Vested EMEA Shortlisted for New Agency of the Year by PRmoment

We’re thrilled to announce that Vested EMEA has been shortlisted for the  New Agency of the Year award by PRmoment. Vested EMEA, which opened in January 2018, has been nominated alongside Tuesday Media, Tyto, Don’t Cry Wolf, Newsfeed PR, Pembroke and Rye, Renegade Talent and Centropy PR.

Vested was assessed on its recent client work, as well as its annual fees, company philosophy and delivery on its goals since inception.

The self-proclaimed “cool nerds” in us relished in sharing the diverse and dynamic professional, personal and educational backgrounds of our growing team and how we approach integrated communications for financial services. And, when looking back at our goals for building the best team in the business, bulking up our client base across the financial services industry, and making the Vested brand relevant to the European market, PRmoment’s recognition of such is just further validation we’re on the path to success.

Again, we’re incredibly honored by this recognition from PR Moment and look forward to further developing our client base, providing exceptional marketing and communications services, and building the smart, fun, creative and dedicated team that makes recognition like this possible.

As another government shutdown looms, markets remain steady

The government shutdown caused considerable concern and commotion seemingly everywhere.  Worry that it will return continues to do so.  Politicians decry it as a failure of government (but not them personally.)   Bureaucrats at high and low levels describe it as a threat to national security, law enforcement, and the nation’s general well-being.  Those at the IRS have threatened delays in refunds.  Some economists, though not all, predicted that the lack of budget authority in Washington would stall the economy.  The media has run stories non-stop on who was right, who was wrong, and what evils would befall the country if Washington fails to work out matters.  Now that the shutdown is on pause, the same concerns about another bout remain.  The only place where insouciance has is in financial markets.

Stocks and bonds came through the shutdown as if nothing was happening.  Of course, there were good days and bad, but government bonds held their value.  The yield on 10-year treasury bonds, for instance, stood at just under 2.8 percent just before the shutdown began on December 22 and hardly changed at all despite all the warnings of disaster.  These yields ended 2018 at just over 2.7 percent, hardly much change, and ended the shutdown at much the same levels.  The stock market, if anything, seemed even less bothered.  The broad-based S&P 500 Stock Index did fall on the first day of trading after the shutdown started, by about 2.7 percent in fact.  But stock prices then climbed.  By year end, 2018, this index was up 10.7 percent from its level just before the shutdown began and was about at that level when the present pause began.

In some ways, the market’s shrug seems strange.  After all, stocks, in particular, have a reputation for having a greater not a lesser sensitivity to economic and political news.  It would seem in this instance that the market for once took a longer-term, more fundamental view of things.  (It is highly unusual, to be sure, but it does happen from time to time.)

For one, most investors had confidence that the shutdown would not last.  They have seen quite a few of these over the years, and for all the wringing of hands each time on TV and the rest of the media, all of these historical precedents ended without much economic or financial incident.  And they were right.  No one wants this resolved more earnestly than does Washington.   Even as this one extended a bit longer than the others, investors retained this common sense of the matter.

Despite the commonplace anguish elsewhere in the country, investors were also well aware that the scale of disruption was less than people commonly believed.  According to government estimates, some 450,000 workers were either furloughed or had to work without pay.  That is less than 0.3 percent of the country’s workforce.  The economy produced more jobs than that in the last three months of 2018.  Since government workers earn more than the average American, the dollar effect was likely bigger than the headcount would suggest but still less than the news was suggesting.  Of course, government contractors also missed payments.  They and their workers probably loom larger than the government workers in this equation.  Still, larger are those who depend on government workers and contractors for their business, what economists refer to as the multiplier effects.  If their pain was less intense, their numbers and income surely outweigh those of the government workers and the contractors combined.  But even this entire picture, of which the investment community well knew, fell far short of the picture painted by the media, and investors knew that, too.

The investment community also knew there would be a catchup.  Even if the initial effect had a significant impact on sales, revenues, incomes, and profits, the end of the shutdown would give all the workers their back pay, all the contractors would see their invoices honored, other businesses and workers that depend on these two would also see their situation improve, and the economy would spring back from any immediate setback forced by the shutdown.

On a more fundamental level, investors were also well aware that no issue of economic or financial significance hung on the outcome.  On one side, Donald Trump wanted funding for his “wall.”  On the other, Nancy Pelosi wanted to thwart President Trump.  As much as the country desperately needs a revision of its immigration laws, that is not likely to occur, however, the shutdown matter gets resolved.  Even Trump’s offer to make concessions to the “Dreamers” was incomplete. However it ends, all are confident that no new policy of any significance will emerge.  In other words, nothing will alter the value calculations made before the shutdown started.

If the sides fail to reach a compromise and the shutdown returns, these same feelings will likely still prevail.  There is a chance that such an event because it would have no historical precedent in the memories of most investors, could foster the sense that this time things are different, but likelihoods do not favor such a reaction.  What might change matters is if the dispute takes on more substance than a cynical battle between political heavyweights to see who can get the other to take the blame they both deserve.

