MONEY Jobs

Employers Add 295,000 Jobs as Economy Keeps Rolling

Amid signs of turmoil overseas, the U.S. economy keeps chugging along.

The U.S. economy gained 295,000 jobs in February, the 12th consecutive month employers added more than 200,000 to their payrolls. Meanwhile the unemployment rate dropped to 5.5%.

This is yet another sign of an improving — or what economists would call a “tightening” — labor market.

The rate at which workers are quitting their jobs has risen near levels not seen since before the 2007-2009 recession, implying that workers are feeling more secure that better opportunities lie ahead.

The number of unemployed workers who’ve been out of work 27 weeks or longer, while still high, is 31.1%, compared with 36.8% a year ago. Average hourly earnings grew by 0.1% last month, after rising 0.5% in January. Wages are up 2% over this time 12 months ago. That’s being be read by many analysts as a relatively sluggish number.

That last bit is important. While the labor market has been improving for more than a year, wage growth has disappointed. That in turn has kept a lid on inflation, which is one of the main reasons why interest rates have been next to nothing since the Great Recession and why the Fed, even now, will be “patient” in raising the cost of borrowing.

Even so “labor tightness is showing up in several high-profile labor disputes,” notes BMO chief investment officer Jack Ablin.

Recent anecdotal evidence points to workers having more power in their dealings with management — take striking port and refinery workers and pay raises for Wal-Mart and TJ Maxx employees. And the economy is still plugging along: an index that gauges non-manufacturing business rose a bit last month despite the headwinds from West Coast port strikes. “It was a miracle that the ISM non-manufacturing index managed to tick up for the second month in a row,” says Gluskin Sheff chief economist David Rosenberg.

Americans are feeling more confident about their finances, too. In the first three months of this year, the Wells Fargo/ Gallup Investor and Retirement Optimism Index jumped to its highest level since 2007. (Thank cheap gas prices.)

Wells Fargo Securities senior economist Sam Bullard believes the economy will continue to add workers this year at a clip of 224,000 per month.

“If realized, this strength in hiring would be enough to continue to pressure the unemployment rate lower and should result in a higher pace of wage growth–all supportive to a Fed tightening move in the coming months,” Bullard says.

MONEY credit cards

Check Out the Insane Rewards Offered by this New Credit Card

150304_FF_discover_2
Rudyanto Wijaya/iStock

You can get 3% cash on everything you buy, at least for the first year.

We don’t get too excited about new credit cards around these parts. So the fact that I’ve personally already signed up for Discover it Miles should tell you something about this card.

The new addition to Discover’s “it” platform, announced late last month, is geared toward consumers who want to earn travel rewards without having to participate in specific airline loyalty programs. To that end, it’s joining into a competitive pool that already includes the Capital One Venture, the Barclaycard Arrival Plus World Elite and others.

Discover it Miles rewards program is unusually generous, but not in the way it’s marketed. According to my analysis, this travel rewards card can actually provide the best cash back value of any card on the market. At least for a year.

What “it” Offers

Discover it Miles is positioned in the non-branded travel rewards credit card space. That means that rather than earning miles for, say, United or American’s loyalty programs, customers instead rack up miles on their card that they can then transfer as a statement credit for travel purchases.

Such cards typically offer better value for your charging dollar, since airline programs have been devaluing miles and making it harder to redeem for tickets.

With Discover it Miles, cardholders earn 1.5 miles for every dollar spent, no cap. Every mile earned is worth one penny, so $10,000 spent equates to $150 in rewards.

Most travel cards offer some kind of signup bonus as an incentive. For example, if you spend $3,000 in three months on the Capital One Venture, you’ll receive 40,000 miles.

But Discover it Miles doesn’t do this. Instead, the card doubles all of the miles you’ve earned at the end of the first 12 months. So $10,000 in spending translates to 30,000 miles, or $300, after a year.

Other perks include no annual fee, no foreign transaction fee, and up to $30 in credit for in-flight Wi-Fi charges. Discover also waives late-fee charges on your first missed payment.

How “it” Compares as a Travel Card

To be fair, the Discover it Miles offers better terms than other no-fee travel cards.

