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Why Base Hits Matter in Baseball
& the Economy 

 Quick takeaways

•  Some companies grab headlines for wild stock market gyrations. But they’re not really representative of the consistent progress that businesses both big and small try to achieve day, year after year. So if you think one company predicts good or bad for the economy, you may want to reconsider.
• The Federal Reserve continues to try to tame inflation. But it takes time, and there may be some economic effects, such as higher unemployment, with interest rate increases. Although history has some clues as to what the near future look like, the exact mix of economic factors at play in 2022 means that the reality remains anyone’s guess.

In some ways, October can feel like an in-between month. The rush of summer subsides, back-to-school routines settle in for many, and the high-octane energy of the holidays hasn’t yet kicked in. Unless, of course, you’re a baseball fan. Then, October marks a sprint of a different sort, especially for teams trying to cobble together enough wins to make it to the playoff finish line. Sports continue to provide some interesting analogies for evaluating the 2022 economy. A lot of baseball teams are stuck not knowing what the future holds. And a lot of us are stuck not knowing exactly where the economy is headed. Several baseball teams will make a frantic dash to win as many games as they can, and many companies—after the mid-October release of third quarter data—may have to make a similar dash to adjust before year’s end. Where will it all end up? It’s worth remembering that the fundamentals—to baseball, to the economy, to your financial situation—matter quite a lot.

What we can learn from baseball (and the movies) Have you ever heard of sabermetrics? Maybe not. How about the movie Moneyball? The latter, of course, was an acclaimed (albeit loose) adaptation of a book, Moneyball: The Art of Winning an Unfair Game, that described the seemingly improbable run of the 2002 Oakland A’s. Lacking big stars and an expansive budget, the team made it to the first round of the playoffs not because of emotion-jolting home runs but because of sabermetrics.

The premise of sabermetrics is that one star player who hits a lot of home runs isn’t enough to push you to the top of the baseball heap. For that you need a team that gets on base all the time, even if none of the players is a regular home-run hitter. Sabermetrics equates to the economy like this: It’s not the one-day run (or fall) of the stock market or the flashy company with the meteoric stock rise—the equivalent of a home run—that represents its health. Meme stocks matter less than the collection of companies ensuring their balance sheets stay in the black while they service customer wants and needs. Declining jobless claims and blue-chip stocks are the equivalent of getting on base, every time, every year. Unfortunately, October, like so many months this year, continues to generate a lot of mixed data—some pitches are home runs and some are strikes. Inflation remains stubborn, but lots of people are working and corporate profits continue to remain strong for many. When you’re looking for a clear message, this complicated data doesn’t help.

Your wallet: Your retirement accounts’ progress has likely presented its own mixed messages based on your goals and asset allocation (mix of investments). But changing your long-term strategy as a response to a short-term headline may derail progress. Time in the market, not timing the market, remains true, even when there’s market volatility.

Why the multiplier effect matters The idea of sabermetrics —getting on base over and over—matters quite a lot in the context of September’s big news-getter, the Federal Reserve’s decision to raise interest rates. It’s the second large jump of the year, and rate increases are the biggest bat that the Fed has to try to beat back the inflation that continues to cause a lot of pocketbook distress. Just like the last time, the Fed’s move garnered lots of news headlines and varying rushes to judgment by pundits. But unless you’re in the market for a home mortgage or a car loan, or have a variable interest loan, that news probably didn’t cause you to do anything different

principal.com

Employers Are Feeling Employees’ Financial Pain, Enhancing Benefits

Views on ability to save for retirement differ by generation 

With inflation outpacing salary gains, employers are feeling more responsible for employees’ financial wellness—97% of employers said so this year, up from 95% in 2021. The finding is from a nationwide survey of employees and employers, with the results presented in Bank of America’s 2022 Navigating a New Era of Financial Wellness report.

The researchers drew on a recent survey of 834 full-time employees who participate in 401(k) plans and 846 employers that offer 401(k) plans and have sole or shared responsibility for decisions made in the plan.

“Offering comprehensive benefits and wellness programs can be critical for employers looking to reduce attrition, can empower employees to take control of their personal finances and [can] improve employee satisfaction,” said Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America.

Addressing Financial Stress

Key findings from the report include the following:

• Employees want programs to alleviate financial strain. 80% of employees are concerned about inflation, and 71% say the cost of living is outpacing growth in their salary or wages. Amid this financial stress, employees are seeking support from their organizations, with 82% saying employers should play a role in supporting their financial wellness.
• Financial wellness programs result in tangible benefits for employers and employees. 91% see higher employee satisfaction when they offer tools and resources that help employees manage their financial well-being.
• Equity (company stock) grants are powerful recruitment and retention incentives. 76% of employers believe equity compensation is a differentiator for recruitment, and 44% of employees who participate in equity compensation plans say it was an important reason for accepting the job.
• Health care education could be improved. 84% of employers feel “very responsible” for their employees’ understanding of retirement health care needs and costs, and 89 percent of employers that offer health savings accounts (HSAs) contribute to their employees’ HSAs. Yet, only 54% of employers communicate about these topics at least once a year.