More from our Chief Economist: 
Consumers Will Regain their Mojo Later in the Year
AOC & Krugman Can’t Justify Their 70% Solution
Jobs Report: All Upbeat in Every Way



Consumers Will Regain Their Mojo Later In The Year

Consumers in this first quarter of the year may well slow the powerful spending momentum they showed in 2018; that enthusiasm will nonetheless return by spring. A breather after the powerful holiday season and the ill effects of the government shutdown will doubtless act as an immediate brake on consumer spending. But these effects are temporary by nature. Behind them are powerful positive fundamentals: a tight labor market and accelerating wage growth as well as strong household finances. These will keep up the pace of spreading during the balance of 2019, and because the consumer equals more than two-thirds of the economy, they will also help sustain a respectable level of overall economic growth.

At the moment, things look a bit rocky. Part of the matter lies in the otherwise upbeat character of household spending during the holidays. In November, overall retail sales jumped 0.3% from October, about a 3.7% annualized rate. Because of the government shutdown, figures for December have not yet arrived, but anecdotal evidence and available statistics from private sources indicate that December was also strong. The confidence implicit in such spending surely speaks to a powerful consumer momentum, but it nonetheless calls for a temporary pause. Because spending growth during these last few months of 2018 outstepped income growth, savings flows appear to have fallen off a bit. These flows as a percent of after-tax income have slid from almost 7.0% earlier in 2018 to closer to 6.0% toward the end of the year. Even though this recent rate remains historically high, households for some time now have shown a tendency to constrain spending whenever savings rates decline, returning them to more prudent levels relative to income before resuming their former spending patterns. The practice is welcome and healthy but will nonetheless slow spending in this current quarter.

And then there is the government shutdown. It will almost certainly exaggerate the slowing effects of this natural prudence. Government workers denied paying simply have to cut back. Available figures put their number at some 420,000, small compared to the overall working population of 163 million, but significant nonetheless. Since most of these government workers earn more than the average American, the consumption impact will exceed the relative numbers of people involved. On top of them are the government contractors whose payments had stopped for the duration of the shutdown. It is harder to put a figure on this dollar flow, but it surely rivals the lost spending from government workers. And beyond that is what economists call the multiplier effects — the impact on the incomes of those who depend on the business of government workers and contractors. In all likelihood, this number exceeds the combined number of workers and contractors directly affected by the shutdown. If the intensity of their loss is less, it will nonetheless constrain their spending as well. Summing up all these effects, the president’s Council of Economic Advisors estimates an annualized loss to real overall growth of about 0.2 percentage points at an annual rate for every week of a shutdown.

But if the shutdown and the natural response to last year’s modest spending excesses will have a negative effect now, they will not last indefinitely. Once Washington reaches a budget compromise, likely in the not too distant future, these workers will get back pay, and the contractors will resume work. They will catch up on whatever spending agenda they had to postpone during the budget troubles. In the meantime, those not affected directly or even indirectly by the shutdown, who no doubt constitute this bulk of the vast consuming public, will have completed the reordering of their finances from their holiday enthusiasm. The momentum exhibited in 2018, and not just around the holidays, will reassert itself.

Households certainly have ample fuel to power future spending. Jobs growth has been nothing short of stupendous. The latest report, for December 2018, showed a payroll increase of 312,000. For the 12 months through December, the last period for which data are available, the economy has created some 1.7 million new jobs at all skill and pay levels. Unemployment hovers at such historic lows that just about any American who wants a job can find one. Because the labor market has tightened, wage growth has picked up after almost a decade of stagnation. Hourly and weekly pay rates have in the past 12 months grown 3.1%, a handsome premium over the rate of inflation. Employment and wage growth combined have over this time lifted worker incomes some 3.3% and overall household income some 4.4%. Especially since households have sustained relatively high savings flows throughout, re-establishing them after modest declines, the American consumer seems well positioned to pick up the pace of spending later in 2019.

On these bases, it is entirely reasonable to expect households over the course of this year to match the real 3.0% pace of real consumption growth they maintained last year, (a figure that admittedly awaits December figures for verification.) Alone, such spending growth would add 1.8 percentage points to the economy’s real growth rate. With still-strong profits growth likely to increase business spending on new equipment and structures, the overall economy could easily produce near 3.0% overall growth for the year, even if government spending languishes.

More from our Chief Economist:

AOC And Krugman Can’t Justify Their 70% Solution
For All The Talk, Millennials Have Done Little To Change The Workplace
Jobs Report: All Upbeat In Every Way


AOC And Krugman Can’t Justify Their 70% Solution

A grinning Alexandria Ocasio Cortez (AOC) garnered considerable media attention with a proposal to raise the top income-tax rate to 70%. Celebrity economist Paul Krugman added to the excitement by endorsing her suggestion as “reasonable.” Both justified the substantial tax hike by reminding everyone who would listen that the country once prospered with maximum rates of that level and higher. As is often the case with easy historical parallels, the justification is misplaced. Much, including the tax code, has changed since then. One can forgive AOC for missing the differences. She, after all, has consistently shown economic and historical ignorance. Krugman, however, should know better.