But if you’re someone who spends at least $475 a year, and you’re looking for travel rewards, you’re generally better off going with Barclaycard World Arrival Plus Elite, one of MONEY’s Best Credit Cards.

While Barclaycard holders endure an $89 annual fee after the first year, they also receive a 40,000 signup bonus, two miles for every dollar spent, and a 10% rebate when miles are used for a travel credit. The signup bonus alone is worth $440 if used for travel purchases.

So $10,000 spent on the Barclaycard would net you 60,000 miles (including the signup bonus), which equates to $600 off on travel statement credits. Throw in the 10% rebate, and you’re looking at $660 for that first year. That’s far more than what you can get by using the it Miles as a travel card.

How “It” Compares as a Cash Card

But you shouldn’t think of Discover’s new card as a travel-rewards product. Think of it instead as a cash-back card that nets you 3% (!) on all purchases for the first year.

How? Besides letting you redeem the miles on your statements for travel purchases, the Discover it Miles lets you claim them as a direct deposit into your bank account. So if you accrue 30,000 miles, you get $300 or 3%.

This is a major boon for consumers looking for cash back. Right now, the highest flat-rate uncapped rewards comes from the likes of Citi Double Cash and Fidelity Investment Rewards American Express Card, which offer 2% for all purchases. The Discover it Miles is a full percentage point better.

That’s a big deal. For $10,000 in spending, the Discover it Miles earns you $300 vs. $200 for the 2% cash back cards.

There are mutual funds on our MONEY 50 list that haven’t returned 3% over the past year!

The doubling miles feature is only good for the first year, so the card is less valuable than other products after the first 12 months. After that, you’d be better off using Citi Double Cash. But since there’s no annual fee on the Discover It Miles, there’s no harm in getting the card, using it as your primary for a year, then holding onto it.

You might actually see your credit score improve, especially if you keep your spending at the same level: A lower credit-utilization ratio is a major plus in the FICO scoring formula.

More from Money.com:

5 Things You Didn’t Know About Using Personal Email at Work

How I Made $100,000 Teaching Online

10 Smart Ways to Boost Your Investment Results

MONEY First-Time Dad

How to Avoid Spoiling Your Child

Luke Tepper
One-year-old Luke, having his cake and eating it too

First-time dad Taylor Tepper learns how not to be the kind of parent he fears becoming.

Our son, Luke, recently celebrated his first birthday. Family and friends generously gave the tyke rubber soccer balls, race cars, pegs, hammers, marbles, and chic winter gear. Luke now has more toggle coats than I do.

Luke’s things, like a rebel army, have begun to outnumber my own. He now has nearly a dozen bins filled with plastic and wooden products crafted by large companies and bought by suckers like me. His clothes occupy a spacious three-drawer dresser, while mine are packed tightly in a small closet. He has twice as many pairs of socks as I do. This all feels silly. Give Luke the option to play with an empty milk carton or a fluffy stuffed animal, and he’ll be shaking the carton between his hands like a boy possessed before you can blink. The box carries more value than the toy inside.

As I cleaned up after Luke’s party, I started thinking about the nature of toddlers and their stuff, and I’ve been mulling over a few issues ever since. The first has to do with spoiling. I know that you can’t really spoil a baby—infants’ needs must be met. But am I developing habits of indulgence now that will ossify over time and lead me to spoil Luke when he’s older? Am I setting myself up to be a bad parent? The second issue has to do with the presents themselves, the catalyst of my spoiling concern: there must be a better use for all that money.

The truth about spoiling

On the first question, the experts are clear. “You’re not going to spoil a baby,” says Tovah P. Klein, assistant professor of psychology at Barnard College and author of How Toddlers Thrive. “They need to be comforted and cared for.”

That Mrs. Tepper and I do. We also warm Luke’s baby wipes, pull him around in a red wagon for hours on end, and turn on “Sesame Street” whenever he’s systematically broken us down. My fear is that our good-natured, responsive parenting will morph into something more unseemly as he ages. It’s not a big leap to image a world where I’m cooking a second dinner because 2-year-old Luke is dissatisfied with the first. I shudder when scenes like that unfold in my mind’s eye.

The key thing for me to recognize, says Klein, is that I don’t need to protect my son from unhappiness.

