A Closer Look at the Unemployment Rate

As weekly jobless claims were reported today as less than expected, it brings jobs in the U.S. back to the spotlight. Although it is refreshing to see positive data such as this, we understand that there are many seasonal factors that are at play that can cause these short-term statistics to fluctuate unexpectedly. Looking at the longer term unemployment rate we see that the rate has held at 8.2 percent, marking the 41^st consecutive month that joblessness has been above 8 percent—this is the longest stretch of such high levels in the post-World War II era. Taking a closer look at this statistic reveals something interesting: The chart below breaks down the unemployment rate by levels of education. While an individual with less than a high school degree faces an unemployment rate of 13% as of May 2012, an individual who has a “college or above” level of education faces a 3.9% unemployment rate.

How Low Can They Go?

Have you been paying attention to the recent direction of mortgage interest rates?  They are moving lower!  This is great news if you’re a first-time home buyer, shopping for a new home or interested in refinancing your existing mortgage balance.  We were contacted today by a local banker, and she shared the following conventional mortgage rates with us. 

·         30 year fixed rate is 3.375% with 0 points

·         15 year fixed rate is 2.75% with 0 points

On June 20 the U.S. Federal Reserve extended “Operation Twist” through the end of 2012.  With this program the central bank is selling an additional $267 billion of shorter-term treasury securities to buy the same amount of longer-term bonds in a bid to reduce borrowing costs and help spur the economy.  The recent drop in mortgage rates can be attributed to this program, so the Fed has accomplished one of their goals.  Now we'll have to see if overall economic activity improves further.      

Staying healthy can (and will) be taxing

As part of the 2010 Patient Protection and Affordable Care Act (referred to as ObamaCare) a number of new taxes will begin going into effect as early as next year.  Business owners and corporate executives should pay close attention to the changes as they will be particularly susceptible to these new taxes.

Just to name a few of the new taxes coming in 2013- there is a 3.8% Medicare “surtax” that may apply to those with modified adjusted gross income over $250,000 (if filing jointly) who also have “unearned” income, a 0.9% Medicare payroll hike for earnings over $250,000 (if filing jointly) and an increase in the threshold for deducting medical expenses as an itemized deduction from the current 7.5% to 10% for those under 65 years of age.

Examples of things to come in 2014 and after- potential healthcare penalties for employers of 50 or more employees (now deemed to be a “tax” by the Supreme Court) and for those employers offering what is deemed a “Cadillac” health care plan a 40% tax on the value of that coverage, levied against the employer.

These changes need to be navigated in context of your comprehensive wealth plan along with the help of your CPA and other advisors to minimize the impact you see from these changes- particularly if you are a business owner or corporate executive.