The February jobs numbers were low. Could your clients be affected?

The February jobs report released in early March raised more than a few questions about a potential economic slowdown in the U.S. The report showed that 20,000 jobs were added in February, fewer than forecasted – 160,000 fewer, to be precise.1

Does the report indicate that an economic slowdown is on the horizon? The jobs report is one signal that a slowdown could be looming, but other numbers such as low unemployment (3.8 percent) and rising average wages (3.4 percent annual increase) seem to indicate otherwise.2

Other key factors may be driving the numbers down. The report showed that weak sectors of the job market included construction, mining and retail3 – industries that are typically weaker during the winter months. The jobs numbers may also have been skewed by lingering effects from the government shutdown earlier in the year as well as teacher strikes in large school districts, including districts in Los Angeles and Denver.

In late 2018, the Federal Reserve predicted that the unemployment rate could drop as low as 3.5 percent later this year4, and the February jobs number doesn’t seem to be diminishing that positive outlook much. Still, it’s important for advisors to keep an eye on the jobs numbers and how they’re trending over several months, especially if those numbers seem to be indicating a potential economic slowdown.

While we’ve enjoyed low unemployment rates recently, we can’t forget that unemployment was at 10 percent just a decade ago.5 In the climate of job security, it’s easy to forget the effects the high unemployment rate had on investors in 2009.

If we are headed for a true jobs slowdown, it’s a good time to remind clients of how they could be affected by rising unemployment and a resulting economic slowdown. The impact won’t just be felt by those seeking jobs; your employed and retired clients could also feel the effects in a variety of ways:

  • Employed clients may feel insecurity about the future of their jobs.
  • The housing market may be impacted, making it more difficult to downsize or sell a house to relocate to a different job market.
  • Job loss may impact how much clients can save in retirement accounts.
  • An economic slowdown may reduce retirement income and investment growth.

The February jobs numbers open an important conversation between you and your clients. If they are currently employed, how are they feeling about their job security? Would they be prepared if something unexpectedly happens to their job? Remind clients that they should contact you before making any major financial decisions such as accepting any buyout or severance packages, which could affect their tax liability or skew a retirement plan. One of your biggest jobs is to help clients prepare for the day when the unexpected happens – and reassure them that it will all be okay when that day comes.

1Amrith Ramkumar & Jessica Menton. The Wall Street Journal. Mar. 8, 2019. “U.S. Adds 20,000 Jobs Last Month, Fewer Than Expected.” https://www.wsj.com/livecoverage/february-2019-jobs-report-analysis?mod=djemalertNEWS Accessed Mar. 12, 2019.

2Ibid.

3Ibid.

4Jonathan Clements. MarketWatch. Dec. 20, 2018. “Forget the stock market, you should really be worried about your job.” https://www.marketwatch.com/story/forget-the-stock-market-you-should-really-be-worried-about-your-job-2018-12-19. Accessed Mar. 22, 2019.

5Ibid.

 

793069 – FOR INVESTMENT PROFESSIONAL USE ONLY. NOT FOR USE WITH CLIENTS OR THE PUBLIC.
This content is provided for informational purposes only. The third-party information and opinions contained herein, have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by AE Wealth Management.

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