“If you think, my role is to make him happy all the time, or to entertain him, the child doesn’t learn how to handle hard times, like when he’s angry or frustrated or sad,” Klein says. “Your goal as parents is, how do you help him deal with anger when limits are imposed.”

That’s an intuitive point, but one slightly difficult to reconcile with experience. Luke is our first child, so everything is new to us. Call it the Unbearable Lightness of Parenting. So in the next five to 12 months, as he develops a sense of self and forms his own ideas of what he wants, it will be challenging to hold a firm line. How do I know this tantrum isn’t just a test of limits but a true expression of real pain? Will I have the stomach to stay the course?

“He’ll be happy if you love him and let him know you’re there,” Klein told me. “Put up some reasonable limits and help him through those frustrating moments. That is what counters spoiling.”

Children, especially really young ones, crave structure. It’s the lack of it that results in insecurity. So if he doesn’t want to eat what I’ve cooked for dinner, fine. But I’m not frying up another meal.

Getting presents—and other stuff—under control

Limits are certainly in order for all of his toys. Between Christmas and his birthday and well-meaning friends doting on the little guy, we have enough Elmos and plastic cell phones and wooden school buses to open up our own boutique. This overflow of generosity leads to a short-term concern as well as a longer-term one.

In the here and now, the problem is sheer volume. “Children need less material goods,” says Klein. “More stuff tends to overstimulate them.” We already try to highlight only a few options for him to play with, but we’ll resolve to be even more selective going forward. We’ll offer him one bin to tear apart rather than two.

Later on, though, I worry about relying on toys (and ice cream and other objects that cost money) as a means of reinforcement. I don’t want to get into the habit of giving him things all the time so that he’ll do X or Y. Plus, I don’t think I’ll be able to afford it.

“Not every reward has to be a material reward,” says psychologist and parenting expert Lawrence Balter. “Sometimes rewards can be privileges as they get older.”

I was discussing the issue of presents at Luke’s party with a friend from college, and she asked me if we had starting saving for his college fund. (We started a 529, but it’s tragically underfunded.) Instead of toys, she asked, why don’t you ask people to donate to the fund instead?

Which is what we’re going to do from now on. Rather than stuff our bins full of perfectly fine but ultimately useless things, we’ll ask friends and family to chip in to help pay for his insanely expensive education. While that might make the act of gift-giving a little less fun for them, it will help us afford an essential good that will dramatically improve his life.

Plus, it’s one less spaceship for me to trip on in the middle of the night.

More From the First-Time Dad:

MONEY Warren Buffett

The Guy Who Made a $1 Million Bet Against Warren Buffett

Warren Buffett
Nati Harnik—AP

Even if hedge funds were winning—which they aren't—you still should be in indexes.

Warren Buffett bet a prominent U.S. hedge fund manager in 2008 that an S&P 500 index fund would beat a portfolio of hedge funds over the next ten years. How’s it going?

“We’re doing quite poorly, as it turns out,” president of Protege Partners Ted Seides, who made the bet with Buffett, told Marketplace Morning Report today. In fact, an S&P 500 fund run by Vanguard rose more than 63%, while the other side of the wager, a portfolio of funds that only invest in hedge funds, has only returned 20% after fees.

The fees are the important component. When the two sides made their respective cases for why they would win, Buffett noted that active investors incur much higher expenses than index funds in their quest to outperform the market. These costs only increase with hedge funds, or a fund of hedge funds, thus stacking the deck even more in his favor.

“Funds of hedge funds accentuate this cost problem because their fees are superimposed on the large fees charged by the hedge funds in which the funds of funds are invested,” Buffett argued at the time. “A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors.”

Before fees, Seides’s picks would be up 44%—still almost twenty percentage points behind Buffett, but way ahead of where they are.

Seides, to his credit, has been transparent. “Standing seven years into a 10-year wager with Warren Buffett, we sure look wrong,” he wrote in a recent blog post for CFA Institute. He went on to cite the Federal Reserve, both for its decision to keep interest rates at basically zero and undertake an unconventional bond-buying program to jumpstart the economy in the wake of the Great Recession, as one reason why his portfolio has been so roundly beaten by the S&P 500. Of course, investors inability to consistently foresee and time major market events is one reason why index funds are so powerful. (He also points out that a broad stock market index fund is a poor measuring stick for hedge fund performance.)