Krugman used three arguments to argue for such high tax rates: 1) The additional dollars lost to taxes by the rich would hurt them less than if those dollars came from the less affluent.  2) Economic scholarship shows that a high marginal rate on the rich is “optimal.” 3) The United States economy functioned quite well from the mid-1960s through the early 1980s under a 70 percent maximum tax rate and did so under an even higher 92% rate in the 1950s and early 1960s.

His point about relative levels of pain is irrefutable but also beside the point. Of course, the rich can cope better with a higher marginal tax rate. That is why the United States has a progressive system. The more important issue is what such a high rate would do to work incentives and the drive behind business expansion and innovation. On this matter, the best Prof. Krugman can do is either ignore it or deny any effects. Several scholarly studies, however, differ with him or, at the very least, admit that the matter is ambiguous.

On the question of an “optimal” tax rate, Krugman quotes two academic studies. One, by Nobel laureate Peter Diamond and Emmanuel Saez, put the optimal tax rate at 73 percent. The other, by David Romer and his wife Christine, former head of President Obama’s Council of Economic Advisors, put it at 84 percent. What he fails to mention is that neither figure takes account of state and local taxes.  When Diamond and Saez make such an accounting, they adjust the optimal federal rate down to 48 percent, still high but closer to the present maximum rate of just under 40 percent than to the AOC-Krugman 70 percent. Though the Romers’ study fails to offer any such adjustment, their statistical work has other problems. It concentrates on the inter-war period when so few fell under the maximum rate as to verge on the statistically insignificant. The authors admit that the matter may introduce biases into their conclusions, as would the number of other shocks befalling the economy at the time. Prof. Krugman fails to mention these points as well.

When he gets to the country’s former prosperity under high tax rates, his analysis gets really fast and loose. It is true that the United States prospered with a 70 percent top rate and higher in the middle of the last century. But when the 70 and 92 percent rates prevailed, the code included a vast array of loopholes that drastically reduced the amount of income actually subject to those high rates. All the tax cuts since have simultaneously closed loopholes.

Between the mid-1960s and the early 1980s, when the 70 percent maximum rate prevailed, taxpayers enjoyed a huge range of tax deductions.  They could take from their taxable income all state and local taxes of any kind and with no limit, including sales taxes and licensing fees, property taxes and income taxes. They could also write off all interest expenses without limit on their mortgages, no matter how large or how many. They could also deduct all other forms of interest payment, on credit cards, for instance, as well as on auto loans or home improvement loans, whatever sort of debt they incurred. Picture the benefits to a plutocrat, buying a third home or fifth Mercedes. His or her tax would be calculated on income reduced by all fees and sales taxes and all the interest expenses on the mortgages and auto loans over the years. The code back then included dividend exclusions and generous provisions for capital gains preferences. Taxpayers in those years had no limit on what they could shelter each year in IRAs.  All unemployment benefits were tax-free, as were Social Security payouts, no matter how high a person’s income. The code then allowed people to write down their taxable income through averaging provisions and transfer as much income as they liked to their children who paid at a lower rate. There was no limit to the rental loss deduction. Losses for business counted against all income not just the particular venture.

It is not surprising from this wonderful array of breaks that few paid those high rates on much of their income. The non-profit Tax Foundation estimates that in the 1950s, for instance, when the top statutory rate stood at 92 percent, the top 1.0 percent of taxpayers wrote so much income off in the calculation that they paid an effective average rate to the federal government of about 17 percent. If today’s one percent were offered today’s code or the old one, they might well go for the old rules even at a 92 percent top rate. The difference might even explain the graph Krugman shares in one of his pieces in which the top tax rate and the economy’s growth rate seem to go in opposite directions, growth being strongest when the top rate was highest. Perhaps the cause lies in the low effective tax on the wealthy during those years of high statutory rates. Such an explanation is as plausible as any other.  Of course, Prof. Krugman does not even mention such matters. Nor does he concede that something else might have affected economic growth rates over the last 70-some years than the top statutory tax rate.

Sadly, Krugman’s argument has gained traction in a media that should show more professional skepticism. But it may not matter anyway. To make such high taxes law, those who support them would have to jump at least four high hurdles. First, they would have to convince the current House leadership to embrace the idea, something for which it has shown little enthusiasm or replace them. Second, the Democrats in the next election would have to keep the House. Third, they would have to capture the Senate. Fourth, would have to capture the White House as well. That is possible, of course, but a tall order indeed.

This piece was originally published on

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Vested Named Top Financial Marketing Agency by Gramercy Institute

Vested is thrilled to be named a Top Financial Marketing Agency by the Gramercy Institute. The agency was honored alongside Copylab, DiMassimo Goldstein, Extractable, Fundamental Media, Imprint, MERGE Boston, MODCO Media, NewsCred, Prosek, Ptarmigan Media, Public Imaging GmbH, and Water & Wall Group.

After opening remarks and award announcements during the ceremony at Thomson & Reuters, the Vested team heard from a range of financial marketing pros about the future of the industry. Bernadette Bridy, Head of Product Marketing at FS Investments; Mark DiMassio, Chief of Dimassio Goldstein; Kat Galligan, SVP of Global Wealth and Philanthropic Solutions Marketing at US Trust/Merrill Lynch; and John Khoury, Managing Director & CMO at Oppenheimer & Co. shared their perspective on why financial marketing matters–especially in 2019, as we head into a bear market.

