Written by Keith Springer 9.5.13
I can’t believe Labor Day has passed already. When I lived in Boston, it signified the end of summer. Now that I’m in California, it means the best summer weather is still ahead, but the days are getting shorter. Either way, the holiday represents a break between the craziness of summer and the beginning of fall, when we all take work seriously again. You’ve probably noticed the increased traffic. For whatever reason, we need a day off to make the switch.
Labor Day wasn’t always just a free day off. Around the end of the 19th century, organized labor was gaining strength across the country. Workers were unhappy with wages and working conditions, so they staged protests and strikes that were often violent. As a response, and a way to ease the rising tensions, some local governments and a handful of states passed laws to officially recognize what unions were calling “labor day.” President Grover Cleveland signed the law that made Labor Day a national holiday as a way to honor the American worker in 1894.
Over the years, the landscape of the American worker has changed dramatically, and with it, the meaning of Labor Day. Approximately 11% of US workers are members of organized labor, that is less than half of what it was just two decades ago. For most of us today, it’s just a day off to eat and drink too much.
Unfortunately for most Americans though, the changing workforce demographics didn’t give you a long weekend this year. Part-time workers now make up 77% of new hires, which means that if you got a new job in 2013, it’s just another Monday on the job because these jobs typically don’t provide paid leave for holidays. In fact, many retailers have sales promotions to draw in customers that may have the day off. Big-box retailers and department stores actually schedule extra workers to meet anticipated demand.
The reason that I am discussing this topic is to illustrate the rapidly changing trends to our labor force. Much of our workforce will be making less money than previous generations, and therefore have less to contribute to payroll and income taxes, as well as less money for discretionary spending to help grow the economy. Consumer spending is what drives our economy. Personal consumption expenditures account for over 70% of the nation’s gross domestic product, by far the biggest share of its components.
From this, we must invest based on the future trends of the economy and the markets by following predictable spending patterns of American consumers. As I discuss in Facing Goliath – How to Triumph in then Dangerous Market Ahead, spending is dictated by our age and stage of life. We begin spending and helping the economy in our late 20’s and peak spending in our late 40’s. on top of that, we can only spend what we have, and borrow as much as our income allows.
With more and more people having to settle for part-time work and lower pay, consumers will choose the necessities over the luxuries. For now the Federal reserve has stepped into daddy’s role and given us all an allowance by stimulating the economy with low interest rates and quantitative easing. Once that is over, many will be forced to delay making the big life purchases of a home or a new car. These workers will also have less money to save and invest in the stock market.
It may sound like the sky is falling, but it’s not. It’s just a normal economic and business cycle. You can’t get to spring and summer without going through fall and winter. Astute investors can make money in any season, if they know how to dress. It’s my job to spot the trends and cycles such as these movements in the labor market, so we can anticipate how it affects the broader economy and target the opportunities to help grow your portfolio and successfully achieve your retirement goals and dreams.
Once this Syria issue is resolved and we finally, hopefully, get past our life during wartime, and after the Fed stops intervening in the economy, successful investing will get back to the old fashioned way, where rewards are earned through hard work and due diligence. I still expect a slowdown in the economy next year and investors should prepare accordingly; now, not later.
And that’s where we can help. To learn more about our comprehensive financial planning approach, our powerful proprietary Investment Management Strategy and/or get a free second opinion on your portfolio, simply reply to this email, or give me a call today at (916) 925-8900.