Preparing for Retirement Amid Uncertainty

Retirement expectations differ among the generations, according to Emerging From the COVID-19 Pandemic: Four Generations Prepare for Retirement, a survey report released Oct. 12 by the nonprofit Transamerica Center for Retirement Studies (TCRS). The report draws on survey responses from 5,493 workers. Key findings from the report are summarized next:

BABY BOOMERS (BORN 1946 TO 1964)

Emerging from the pandemic, Baby Boomers approaching retirement are susceptible to employment risks, volatility in the financial markets and increasing inflation—all of which could disrupt their retirement plans. Almost half of Baby Boomer workers (49%) expect to work past age 70, are already doing so or do not plan to retire. However, these plans depend on support from employers. Just 59% of workers from this generation say their employer is age-friendly, as evidenced by actions such as offering opportunities, work arrangements, training and tools needed for employees of all ages to be successful.

GENERATION X (BORN 1965 TO 1980)

Only 22% of Generation X workers are “very” confident they will be able to fully retire with a comfortable lifestyle and just 28% “strongly agree” they are building a large enough retirement nest egg. 78% are concerned that Social Security will not be there for them when they are ready to retire. Generation X workers seek to extend their working years so they have more time to save. 38% expect to retire at age 70 or older or do not plan to retire, and 55% plan to work in retirement. “The oldest Generation Xers are now in their late 50s and the youngest are in their early 40s, so there is no time like the present to build their savings and create long-term financial plans,” Collinson said.

MILLENNIALS (BORN 1981 TO 1996)

Millennials entered the workforce around the time of the Great Recession, which began in late 2007. They experienced a turbulent economy in their early working years. They started their careers with higher levels of student debt than previous generations. Millennials have waited to buy homes, get married and start families, but with the increasingly widespread availability of 401(k) plans, they made a solid and early start in saving for retirement. 73% are concerned that Social Security will not be there for them when they are ready to retire.

GENERATION Z (BORN 1997 TO 2012)

The pandemic has been especially difficult for Generation Z workers. 51% said they often have trouble making ends meet. Yet, they have not given up on retirement—67% of workers from this generation are saving through employer-sponsored 401(k)s or similar retirement plans, and they started saving at the unprecedented young age of 19 (median). Employers can “help workers protect their health and finances and facilitate saving and investing for retirement,” Collinson said, “and the private sector must continue innovating products, services and solutions that can help people live, work, save and retire better. We’re all in this together.”

www.shrm.org

Long Story Short: Balancing Benefits & Budget  

A closely watched measure of U.S. consumer prices rose by more than forecast to a 40-year high in September, pressuring the Federal Reserve to raise interest rates even more aggressively to stamp out persistent inflation. The core consumer price index, which excludes food and energy, increased 6.6% from a year ago, the highest level since 1982, Labor Department data showed Thursday. From a month earlier, the core CPI climbed 0.6% for a second month. The overall CPI increased 0.4% last month, and was up 8.2% from a year earlier. 

The advance was broad based. Shelter, food and medical care indexes were the largest of “many contributors,” the report said. Prices for gasoline and used cars declined. On the heels of a solid jobs report last week, the inflation data likely cement an additional 75-basis point interest rate hike at the Fed’s November policy meeting and spurred speculation for a fifth-straight increase of that size in December. Traders also priced in a higher peak Fed rate for next year. 

U.S. stocks opened lower and Treasury yields surged, with the 30-year rate briefly hitting 4%, the highest since 2011. The median forecasts in a Bloomberg survey of economists had called for a 0.4% monthly rise in the core and a 0.2% gain in the overall measure. The report stresses how high inflation has broadened across the economy, eroding Americans’ paychecks and forcing many to rely on savings and credit cards to keep up. While consumer price growth is expected to moderate in the coming months, it’ll be a slow trek down to the Fed’s goal. Policy makers have responded with the most aggressive tightening campaign since the 1980s, but so far, the labor market and consumer demand have remained resilient. The unemployment rate returned to a five-decade low in September, and businesses continue to raise pay to attract and retain the employees needed to meet household demand. 

The CPI report is the last one before next month’s U.S. midterm elections and poses fresh challenges to President Joe Biden and Democrats as they seek to retain thin congressional majorities. Already, the surge in inflation has posed a serious threat to those prospects. Shelter costs — which are the biggest services’ component and make up about a third of the overall CPI index — rose 0.7% for a second month. Both rent of shelter and owners’ equivalent rent were up 6.7% on an annual basis, the most on record. 

Economists see the housing components of the report as being elevated for quite some time, given the lag between real-time changes in rents and home prices and when those are reflected in Labor Department data. Bloomberg Economics doesn’t expect year-over-year rates for the major shelter components to peak until well into the second half of next year. Geopolitical developments could also keep inflation elevated. OPEC+ recently announced oil production cuts, and a potential gasoline export ban by the Biden administration could backfire with higher pump prices. The Russia-Ukraine war continues to disrupt supplies of commodities like wheat, while the White House is also considering a ban on Russian aluminum — a key component in cars and iPhones — in response to the country’s military escalation in Ukraine. 

Excluding food and energy, the cost of goods was unchanged from August. Services prices less energy advanced by the most since 1990 on a monthly basis. Changing consumer preferences are underpinning services inflation and have helped ease demand for goods. Meantime, a strong dollar is diminishing foreign demand for US-made products. Prices paid to US producers rose more than expected in September, driven in large part by services costs, Labor Department data showed Wednesday, likely portending ongoing price pressures for consumer prices for services. Producer prices for food and energy also rose. 

A separate report Thursday emphasized how inflation is depressing workers’ purchasing power. Real average hourly earnings dropped in September and were down 3% from a year earlier, elongating a string of declines dating back to April 2021. 

benefitnews.com