Later, Christina Cenci, Director of Account Management at InvestingChannel; Catherine Weigel, Vice President of Content at ProShares; and John Branchel, SVP of Content Marketing Executive at Bank of America took a deep dive into how to keep content competitive and engaging, and the importance of brand authenticity–and how it translates to content–to an audience that no longer believes in institutionalization.

The group also heard for Michael Ellison, CEO of Corporate Insight on the importance of financial wellness, the gender gap between male and female’s financial habits and health, and the overwhelming need for employers to incorporate financial wellness into their benefits.

Last but, of course not least, was the panel on what makes for an effective marketing team in financial services. David Blackburn, Head of Digital Marketing for DTCC; Maureen Duff, Managing Director of Global Head of Marketing at Pershing (a BNY Mellon Co.); Gail Gross, Director of UHNW Segment & Field Enablement Marketing at Bank of America; and Dan McGrath, Executive Director of Strategic Marketing & Communications at UBS discussed the importance of having a balanced mix of general marketing pros alongside highly specialized staff.

It was a fantastic and insightful morning with some of the best in the biz, and excited to kick off 2019 on such a high note.

National Data Privacy Day: 4 Compliance Tips for Digital Marketers

Today is National Data Privacy Day. Chances are if you work in marketing, you’ve probably heard the term “big data” ad nauseam. Much like “engagement,” “disruptor,” or “gamification,” this marketing buzzword is a surefire way to sound smart in a meetingbut it also holds some serious weight when it comes to compliance.

In short, “big data” is quite literally very large sets of data that marketers and researchers analyze to spot trends and patterns as they relate to human behavior. In theory, it’s a gold mine for marketersunderstanding what their customers are thinking, where they’ll click next, and how to ultimately predict their wants and needs to drive sales. But after data privacy issues like Cambridge Analytica and phone providers like AT&T, T-Mobile and Sprint caught selling location data of customers to private entities, the line for marketers between ethical and unethical, and legal and illegal, is very fine.

Here are four must-read tips for all digital marketers to ensure their tactics are up to snuff.

Consult the GDPR

Shortly after Cambridge Analytica’s issues, it became clear to lawmakers that little was being done to protect the public’s data. Enter the GDPRan update to an existing set of laws that govern how companies collect and use data. Prior to its 2018 facelift, the regulations were last updated in the ‘90s.

While the rules are put forth by the European Union, they do not just apply to countries belonging to the organization, including the U.S. As of May 25, any company that fails to comply is at risk of a 20 million euro fine, or four percent of a company’s global revenue, depending on which is larger. Yikes.

Be mindful of anonymization

As companies and the government still navigate the waters of big data, it’s important for marketers to work with data scientists and market researchers to remove any information that could potentially identify a specific individual. When marketers have just one set of data, it’s pretty straight-forward as to what counts as personally identifiable information (PII).

But things get tricky when multiple, large sets of data are combined to reach a highly targeted audience. Because much of the technology used to mine big data also has the ability to sort so granularly, it’s becoming increasingly easier to piece once anonymized pieces of information back together from one or more datasets. Marketers should be extra careful that the audiences and data sets they’re using are truly general groups of people and don’t unveil any PII about individuals.

Owning vs. renting data

Marketers run into particular trouble when they’re renting target audience’s data as opposed to owning it. Not only are rented datasets accessible to competitors, but it can also be expensive and outdated. It also leaves a lot of room for questions about where the data was acquired from, if it was vetted, and whether it is compliant with the most up-to-date privacy laws.

“By owning data, organizations know the source of the data they’re collecting on consumers and can guarantee they’re collecting it from consenting individuals,” Jonathan Lacoste, Jebbit’s president and co-founder told “First-party data will not only become a way to comply with regulation, but also a significant competitive advantage.”

Use data-mapping
Marketers are constantly dealing with multiple sets of data, which often times lives in more than one place. Understanding where data lives, and how one system of information relates to anotheralso known as data-mappingallows businesses to discover and classify information so that it can be protected and managed in a consistent, reliable way.

“By identifying every database, and every instance of it, you’ll know the full extent of all of the data that is being used and accessed,” writes “It’s also useful at this stage to literally map out every location, with arrows showing how data flows between them.”

10 Financial Impacts of the Government Shutdown

Today is day 33 of the federal government shut down–the longest shuttering since Bill Clinton’s presidency in’95-’96, which lasted 21 days. For some Americans, especially the 800,000 who will miss their second paycheck on Friday, the impact of the shutdown has been felt deeply and immediately. Yet for those who don’t work for the federal government or live in districts heavily populated by federal workers, direct effects of the shutdown have been felt lightly, if at all.

Even if your pockets aren’t hurting currently, the shutdown still has real and long-lasting financial impacts on Americans across the country. Here, we break down its effects and what the shutdown means for personal and public finances.

Almost One Million Americans Without Pay

Since the shutdown began in late December, an estimated 800,000 federal employees have gone without pay. Of those 800,000 an estimated 380,000 are furloughed, meaning they’re out of work and pay. And the other 420,000, deemed essential to the function and security of the nation, have been forced to work without pay. Collectively, they’re due to be owed more than $6 billion in back-pay by the end of this week.