There’s still three years left in the bet, but barring a prolonged stock market crash, Girls Incorporated of Omaha—Buffett’s charity of choice—seems well placed to win. (The size of that donation stands right now at more than $1.5 million, for reasons having to do with zero-coupon bonds.) Those who are inclined to support passive investing, like MONEY, can be satisfied that once again indexes trumped active traders.

Now here’s the thing: Seven years ago, Seides’ chances of winning this bet actually weren’t so terrible. Cheap index funds have a strong statistical edge over active managers, but that doesn’t mean every stock picker loses. Last December, S&P Dow Jones Indices published “The Persistence Scorecard,” which measures whether outperforming fund managers in one year can continue to outperform the market going forward. “Out of 681 funds that were in the top quartile as of September 2012, only 9.8% managed to stay in the top quartile at the end of September 2014,” according to the report. While that’s not a terribly good record, about 10% of portfolio managers (and their shareholders) think that they are clever investors.

The trouble is, they probably won’t be in the top 10% of investors over the next ten years. There will always be market beaters, even if just by random (and unfortunately unpredictable) chance. That fact goes a long way towards keeping money managers in business.

So when you hear a hot-shot alpha investor type say that he’s beaten the market over the last couple of years, just remember: Stuff happens.

MONEY stocks

Can You Really Beat the Market?

Campbell Harvey, Professor of Finance at Duke's Fuqua School of Business
Jeff Brown Don't assume everything you read in financial journals is true, says Duke University finance professor Campbell Harvey.

Turns out the smart money isn't always so.

We put the question to Duke University finance professor Campbell Harvey, 56, former editor of the Journal of Finance and president-elect of the American Finance Association. Harvey is known for taking unorthodox positions when it comes to academic research, portfolio rebalancing, and Bitcoin.

MONEY writer Taylor Tepper interviewed Campbell for the March 2015 issue of the magazine, where this edited interview originally appeared.

Q: Can you really beat the market?

A: There’s all this academic research out there that attempts to explain why stocks do well or poorly by focusing on investment factors, such as momentum or low price/earnings ratios. In all, 316 different factors were identified in the papers I studied, including things like the amount of media attention a company gets or how much it spends on advertising. My research found that of all the published papers in finance, over half are likely false. The problem is the researchers were applying the tools of statistics as if there was only one test going on when there are multiple variables. Some factors are going to look statistically significant just by chance.

Q: Can you help us understand?

A: There’s a cartoon that explains this well. Let’s say somebody has a hypothesis that jelly beans cause acne. So researchers conduct a controlled experiment where some people get jelly beans and some don’t. It turns out that there’s no significant difference. Then somebody says, “Well, maybe we’re looking at this incorrectly. We should look at this by the color of the jelly bean. So then 20 new experiments are undertaken. Again, some people get jelly beans and others don’t. But the jelly beans are just red. A separate experiment uses just yellow beans. Then all purple. Each time there’s no effect. On the 20th try, which happens to test green jelly beans, they find there’s a difference that is statistically significant by the usual rules. And then in the newspaper the next day, there’s this headline: GREEN JELLY BEANS CAUSE ACNE.

Q: What should the standard be?

A: Usually you’re looking for 95% confidence, which means there’s a 5% chance the result was a fluke. But that’s true only if you’re conducting a single test. As soon as you go to multiple tests, it’s like the jelly bean problem. You do 20 experiments and you’re likely to get a hit by chance.

Q: To be fair, you’ve made this mistake yourself.

A: Some of the papers we analyzed are my own. This actually gives me a bit of a pass when I’m talking to my colleagues and saying, “Half of what you guys published is false.” And they kind of push back: “How could you say that?” And I say, “Well, it also holds for me, okay?”

Q: What does this mean for the average investor?

A: For individual investors the best thing to do is to just go with an index fund. Don’t believe these claims of using this or that “factor” to beat the market. Invest in the broad market, and go with the lowest possible fee.

Q: But so-called smart beta index funds claim to capitalize on these “factors.”

A: Imagine there are 316 of these “smart” beta index funds, each chasing one of the factors that I detail. It is likely that more than 50% of them are destined to disappoint.

