Perspectives Blog

The U.S. labor market — Show me the money

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | November 17, 2014

…ral Reserve though, this is not enough. They want to see this data feed through to a broader rise in incomes and wages, and ultimately spending. This will be necessary to bend the economic trajectory toward sustainably higher growth. Many statistics indicate that we may be on the cusp of stronger gains in wages. It is clear the output gap is now much narrower, and that excessive labor market slack has dissipated with the unemployment rate at 5.8%…

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…ation plans. The execution of non-qualified stock options or the vesting of restricted stock create supplemental wages, which increase MAGI and can push more income into higher tax brackets. This could be at least partially offset by contributing a portion of wages or bonus to a non-qualified deferred compensation plan, which lowers current wages, provides tax-deferred growth and, when distributed, will not be included as net investment income. P…

Half-time report on the U.S. consumer

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | July 28, 2014

U.S. consumers have taken a more cautious attitude toward debt and been more selective about using it for discretionary purchases. With consumers using credit cards less and using debit cards much more, the supports for higher discretionary spending are keyed off income and wages and also employment. With low debt use and income growth holding back consumption and demand, households will require stronger job growth and real wage gains to accele…

U.S. rates – An intriguing six point three

Zach Pandl, Portfolio Manager and Strategist | June 9, 2014

…and David Blanchflower—economists with similar ideological stripes as Janet Yellen—argued in a recent paper that wages should be used as a central guide to policy due to uncertainty about resource slack. With wages not yet definitively moving higher, Fed officials can afford to look past faster-than-expected declines in unemployment for now. Exhibit 1: Labor market slack by type (Levin 2014) Exhibit 2: Total labor market slack since 1960 (Levin…

A tepid cyclical lift

Tom West, Director of Equity Research | April 28, 2014

Cyclical investment and discretionary spending are on track to deliver earnings growth of 7% in the S&P 500. Strength in some consumer durables appears more of a “wallet share” gain than a general lift due to recovering wages or a release of excess savings. Construction and energy are poised for another year of growth, while “enterprise” spending and investment in the tech sector remain challenged. The S&P 500 Index should grow earning…

Labor markets in the new digital age

Columbia Management, Investment Team | April 14, 2014

The downside to technological progress is short-term dislocations and job loss for those displaced by automation. Workers with high skills and advanced education command a wage premium while unskilled and lower-skilled workers are displaced which aggravates income inequality. The winners will be those who have skills complementary to the new emerging technologies and those who discern how best to adapt and gain competitive advantage. By Marie…

Quality milestone in the European recovery story

March 17, 2014

Business, economic and political news all point to a strengthening recovery in Europe. We foresee a period of low inflation and low interest rates in Europe. We favor domestic European plays over internationally-exposed stocks, with an overweight stance in banking and telecoms. By Paul Doyle, Head of Europe ex. UK equities and Frederic Jeanmaire, Fund Manager, Threadneedle Investments After 18 consecutive negative months, the flow of eurozone…