The effects of lost work and wages extend far beyond the kitchen tables of these employees. Consumer spending, which accounts for more than two-thirds of the U.S. economy, took a serious hit this month. The University of Michigan kept a close eye on the overall sentiment, noting a 7.7 percent drop, reaching its lowest point during Trump’s presidency.

Retail Spending in Jeopardy

In a perfect, albeit sad, segway to the next effect: not only has the consumer spending index dropped, but retailers are also starting to see the shutdown’s effects in their sales. Michael Niemira, chief economist at the consulting firm Retail Economist, said sales in these chain stores fell 1.3 percent last week–the second week of decline. Niemira said the cold may have also played a role, but the shutdown was likely to have contributed to the drop.

Brett Rose–CEO of the United National Consumer Suppliers, a wholesale distributor to retail giants like Macy’s, Bed Bath & Beyond, Homegoods, and others–echoed Niemira’s concerns.

“If the government reopens by early February, the reverberating effect of the shutdown could force large retailers to adjust their 2019 numbers just to balance out profits made last year.”

Consumer Reports Delayed

The Department of Commerce is without funding during the shutdown, delaying key reports on consumer spending and habits. Without these reports, it is difficult for analysts to determine the precise effects of the shutdown on consumer spending, as well as to determine the overall GDP cost of the shutdown.

TSA and Airport Delays

TSA employees are among the hardest hit by the government shutdown. Nearly all have been forced to work without pay, a tough proposition at an agency where airport screeners make only $35K in salary on average. TSA agents have been calling in sick at exceptionally high rates, more than double the rate at the same time last year. Commentators are unsure if these sick call-ins represent a coordinated protest against the shutdown, or if the agents are merely looking for temporary work to sustain themselves while they wait on their usual paychecks. Of course, everyone’s first and immediate concern is safety. But a lacking TSA has also resulted in serious economic hardship for airlines and their shareholders.

Delta announced it would lose $25 million in revenue in January alone due to government employees and contractors not traveling. Its stock dropped 2.1 percent to 47.10 nearing its year-low of 45.08  United Airlines’s stock dropped 2.63 percent, while Southwest’s fell 2 percent ad American’s fell 3.62 percent–dangerously close to its 52-week low of 28.81.

Refunds in Doubt

As we enter the beginning of the 2019 tax season, almost 90 percent of the Internal Revenue Service’s (IRS) employees have been furloughed. This includes workers responsible for determining and processing tax refunds, as well as those who would field queries from tax filers, hugely important as a new tax code comes into effect.

Where we’re likely to feel the effects of this most, though, is in our tax returns. The White House announced it has the staff to collect documents and process tax refunds, stating “the IRS will ‘provide refunds to taxpayers as scheduled,’” in an agency press release. However, there is no precedent for this.  During the 2013 government shutdown, 90 percent of IRS workers were furloughed and some $2.2 billion in tax refund payments were delayed.

Last year, the average tax return was $3,100, a sizeable chunk of money for families and individuals alike. Without this extra cash in people’s pockets, we anticipate consumer spending will likely continue to plummet.

Local Transportation Under Threat

The Federal Transit Administration (FTA), which provides financial support for local and municipal transportation systems around the country, has also been shuttered during the shutdown. While local groups have thus far been able to cover the costs of transportation through non-federal funding, they will struggle to maintain service without support from the FTA. If local transportation systems slow or shut down, regardless of your place of employment, working Americans and their companies are sure to feel the effects.

IPO Market Delayed

The Securities and Exchange Committee (SEC) has been largely shuttered since the start of the government shutdown, with only 6% of the Committee’s 4,400 employees excepted from furlough. The staff on hand are primarily maintaining ongoing investigations, and are not processing disclosures for 2019 IPOs. This could have massive economic consequences, with giants such as Uber and Lyft set to delay their IPOs in the wake of the shutdown. And, as we head into a likely bear market, the pressure is on.

Food Assistance Programs Running Out of Funding  

The Department of Agriculture’s funding has been imperiled by the shutdown, putting the Supplemental Nutrition Assistance Program (SNAP), which helps feed nearly 40 million Americans, in danger. The program is set to run out of funding at the start of February according to White House officials, which could prove the most devastating consequence of the shutdown so far. The program funds roughly 10% of the total amount spent by US consumers on food products.

Border Security Debacle

Perhaps the greatest irony of this government shutdown–triggered by the inability of the Democratic leadership and Donald Trump to come to an agreement on border security–is the 54,000 Customs and Border Protection agents forced to work without pay.

A Zero-Growth Q1

White House officials have warned that, if the shutdown persists, we could be facing the prospect of a full quarter without growth. The White House recently increased its assessment of the shutdown’s economic impact, estimating that GDP loss could be as great as 0.1%–or $1.2 billion–per week that the government remains shut down. Other analysts have varied in their estimates. Some think that the White House numbers are too drastic, and predict a more modest loss of 0.05% per week of the shutdown. However, others, including Ian Shepherdson of Pantheon Macroeconomics, have more dire predictions, with some forecasting GDP contraction through the first quarter if the shutdown persists.