Suppose there’s an ETF investing only in stocks beginning with the letter “H.” The managers claim historical outperformance for H stocks based on simulations going back to 1926. They claim their results are “significant.” They’re likely using the wrong statistical method to declare their strategy “true.” They might have tried 26 letters and “H” worked by chance.

“Don’t believe these claims of using this or that ‘factor’ to beat the market. Invest in the broad market, and go with the lowest possible fee.”The insight is the same for 316 factors. If you try enough strategies, some will work by luck. In many cases it’s not about being “smart.”

Q: Speaking of smart, rebalancing has been recommended as a prudent approach. You’ve done research on this topic, right?

A: Rebalancing is like mom-and-apple-pie sort of finance, in that we just assume it’s a good idea. We don’t think through what it involves. In my research I detail the risk that is induced by a rebalancing strategy.

Q: Don’t you rebalance to reduce risk?

A: Let’s say you’ve got a portfolio of 60% stocks and 40% bonds. Now, imagine stocks drop and you’re in a prolonged bear market. If you’re rebalancing, you have to buy equities to get that proportion back up to 60%. So as stocks are falling, you’re buying more and more. Your portfolio is going to have a bigger drawdown than another portfolio where you didn’t rebalance.

It works in bull markets too. If equities are going up and up and you’re rebalancing, you’re dumping stocks. The market goes up. You dump more. All of a sudden your portfolio has done worse than if you had just let it run.

Q: So how should investors think about rebalancing then?

A: It is not smart to rebalance the last day of the year or the last day of the quarter by rote. It means you’re ignoring all of the information in the market. There’s lots of information out there, so use that
information. Use your judgment.

Q: If you don’t have time to figure this out, isn’t rote rebalancing worth the risk to keep from being overly exposed to stocks before a bear market?

A: If you have a very long time horizon, you may be able to bear the extra risk by rote rebalancing. You will still have bigger drawdowns in the value of your retirement portfolio, but you don’t need the money in the short term and you can ride out the risk. My point is all investors need to understand that rote rebalancing is an active investment decision that increases risk.

Q: You’ve also done research on Bitcoin. The smart money is pretty sure it’s a worthless currency. What don’t people get?

A: Almost everything. For instance, part of the misunderstanding is the focus on the price of the Bitcoin. You see that it was at $1,000, then it’s down to $200. People say, “Well, the bubble has burst,” and stuff like that.

They are looking at just one aspect of Bitcoin. These critics don’t start by asking themselves, “What problem does Bitcoin solve?”

Q: What problem does it solve?

A: I am tired of constantly getting phone calls from my credit card companies, having to go online to fix the 20 things I’ve got auto-debits for, and dealing with charges that are not mine on my card. These are problems that many people encounter.

Q: Bitcoin is safer?

A: Bitcoin is much safer. When you go to buy something, the retailer actually is able to check a common ledger of all transactions to make sure you actually have the money to spend. The public ledger, which is almost impossible to hack, solves the problem of double spending—using the same Bitcoin to buy two things. Merchants, such as restaurants, which are paying 3% to the credit card companies, love this.

For me, though, I look at Bitcoin not just as a currency, but what it could do in the future in other applications. Think of the Bitcoin technology as a way to exchange and verify ownership. It’s like getting into your car with your smartphone. You present cryptographic proof of ownership. You’re the owner, and it’s verified through this common ledger. The car is able to identify that it is your car, and so the car starts. You’re done.

Now suppose you borrow money from the bank for the car and you’re three months behind in your payments. You present your key, the car doesn’t start. The bank has the key that starts the car. So this is a very cool idea, right?

Q: There’s still a problem with the roller-coaster ride in Bitcoin prices, right?

A: There is, and Bitcoin currently is not a reliable store of value because of it. But the price swings could be solved with more liquidity—more money in the market. The recently launched Bitcoin exchange, which is fully regulated, insured, and backed by the New York Stock Exchange, should help with this. Bitcoin price fluctuations are a factor of it being so young.

The best way to judge Bitcoin is not to look at the price progression, but to look at the vast amount of money that’s being invested by venture capitalists into Bitcoin-related companies. That’s what I look at.

