This week's economic reports amount to a three-alarm blaze, on a scale of 1 to 5. After last week's Beige Book and the February jobs report, this collection isn't quite so sizzling. Even so, an update on consumer spending is always important.
Sales, prices, sentiment and 'Jolts'
Here's what we have scheduled this week:
- The Labor Department releases its Job Openings and Labor Turnover Survey, also known as Jolts, Tuesday at 10 a.m. (all times Eastern).
- The Commerce Department releases February retail sales Thursday at 8:30 a.m.
- The Labor Department releases the February producer price index Friday at 8:30 a.m.
- The University of Michigan consumer sentiment survey is released Friday at 9:55 a.m.
The center of gravity for the U.S. is consumer spending. So, the reading on February retail sales is the star performer of the week. We know that much of the economic activity has been dampened by severe winter weather. And that raises a dilemma here: How much importance do you attach to these reports when weakness is blamed on wintriness?
Economists forecast good, bad and 'meh'
Bankrate's inaugural survey of economic experts brings a mixed bag of findings. What does it hold for you?
LISTEN TO AUDIO
Mark Hamrick: From Bankrate.com, 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.
Navigating the personal financial world can be complicated enough. Then, there's trying to chart the twists and turns of the economy. Those turns have required a seat belt at times in recent years.
To try to assist with the navigation, Bankrate has completed its first ever quarterly economist survey. We'll be joined by our chief analyst to discuss the findings and what they might mean for your pocketbook.
Have filed your income tax return yet? Bankrate's Barbara Whelehan tells us about a tax break for use when assisting a parent.
And, as always, we take a look back at this week in business history.
All of that and more coming up on "Your Money, This Week."
Our first ever Bankrate economic survey was conducted in late February. The results came in just before the monthly unemployment report, covering February, from the Labor Department.
I spoke with Bankrate's chief analyst, Greg McBride, about what we found, and how it might affect your own personal financial decisions. We began talking about the findings involving the job market.
Greg McBride: The good news is they do expect the job market is going to continue to grow. We're going to continue to see job growth on a consistent basis every month. The bad news is, it's not really going to accelerate from the pace that we've seen recently. And you know, I think to a lot of people, that may come as a disappointment.
Mark Hamrick: Yeah, so the survey of two dozen economists found that if we kind of lump them all together that they see the unemployment rate falling to 6.2 percent 12 months from now. That is isn't a whole lot lower than where it is right now. Greg, as you know, over these many months there's been a discussion about the quality of the improvement in the job market. That has been suspect for some time hasn't it?
Greg McBride: Yes, it has. I think that the unemployment rate -- you know, for anybody that didn't already know, I think it's been revealed as something that is not the single best barometer of the health of the labor market. In particular, going forward, I think the story is going to be much more about the quality of jobs being added rather than what happens with the unemployment rate or frankly even the number of jobs being added. I think you know there's a big difference between 200,000 low-paying service jobs and 200,000 higher-paying jobs that are going to actually produce real spending power for people.
Mark Hamrick: Now in the survey, on balance the economists found they are looking for about 200,000 jobs or slightly less than that being added, on average, each month over the next year. Obviously, when you're talking to a number of different people, we had someone who looked for fewer than 100,000 on average and we had one economist -- Mark Zandi of Moody's Analytics, very well respected -- looks for a little better growth than that in terms of the number of jobs added per month. You have talked a lot about your own forecast for not only the economy but also how consumers/investors/savers should behave. When you're making a forecast like that, Greg, what kind of economic outlook are you sort of counting on?
Greg McBride: I'm counting on one, I think, that's pretty similar to what we found from the polls of economists. That is, that, you know more of the same: steady growth, but slow growth; the stagnant income; not a lot of growth in spending power; an environment where longer-term interest rates start to creep higher; and where the days of ultra-low short-term interest rates are numbered. Even though we're not going to see that kind of change this year, knowing that those days are coming.
Mark Hamrick: Of course, the Federal Reserve does its own poll essentially of the members of the Federal Open Market Committee. That's the policy-setting group that meets about every six weeks at the Fed. Those folks have said that, by and large, they look for an interest rate increase in 2015. It just so happens the economists took a clue from that, and most of them also said they would look for a short-term interest rate increase -- maybe about a year or so from now. So Greg, if indeed that happens, and obviously a lot of dominoes have to line up for that, what does that mean for individuals, let's say, first of all, who might be borrowing or saving?
Greg McBride: I think from a borrower's standpoint, I think you look at 2014 as what may well be your last hurrah to pay down things like credit card debt or even variable-rate home equity lines of credit, in an environment where you have the tailwind of ultra-low interest rates rather than the headwind of interest rates creeping higher.
You know, now that being said, once that first rate hike comes, it's likely to be small and measured. The Fed is going to have to raise rates a whole lot of times before rates really start to get up to a level where they become problematic. But I think it's the change in direction that I think people need to be mindful of.