Jobs Report: All Upbeat In Every Way

Commentators who revel in contrary detail will only find frustration in the December jobs report. From top to bottom, the Labor Department offered exclusively upbeat figures. Even the slight rise in the unemployment rate failed to detract from the picture of economic health. The rate remained low by historic standards and resulted more from a remarkable flow of new job seekers than from layoffs. Though low unemployment might suggest a labor constraint on the economy, the report also made clear that still large reserve of potential workers should give the economy a future flow of needed labor power for some time to come. Further into the future, labor shortages may very well stymie growth, but that difficulty is still a ways off.

The most striking feature of the report is the number of new jobs recorded in December. Some 312,000 more Americans found work during the last month of the year, most in the private sector, which increased employment by 301,000. Of course, any single month’s figure is suspect, but the average for the last three months, a more reliable gauge of underlying trends, comes to a monthly average gain of 254,000 jobs, a pace of over 3 million a year, an improvement over last year’s rate of job creation and a vast difference from the way things looked in the earlier years of this recovery. Still more encouraging is how employment has grown in most industries. The Labor Department’s so-called “dispersion index” showed that 70% of the 258 industries it tracks increased employment during the month, up from some 65% three months ago, and a remarkable change from the pattern exhibited earlier in this recovery.

Unemployment did rise slightly, jumping from an inordinately low 3.7% of the workforce in November to a still historically low 3.9% in December. The increase emerged in the absence of significant layoffs. Rather it reflected a flow of some 419,000 new job seekers that outstripped even the impressive employment gains. Clearly, the improved jobs market is drawing people into the search for work. Some 63.9% of the civilian, working-age population was either employed or seeking employment in December, up from 62.9% in November and 62.7% in December 2017. These look like small changes, but, given that the percentages are calculated off a base in over 260 million people, the gain from a year ago involves a 2.6 million increase in those ready for work.

Even as this new flow of people enlarges the workforce, it is apparent that employment gains have tightened the jobs market from the abysmal state that had prevailed earlier in this recovery. One clear sign emerges from the numbers of workers who have voluntarily left their jobs. This December report indicates that 113,000 have left their jobs of their own free will to seek better opportunities. Little can give a clearer sign of people’s confidence that opportunities exist. Wages offer still another sign of a seller’s market for labor. Average hourly wages have risen more than 3.2% over the past year as have average weekly wages, outpacing inflation by a significant margin. Sometimes these figures jump because business relies on overtime. But that is not the case now. Average weekly hours have remained steady at 34.5 all year. These wage gains lie in basic pay packages, a sharp break from the stagnation that had prevailed during most of this recovery.

Also encouraging is how over the past year unemployment rates for just about every group tracked by the Labor Department have fallen, adult men and women, teens and every major ethnic and racial group. Asians are the only exception. Their unemployment rate has risen from 2.5% a year ago to 3.3%. Probably, this difference reflects how new immigration is a larger percentage of this group than others, though current figures to support such a supposition are not yet available. Another sign of a tightening jobs market is how the greatest improvements have occurred among the less skilled. Those with less than a high-school diploma have seen their unemployment rate fall from 6.3% a year ago to 5.8% last December. The same happened all the way up the education ladder except those with a bachelor’s degree or better. They saw no improvement but held to their remarkably low 2.1% unemployment rate.

In past cyclical recoveries, these impressively low unemployment rates would have given cause for concern that the economy might run out of the labor power it needs to sustain future growth. The wage increases might have added a worry over a wage-price spiral in which labor’s power to procure wage hikes prompts business to cover costs by raising prices that wages then chase causing still more price hikes. Some have openly voiced such concerns including people at the Federal Reserve (Fed). Without dismissing these points out of hand, there are differences in this environment from the historical experience, and this brings the conversation back to participation rates.

Recent increases in participation hardly have exhausted the reserve of labor presently available to this economy. During the great recession of 2008-09 and the long, slow recovery that followed through 2016, jobs growth was so slow that vast numbers of workers gave up the search for paid employment. Some went back to school. Others depended on government relief.  Still, others worked part time just enough to make ends meet. Overall rates of participation in the labor force fell precipitously, from almost 68% in the earlier years of this century to lows in 2015 of 62%. As in the earlier comparisons, these differences look small, but on a base of the entire working age, civilian population, they amounted to a withdrawal of 15 million workers from the economy. Women, in particular, left the workforce. Among prime working-aged women, those between the ages of 25 and 54 years old, participation rates dropped from 76.6% before the great recession to a low of 73.3% in 2015, alone a loss to the workforce of 2.4 million.

These once frustrated job seekers have only just begun to return, the women and others. Because of improving employment prospects and rising wages, participation overall, as already noted, has climbed. The shift has been especially marked among women in that prime working-age cohort. Their participation has climbed from those 2015 lows to 75.2% recently, just over 2 million more either employed of seeking work.  Were participation for this group to return to its former high of 76.6%, just this one important part of the labor force would provide the economy with an additional 1.4 million workers. (For a complete discussion of work patterns among this important group see this post.) The potential clearly exists for increased participation rates among younger and older women as well as men in every age cohort. From today’s already improved overall participation rates, a return to the recent high of just over 68%, would give the economy some 13 million additional workers, many of them skilled.