MONEY credit cards

3 Secrets to Maximizing Your Credit Card Travel Rewards

travel rewards first class
iStock

A ticket to the first-class cabin may be in your future if you follow these strategies

Consumers lately have been favoring credit cards that give cash back over those with travel rewards.

Less than half of credit cardholders surveyed by ThePointsGuy.com recently accumulate travel points or miles, and only one in three Millennials. It’s no wonder, given that airlines have seriously devalued frequent flier miles and made it more difficult to redeem points for tickets.

“But there is still tremendous value in getting the right travel card,” says Brian Kelly founder of ThePointsGuy.com.

What to Look For

•A hefty bonus. Sign-up bonuses among the 20 most popular travel cards increased 25% this year, according to Kelly. And in some cases, he adds, just a single bonus can provide enough miles for a first-class airline ticket anywhere in the world.
•Flexible redemption options. To get the most for your spending dollar, Kelly notes, you’re likely better off skipping airline-branded cards that let you rack up miles on a particular carrier (since these limit your redemption opportunities) in favor of cards that let you transfer miles to other loyalty programs or allow you to use the rewards you’ve accumulated as cash toward any kind of travel purchases.
Most travel cardholders either aren’t don’t have such a card or don’t take advantage. ThePointsGuy.com’s survey found that, among the 42% of people who have a travel rewards card, only 19% have ever transferred rewards points or miles from their credit card to an airline’s loyalty program.

•No foreign transaction fees. These are another self-inflicted wound for consumers. According to the survey, one-quarter of all credit cardholders have to pay a fee when they buy stuff overseas (it’s typically 2% to 4%), and one-third don’t know if their card charges them extra. With so many products available that do not charge this fee, a lot of borrowers are throwing money away.

Your Best Bets

MONEY’s two Best Credit Card winners for travel offer among the heftiest bonuses in the biz with no foreign transaction fees, and neither leaves you stuck with one airline.

The Barclaycard Arrival Plus World Elite MasterCard offers a sign-up bonus of 40,000 miles once you spend $3,000 within the first 90 days, in addition to two miles per dollar spent. You can redeem the miles as a statement credit against any kind of travel, and get 10% miles back when you do so. This means that the sign-up bonus alone will earn you $440.

Chase Sapphire Preferred‘s sign-up bonus comes in at 40,000 points after you spend $4,000 in the first three months. You receive double points for dining and travel spending, 5,000 points for adding an authorized user and a 20% discount when you book the travel through Chase. While you can apply the points as cash back for travel, you can also transfer them to a number of partner loyalty programs, including Southwest and United.

More from Money.com:

How to Balance Spending and Safety in Retirement

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The Easiest Way to Check Your Credit—Fast

MONEY Currency

Why You Might Not Want to Cheer for a Strong Dollar

Chris Pine in JACK RYAN: SHADOW RECRUIT, 2013
Anatoliy Vorobev—©Paramount/Courtesy Everett Col Don't tell Jack Ryan, but a strong buck is a mixed blessing.

On Wednesday, the euro fell to a near 12-year low against the dollar. That makes foreign vacations cheaper, but selling things to foreigners harder.

The U.S. dollar has strengthened against pretty much every major currency over the past year. That feels like good news—and in some ways it is. It means that investors worldwide are betting that the U.S. economy is strong; it’s also nice if you’ve been planning a get-away to the French countryside.

And intuitively it just feels like a strong U.S. currency is a good thing, and a weak one is bad. Last year, the plot of the action flick Jack Ryan: Shadow Recruit turned on a (mild spoiler alert) Dr. Evil-like plot to tank the greenback’s value.

But at this moment a too-strong dollar may be the bigger worry.

That is the context behind all the headlines you may be seeing these days about so-called “currency wars.” In a currency war, countries don’t try to take down other nations’ currencies. Instead, they cut the value of their own currencies, in order to make their products cheaper and stoke demand. When one currency falls, that means somebody else’s currency has to go up. Lately, the U.S. has been that somebody else.

Currency

 

Why is the dollar going up? Central banks around the world, from Europe to Japan to Mexico, have been doing what our own Federal Reserve did following the financial crisis, buying up bonds and aggressively seeking to hold down their interest rates. They’re not only doing this to lower the relative value of their currencies—nobody has actually declared a currency war—but it has had that side effect. With yields on 10-year German bonds at just 0.3%, U.S. Treasuries that are paying almost 2% look like a better deal.

