This week I want to talk about jobs. Specifically, let's talk about the U.S. Government. The most recent statistics that I could find were as of January 2007; not the most recent but let's take a look:
The federal government (excluding the post office) employs approximately 1.8 million people. The largest segment of that, or about 625,000, is employed by the defense department. The next largest segments are Veterans Affairs 239,000, Homeland Security at 149,000, U.S. Treasury 109,000, and then the department of Justice 105,000. We are talking about a lot of employees. Do we need that many people in Veteran's Affairs?
The areas of largest growth over the next ten years are: correctional officers, criminal investigators, air traffic controllers, and conservation scientists. Areas showing the largest declines over that same ten year period are word processors, procurement clerks, agricultural inspectors, and aircraft mechanics.
Compensation is all over the board; an entry-level clerk makes $17,000 all the way up to the President of the United States who makes $400,000 a year with an expense account of $150,000 plus another $100,000 for non-taxable travel and $19,000 for entertainment.
Every week we get new information on the state of the economy. It is our job to put that information together in a way that helps us get a picture of what's really going on. Let's look at last week:
The U.S. trade deficit widened to $27 billion in June from $26 billion in May. The increase was attributed to higher oil prices.
New jobless claims rose to 558,000 in the first week of August and continuing claims fell by 141,000 to 6,202,000.
Retail sales fell 0.1% in July after two straight months of gains. Sales were expected to increase by 0.7%
Foreclosures continued to rise. There were more than 360,000 properties with foreclosure filings in July which is an increase of 7% from June and 32% from July 2008.
Signs that the economy is stabilizing have more or less lifted stocks since March, with the S&P 500 gaining 50%. The roughly five-month rally hit a roadblock last week after a worse-than-expected consumer sentiment report Friday. Consumer sentiment for August fell to 63.2 from a reading of 66 in July.
The Federal Open Market Committee met last week, holding the target for the fed funds rate steady at 0% to 0.25%. This committee makes decisions about interest rates and the growth of the United States money supply. In its statement, the FOMC said that economic activity is leveling out. Activity is likely to remain weak for some time. The Fed also expects inflation to remain subdued for the coming months.
Let's take a look at the first half of 2009. The second quarter brought a stock market rally that allowed several major indexes to return to positive territory for the year. At the end of June, the S&P was up 3% and the Nasdaq was up 16%. International and emerging markets performed exceptionally well. The EAFE was up 8% and the Emerging markets index was up 36%. Treasury rates did not change much on the short end of the yield curve during the first six months of 2009. The 1-year was just under 0.4% at the start of the year and ended the second quarter just under 0.5%. Longer treasuries, for example the 10 year, have jumped significantly. At the beginning of the year the 10-year stood at 2.25%. At the end of June, it was up to 3.5%. Mortgage rates tend to price off of the 10-year treasury.
At the end of the second quarter, nearly half of Americans believed the economy had stabilized; however, only 1 in 8 believed a recovery had started. A CNN poll reported the most important issue on Americans' minds after the economy was health care, followed by the federal deficit, and the war in Iraq.
Though the government is quickly approving stimulus spending, consumers are doing the opposite. The personal savings rate hit a more than 15 year high in the second quarter, at 6.9%. That's a big change from the zero to 1% savings rate of 2005 through 2008. Economists are debating whether this rise in personal savings is a freak occurrence due to increased stimulus and personal debt reduction, or if consumers are changing their long-term behavior. If the latter is true, we could be in line for a slower and more gradual climb out of this recession.
We have spent a lot of time on the financial markets, and they are very important, but this week we are going to talk about wills and trusts. 70% of adults over the age of 18 do not have a will! That's 7 out of every 10 people that are reading! 7 out of every 10.
A will simply covers how you want your assets distributed upon your death. Sounds pretty simple and believe me, it is. However, there are some important issues that need to be covered in your will, let's look at them.
(1) If you have children, who are you going to appoint as their guardian? Your first choice would, of course, be your spouse or even ex spouse if you have gone through a divorce. What if a common disaster occurred and both of you died? You want someone to raise your children who has similar values to you. Many people say that they don't need a will because they have no money, but here is an asset that is more valuable than money and you need to determine who will raise your children.
(2) Who is going to be your personal representative? You might be asking, what is a personal representative? This is the person or entity that collects your assets and distributes them according to the terms of your will. Most people choose their spouse, if they have one, children are often named, friends and family are sometimes used. Children can be used, but what if you have more than one child? Will they fight over assets upon your death, are they competent to handle your assets, do they live nearby so they can deal with real estate or local government? Lots of issues, and having a corporate personal representative has several advantages: We'll cover those in the future.