Eventually, the labor worries alluded to above will have a basis in reality. Shortages of both skilled and unskilled positions will stymie further growth, as will the burden of rising wages on business decision makers. But as should be apparent from this perspective on the December picture, the U.S. economy is a ways from such a difficult juncture. It is highly unlikely to bite this year and perhaps not even in 2020. A growth interruption is entirely possible before then, of course, from a trade war perhaps or some shock from abroad or perhaps from mistakes in Washington, always a major risk. But where labor is concerned, the troubles will wait quite a while yet.

More from our Chief Economist: 
How Asset Managers Should Prepare for Market Volatility
For All The Talk, Millennials Have Done Little To Change The Workplace
UBI: More Complicated and Riskier Than It Seems

How Asset Managers Should Prepare for Market Volatility

Volatility seems to have terrified a number of investors.  Since it will likely continue for the foreseeable future, the question of the moment is: “How should asset managers, particularly equity managers, deal with it?”  Should they adjust their portfolios in some way to mitigate the effects? Should they flee equities, into gold as its rising price indicates some have done? Should they buy bonds?  Or should they go with the fundamentals of their investment process and all but ignore volatility? The last answer, cold-blooded and unexciting though it may be, is the correct one.  It, more than the others, goes to the nature of equity investing.

The volatility began during the closing quarter of 2018.  In turn, it created these five concerns:

  • The Federal Reserve (Fed), having raised interest rates gradually for years, left ambiguous what it would do in 2019. Investors, who had expected some abatement, began to worry that further increases would set back the economy and earnings and force a downward revaluation in equity prices.
  • Valuations had extended far enough to give concern. Markets by the last quarter of 2018 had reached new highs.  Price-earnings ratios and other, more elaborate valuation measures, if not yet flagging sell signals, had long since left behind the attractive valuations that in earlier years made a case for stocks almost regardless of anything else that was happening.
  • The threat of a trade war with China emerged as a real possibility, forcing additional unknowns into investor thinking.
  • Inflation had begun to pick up, albeit modestly, as had wages, forcing investors to consider pressures that they had conveniently ignored for more than a decade.
  • It became clear that the Democrats would command the House of Representatives. Whatever each investor’s political commitments, that fact introduced uncertainties into what might happen in 2019 and certainties that the policy patterns of the past two years, largely supportive of stocks, would change.

Some of this may get resolved in the coming months and quarters.  The Democrats will make their goals clearer and events will indicate how far they might get, including on the question of impeachment.  China clearly needs a trade deal, enough perhaps to disarm the matter of trade war. Valuations improved during the last quarter, markedly so in fact.  And the Fed, though it wisely has made no promises, has softened its language on rate hikes, giving markets more loving care than it did some weeks ago.  All this might offer hope, but that is the best it can do. The more reasonable expectation is that most of these influences, and perhaps others, such as an economic slowdown in Europe or more political trouble within the euro area, will continue to unsettle thinking and create volatility.

Faced, then, with the prospect of continuing volatility, asset managers need to keep two fundamentals of equity investing clearly in mind.

  • First, it is impossible to anticipate the kinds of day-to-day and week-to-week swings volatility imposes on investment life.  Those who believe they can guess such swings should seek the help of a qualified mental health professional. That kind of guessing is a fool’s game.  All a manager need do is make one false move and his or her performance can suffer irreparably. It is noteworthy in this regard that in the last 25 years one-third of the equity market’s entire gains occurred in less than 15 trading days.  Miss one of them and a manger’s performance could lag for years.
  • The second and more important for managers is to remember that volatility lies in the nature of equities.  That fact alone makes them a long-term investment, and only a long-term investment. Investors who cannot look beyond short-term swings have no business in equities.  Those who flee volatility to buy gold should never have invested in equities in the first place. Some days are down, some quarters are up; stocks rise over the long term.

It is these two considerations that led to the upfront conclusion here that asset managers would do best to ignore volatility.  Presumably, a manager, especially a professional manger, has an investment discipline. He or she should stick to it, whether it is value or growth based, whether it aims at small stocks or large, foreign or domestic.  If a stock looks good, buy. If it looks bad, sell. Volatility no doubt tempts managers to time such buys or sells. Since no one can know whether yesterday’s gains (or losses) will build on themselves or reverse tomorrow, trying to time that purchase or sale can lead as readily to pain as to joy.  If a manager feels a need to account for the violence of price swings, perhaps dollar cost averaging can satisfy. It gives the sense that one is doing something about volatility and will at least limit the damage of a wrong move. This concession to daily swings aside, the manager should stick to his or her presumably well-thought-out discipline.

Volatility is no fun unless one is a thrill seeker.  Since asset managers cannot anticipate the moves, they must continue to do what they do best: pick stocks on the basis of their discipline.  Volatility’s challenge is convincing oneself and one’s clients of the wisdom of that fundamental long-term approach.  It is the only sane way to proceed.