When investors seek to hold U.S. assets, that pushes up the buck too.

And there’s reason to think the dollar will keep getting stronger for a while, says Wells Fargo Securities senior economist Sam Bullard. The U.S. economy looks pretty good right now compared with the rest of the world. The American gross domestic product, for instance, grew by 4.6%, 5%, and 2.6% over the past three quarters, while the eurozone muddled through with growth rates at 0.3% or lower. Our unemployment rate is down to 5.7%, while in the eurozone it is stubbornly stuck over 11%.

As a result, the Federal Reserve has begun to put out hints that it will raise short-term interest rates sometime in 2015, the first increase since the Great Recession. Again, that should make dollar-denominated assets relatively more attractive. And a strong dollar trend could feed on itself—the more stable the dollar looks, the more people will want to to invest in the U.S. “Investing over here if you’re foreign company committing capital is more attractive since returns will get translated into your home currency at a more favorable rate,” says Bob Landry, a portfolio manager at USAA Investments.

Still, whenever there are winners, there are also losers.

Who’s losing out? For a start, multinational corporations with significant businesses overseas. Procter & Gamble and its shareholders, for instance, endured disappointing earnings last year and announced that the consumer goods behemoth doesn’t expect to enjoy sales growth this year due to the dollar’s strength.

A strong dollar generally makes U.S. exports less attractive—consumers with euros and yen are finding our products more expensive. The ISM manufacturing new export orders index fell in January to its lowest level since the fall of 2012. That’s bad news for anyone who works in manufacturing, or any other business that hopes to sell to global markets.

Overall, Bullard says, a strong dollar should be “a net drag on overall GDP in 2015.” Perhaps Jack Ryan could have saved himself the trouble.

MONEY Jobs

Employers Hired 257,000 Workers in January

150206_INV_Wage_1
Datacraft Co Ltd/Getty Images

The economic picture continues to mend, but workers still looking for better wages.

The U.S. economy added 257,000 jobs in January, the 12th consecutive month employers hired more than 200,000 workers. Meanwhile, the unemployment rate rose slightly to 5.7%.

Employers also added more employees in the end of 2014 than originally thought. The Labor Department revised November’s employment change to 423,000, compared to 353,000, and December’s to 329,000, from 252,000.

The positive monthly employment report is another sign of a building economic recovery. The four-week moving average initial jobless claims recently fell by 6,500 to 292,750 The employment cost index, which measures salary and benefits, increased by 2.3% in the last three months of 2014. And the gross domestic product grew by 2.6% in the last quarter of 2014 after climbing by 5%. This good news, along with cheap energy prices, has also pushed up economic confidence.

The economy still is not back to a pre-2008 definition of normal, however. The headline unemployment rate measures only people who are looking for work. Since the post-crisis recession, however, many people dropped out of the work force, and they have been slow to come back in. Today’s report shows the labor-force participation rate at 62.9%, a marginal increase from a month ago, but still in line with a long-term decline. The rate is five points lower than it was at the turn of the century.

Another sign that the job market recovery remains soft: Average hourly wages in January were only up 2.2% compared to a year earlier. (While that’s an improvement over last month, wages grew around 4% per year prior to the Great Recession.) Long-term unemployment is also still at elevated levels.

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Modest wage growth helps to explain why inflation has remained low, even after stripping out the effect of falling prices at the gas pump. Core inflation, which strips away volatile energy and food prices, was up 1.6% year-over-year in December. That’s well below the 2% the Federal Reserve says it is targeting in deciding whether or not to raise key interest rates.

The Fed has been holding short-term rates near zero since the crisis, and is widely expected to begin raising rates this year as the economy improves. But they’ll have to weigh the encouraging signs from the new unemployment numbers against continued low inflation and wage growth, as well as the mounting economic troubles in Europe.

Sam Bullard, a senior economist at Wells Fargo Securities, shares the Fed’s belief that the labor market and economy are repairing, and thinks more hiring will push down the unemployment rate in the months to come, which will result in more money in worker’s paychecks. Eventually.

“Overall, we’re looking at an economy that’s improving,” says Bullard. “The one missing piece is a pickup in wage growth.”

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