From an investor's standpoint, we had a blockbuster year last year. The market was up more than 30 percent with almost no volatility. But that was counting on a better economic environment going forward. Well, if in 2014 the economic outlook is going to be more of the same, then I think that alters the behavior you're going to see out of the equity markets in that things are going to be much more based on fundamentals and a lot more volatility as we sort of weigh the pros and cons of what's happening with the economy at a given point in time and what that means going forward.
Mark Hamrick: And I would urge our listeners of the podcast to check out Bankrate.com. This was our first ever economic survey, and we do plan to continue doing them in coming quarters. And, on Page Two of the survey, you will find Greg's takeaways from what the economists had to say and then sort of how you might adjust your own personal financial decisions.
Greg, as you just noted, the stock market has been doing really fantastically well. If the economy were to falter, that could really set off what some might say is an overdue correction.
Greg McBride: Yes, and look, it could be any variety of variables, not necessarily the economy stumbling, that produces that correction. I think the takeaway for investors is that we are overdue for a correction and that when it comes, it's not a reason to sell but rather a reason to buy, as long as we see an economic environment where the economy is still growing. We are overdue for that correction. I would expect volatility. I would embrace volatility -- not run the other way from it.
Mark Hamrick: Greg McBride, thanks for your time. It's
At issue is where adults become caregivers for their parents, as Bankrate's Barbara Whelehan explains.
Barbara Whelehan: Are you taking care of your elderly parent?
If you help out your Mom or Dad financially, Uncle Sam might be able to return the favor by giving you some tax breaks. But that's only the case if your parent qualifies as a dependent. If so, you could claim an added personal exemption on your income tax return.
Of course, you have to meet certain criteria. First, you have to take into consideration their income. Does it exceed the exemption amount? Social Security is generally not factored in the equation, but other taxable income, such as dividends and interest, cannot exceed the exemption amount.
Second, do you provide more than half of your parent's support? That might be the case if Mom or Dad lives with you if you take into account fair-market room rental, food, medicine and other support items. But if your parent is paying for these things with Social Security income, you have to consider that in the calculation.
For more on this and other personal finance information, visit Bankrate.com. I'm Barbara Whelehan.
Mark Hamrick: Finally, our look at this week in business history …
March 13, 1991. The U.S. Justice Department announces that oil giant Exxon agreed to pay a billion dollars for cleaning up Alaska's Exxon Valdez oil spill. The spill itself occurred two years earlier, in March 1989, off Prince William Sound, Alaska. It is still considered one of the worst environmental disasters in modern history.
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.
We're hoping you can help us get the word out. Also check out our other podcast, "Special Report," featuring breaking news and special features.
For more on this and other personal finance issues, visit Bankrate.com. And you can follow us on Twitter @bankrate and I'm at @hamrickisms.
Thanks to producer Lucas Wysocki for his work in the studio and to editor Doug Whiteman.
I'm Mark Hamrick. From all of us here at Bankrate, here's hoping you have a great week.
Purchases on ice
Some recent spending has been done out of necessity, such as purchases of snow shovels, ice melting material or winter clothing and boots. But when it's been particularly bad outside, consumers have been hibernating -- curbing purchases of spring/summer clothing and new cars.
Kathy Grannis, a spokeswoman for the National Retail Federation, says it is likely many of those purchases have simply been delayed. "There is no reason to believe that consumers aren't going to come back in the spring. You know we’re not hearing any reports of economic conditions that would lead you to believe that consumer sentiment, or anything like that, is completely troubling," says Grannis.
Some experts worried
Not all economists are in the "blame it all on weather" camp. They note that the economy initially appeared to have strong momentum in place in the final quarter of last year, before winter tightened its grip. But growth for that period has since been revised lower. One source of drag right now is that business inventories are being drawn down to match actual demand.
Those more skeptical about the economy include Jeffrey Rosen, chief economist for Briefing.com. "All the economic numbers have been sliding, which is what happened over the last few years during this point in the calendar year," he says. "Strong growth in the second half of the year was not carried over into the next year." At any rate, it will likely be weeks or months before we have a better sense whether it was just the weather or if the economy has bigger problems.
Ahead to the Fed
The week's economic reports serve as a kind of prelude to the next meeting of the Federal Reserve. The first policy-setting meeting with Janet Yellen at the helm is scheduled for March 18-19. She has said that soft economic reports are likely because of bad weather, but she conceded that we won't be certain until the coming months.
This week in business history
On March 13, 1991, the Justice Department announced that oil giant Exxon had agreed to pay $1 billion for cleaning up Alaska's Exxon Valdez oil spill. The spill took place in March 1989 off Prince William Sound, Alaska. It is still considered one of the worst environmental disasters in modern history.
Follow me on Twitter: @hamrickisms.