For All The Talk, Millennials Have Done Little To Change The Workplace

 The “gig economy” has gained an easy association with millennials. Consultants and articles of all sorts continue to tell us that among other things millennials resist conventional full-time employment and prefer part-time associations and independent contracting. These same articles, lectures, and conversational bits of advice explain how millennials, even when full-time employees, demand a more flexible and idealistic workplace where the environment and corporate commitments will compensate in part for salary and bonus.

Perhaps these demands will emerge in time.  But if they were going to do so, signs should have emerged by now. Yet, even though millennials have already gained ascendency in the workforce, the Labor Department reports that nature of the workplace has changed little. At the same time, several rigorous surveys show little difference in priorities between these young people and other generations.  Perhaps millennials want the “gigs” and other priorities but cannot get them. If so, they, like every other generation, have settled. The world of work seems poised for less radical change than has been widely forecast.

If millennials were going to force big change, they should by now have the weight to do it.  Some 73 million people were born in this country between 1980 and 1996. The bulk of this millennial generation has completed its education and entered the workaday world. At some 56 million, they already dominate the workforce, amounting to some 35 percent of the total working population.  The generation of the late 1960s and 1970s, the GenXers as they are called, runs a close second with 53 million in the workforce.  By contrast, boomers have already fallen off.  They peaked at 66 million at the turn of the century and have fallen to 41 million still at work now, barely over 27 percent of the entire workforce. And the ascent of millennials has happened quickly. At the turn of the century, they accounted for less than 6 percent of the workforce. By 2010, they had risen to some 25 percent of the total, still less than boomers and GenXers. Now they constitute a clear plurality.

According to what might be called the millennial-advice complex, their very distinct work performance will radically alter the workplace. Millennials were surveyed and found to harbor more idealism than others and value inclusion and diversity and environmental considerations more than others. This, we have been told, would change corporate objectives and strategies. Millennials also valued flexible hours more than older generations and the option to work remotely. This would break open hidebound corporate practices. They also valued more face-to-face meetings with their superiors, who they wanted to take an interest in them as people as well as workers. This sounds contradictory unless these meeting happened via face-time computer arrangements, but such contradictions are hardly unusual for people of any generation. Everyone wants it both ways. Most potentially disruptive, they told the survey people that they wanted to change jobs more frequently and avoid settled full-time employment arrangements.

Without doubting the integrity of those compiling these survey results, the whole picture might well yield to an entirely different and more prosaic interpretation. The attitudes associated with millennials are less unique than simply those associated with youth in any generation. Since time immemorial, the young espouse greater idealism than the middle-aged and the old. They have their causes, and not yet having had the opportunity to screw up as their elders unavoidably have, they are more certain of their moral rectitude. Closer to the nurturing atmosphere of family and school, youth has also always stressed the need for a more caring environment in what otherwise looks like a colder, less comfortable world than the one they are leaving.  And youth, with so much exciting to do, has also always valued flexible hours more than elders who have long grown accustomed to family and work obligations and the sometimes-welcome routine they impose.

Even ignoring the different attitudes of old and young, a recent (less well publicized) survey by IBM shows little difference in the long-term goals of the different generations. Some 22 percent of millennials, for instance, indicated the importance of working with a diverse group of people. The consultants and articles stressed this as unique, but just about the same percentage of GenXers and boomers say the same, 22 percent and 21 percent respectively. Some 22 percent of millennials insisted on work that helped solve social and environmental challenges. Only slightly less, 20 percent, of GenXers indicated a desire for work that does this and an even larger proportion, 24%, of boomers embraced this attitude. On managing work-life balance, it was GenXers that rated this goal highest, at 22%, followed by boomers at 21%. The millennials showed relatively less interest at 18%. Only when it came to starting a business did millennials distance themselves.  Even then, a relatively small group, some 17%, of them aspired to this goal compared with 12% for GenXers and 15% for boomers.

Meanwhile, the Labor Department, despite the dominance of millennials, notes little substantive change in the nature of working arrangements. To be sure, firms today stress inclusion and diversity more than they once did, much as they stressed patriotism decades ago when it was popular. And no doubt companies, either out of genuine commitment or a cynical effort to burnish their image according to current trends, have changed their hiring and promotion policies to advance groups that count under this heading. But the “gig” economy has hardly emerged as many had forecast.  Labor Department statistics report that some 10.6 million independent contractors work in the economy today, about 7.0 percent of total employment. In 2005, when millennials were less than half the proportion they are today, this figure was even higher, about 7.5 percent of the workforce.  When it comes to other alternative work arrangements — on-call workers, temporary help, and those associated with contract firms – they, combined, amount to some 5.0 million or 3.2 percent of total employment presently, about where they were 12 years ago when millennials were much less important.

Perhaps it will take more time for the supposedly unique preference of millennials to have an effect.  After all, few of these still youngish people have reached the positions of power from which they can bring about change. But perhaps then their attitudes toward work arrangements will have changed, not necessarily because they have grown older but because one’s standpoint always changes with where one is situated in the social and economic hierarchy.  If, however, a great change were in store for the business world, it at least would have given a hint of itself now that millennials have risen to a plurality in the workforce.  Without any sign, it seems pointless to expend resources anticipating a revolution.

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