as CardStar or Key Ring, which organize and keep your loyalty cards all in one place.

If putting pen to paper seems a bit outdated, task-manager apps like Remember The Milk may be useful for your grocery lists.

For more on smartphones and smart spending, visit I'm Amanda Rowe.

Finally, our look at this week in business history:

On May 6, 1915, the actor-director Orson Welles was born. He'll be best known for the movie "Citizen Kane." After the film's release in 1941, it was a box office disaster, failing to recoup the costs of production. Over time, it has been regarded by many as one of the best films in movie history. The result: a lesson -- a great disconnect between immediate marketability and artistic achievement.

Welles died in 1985 at the age of 70.


You've been listening to "Your Money This Week."

If you enjoyed the podcast please check us out on iTunes and rate and subscribe to our program.

For more on this and other personal finance issues, visit And you can follow us on Twitter @bankrate.

Our Editor-in-Chief is Julie Bandy. Managing Editor: Katie Doyle. Editor: Doug Whiteman.

Thanks to producer Lucas Wysocki for his work in the studio and to Amanda Rowe.

I'm Mark Hamrick. From all of us here at Bankrate, here's hoping you have a great week.

Embed Audio


Janet Yellen: Star of the week

Just a week after releasing a written statement capping a two-day Federal Reserve meeting, Chair Janet Yellen gets to spend two days on Capitol Hill. No doubt, she'll be peppered by both Republicans and Democrats about the future direction of interest rates. For the rest of us, the hearings provide an opportunity to hear Yellen explain the central bank's outlook.

This week's economic data will be thin in terms of providing new information about where things stand with the economy right now. On the other hand, we will get some readings that will help fine-tune the recent report on first-quarter growth, now thought to have shown a modest contraction.

2nd-quarter temperature-taking

What about the current, or second, quarter? There's some early evidence that consumers have been revving up their purchases, helped by rising income.

"I expect a strong second quarter snap-back as pent-up demand that built up over the winter for both consumers and businesses drives growth over the next couple of months," says Alan MacEachin, corporate economist for Navy Federal Credit Union.

A more downbeat view comes from Jeffrey Rosen, chief economist for

"The underlying trends do not warrant the 3 percent-plus second-quarter GDP forecasts that many economists are projecting," he says. "Our analysis of the data does not show large weather-related effects that would result in an upward shock to growth next quarter."

Rosen is thinking that growth this quarter will come in at an annual rate of about 2 percent, well below many forecasts. That would keep the corks in the bottles for a while yet.

This week in business history

Citizen Kane © catwalker/

On May 6, 1915, actor-director Orson Welles was born. He's best known for the film classic "Citizen Kane."

It did not fare well after its box-office release, initially failing to recoup production costs. Over time, however, it has come to be regarded as a cinematic masterpiece.

At the time of his death in 1985, the great showman Welles himself would know as well as anyone about the occasional disconnect between marketability and artistic achievement.

Follow me on Twitter: @Hamrickisms

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