In The Headlines

U.S. Unemployment – A Good News, Bad News Story

As has so often been the case with previous unemployment reports since the start of the Great Recession, the latest data contains both good and bad news. The headline figures from the Bureau of Labor Statistics’ (BLS) April jobs report were surprisingly upbeat, with the agency reporting that nonfarm payroll employment rose by 288,000, beating economists’ expectations of 210,000 to 220,000 new jobs and pushing the unemployment rate down 0.4% to a five-and-a-half-year low of 6.3%. But beneath those surface numbers, there is an ugly trend: Fewer Americans are hunting for jobs.

There was hope among analysts that just the opposite would happen in April. Many thought that Americans who had previously been discouraged by poor job prospects would find renewed optimism. That prospect was quickly dashed by the latest report, which revealed that the labor force declined by 806,000 people, or 0.4%. The labor force participation rate was 62.8% in April, matching the three-decade low reached in October and December of last year. It remains far behind the pre-recession levels, which were above 66%.

Worse, the 6.3% unemployment rate and sagging participation rate are being attributed to a decrease in both new entrants to the labor pool as well as people reentering the labor market to look for work. Erica Groshen from BLS said, “Our analysis of the household survey suggests the labor force decline was mostly due to fewer people entering the labor force than usual, rather than more people exiting the labor force.”

Much of this likely comes down to the fact that 417,000 fewer jobless workers who had dropped out of the labor force decided to come back to the job market in April than in March. This represents the largest drop in reentrants ever, according to the BLS. There were also 126,000 fewer people looking for a job for the first time.

It is not clear why Americans are steering clear of the job search. One potential factor is that the long-term unemployed (those without a job for 27 weeks or longer) have abandoned the job hunt since losing their insurance benefits due to a Congressional stalemate in December. In April, the number of long-term jobless dropped by 287,000 workers to 3.5 million. To keep unemployment insurance, individuals must prove that they are still trying to find a job. Without the prospect of insurance benefits, the long-term unemployed are dropping out of the labor force. It is unclear when they will return. Baby boomers who choose to retire instead of seek employment could also be contributing to these numbers.

At the other end of the age spectrum, there are 1 million high school graduates who are not working, not looking for work, and not enrolled in further education, according to a report recently released by the Economic Policy Institute. Those idle 17-to-20-year-olds could also be part of the labor market participation shift.

Finally, there is the sluggish U.S. economic recovery, which has sapped optimism from Americans who once held long-term, full-time, well-paying jobs. The April jobs figures, even with the addition of 288,000 new jobs, will not provide much hope. While the number of jobless Americans dropped by 733,000, (the biggest dip since the recession began according to the household survey), the number of unemployed still stands at 9.8 million or about 2 million higher than what it was in January 2008.

Weight Watchers Adopts a Technology-Rich Diet

While millions of healthy strivers have been busy slapping on bracelets that count their steps and sync their workouts with their diets, Weight Watchers just keeps counting calories and trying to get people together for morale-boosting meetings, just as it has done since 1961. Now, according to Morningstar analyst R.J. Hottovy, “The popularity of some of these services has almost commoditized the weight-management industry.”

The value of Weight Watchers over the decades has rested on a food-analysis program it calls PointsPlus, which rations meals and snacks, based on a proprietary formula that measures protein, fats, carbohydrates, and fiber. The company has even developed a pair of apps—including bar-code scanners—to help users keep track. But there has been little effort to factor exercise into the mix, even as a new crop of wearable computers kick out calorie-burn data based on a person’s daily activity, measured down to the step. Such companies as Nike, Jawbone, and Fitbit sold an estimated $330 million worth of activity trackers last year, according to NPD Group.

Most of the revenue for Weight Watchers still comes from the fees it charges its customers to get together for an hour and talk about eating. The theory is that moral support brings results. “Tools alone, technology alone, food programming alone will never reach the levels of success that are possible when they are combined with human engagement to guide and provide accountability,” says Weight Watchers Chief Executive Officer James Chambers.

That accountability is not cheap. For unlimited meetings, Weight Watchers charges $14 a week or $43 a month. Once a customer has maintained a target weight for six weeks, payment is no longer required. Last year, the company collected half its revenue from those charges. Members do not like it—monthly meeting attendance has dropped from 18 million to 11 million since 2011.

The company offers online-tracking services for which it charges $15 to $19 per month. However, a host of startups provides similar services at no cost. MyFitnessPal, a free service, tracks both meals and activity. Dieters who just want a free tool to track nutrition increasingly turn to FatSecret and Cron-O-Meter. These platforms are doing to Weight Watchers what Craigslist did to newspaper classified ads in the early 2000’s. By comparison, Weight Watchers appears relatively low-tech, time consuming, and expensive. It has lost 14% of its active subscribers in the past 12 months. Its sales in the first quarter dropped 17% to $409 million, following a 6% drop in revenue last year. Weight Watchers could lower prices, but it is difficult to compete against free. To offer more value, the company is rushing to integrate its platform with the leading activity-tracking devices. “They’re effectively turning fitness apps from a source of competition to an asset,” Hottovy said.

Weight Watchers also recently bought Wello, a startup that connects customers via video feeds to remote personal trainers. Instead of a 12-person huddle for food talk, Weight Watchers members may soon be exercising under the remote supervision of a trainer. The company is also hustling to make inroads as a health partner for insurance companies and employers, a segment that is less likely to switch to a Silicon Valley startup. Weight Watchers currently makes about $75 million a year from business customers, a number it hopes to push up to at least $300 million by 2018.

Despite its problems, demographics are in the company’s favor. From 1980 to 2008, the share of overweight adults worldwide surged from 23% to 34%. In the U.S., that number is hovering near 70%. That is a big pool of potential customers if the company can move into the 21st Century of dieting.

Sources:
1. http://bit.ly/1g11rnM – Fortune
2. http://buswk.co/RitlFC – BusinessWeek
3. http://bit.ly/1hpZZeZ – Morningstart

The Good News Is . . .

• U.S. employers added a robust 288,000 jobs in April, the most in two years, and the strongest evidence to date that the economy is picking up after a brutal winter slowed growth. The Labor Department also reported that the unemployment rate declined to 6.3% from 6.7% in March, its lowest level since September 2008. The number of jobs added in February and March were revised up by a combined 36,000. Employers have now added an average of 238,000 jobs over the past three months.

• ConocoPhillips, a global producer of oil and natural gas, reported earnings of $1.81 per share, a 27.5% increase over year-ago earnings of $1.42. The firm’s earnings topped the consensus estimate of analysts by $0.25. The company reported that revenues rose to $16.0 billion, a 9.5% increase. Management attributed the company’s performance to increased production in its North American and Canadian markets.

• The utility operator Exelon agreed to buy Pepco Holdings for $6.8 billion to strengthen its operations on the East Coast. The acquisition is the latest effort by a utility to cut costs by growing larger as the industry contends with declining electricity sales and gas prices. Exelon, which runs power companies in 47 states and Washington, D.C., was interested in buying a regulated utility like Pepco for more predictable, steady returns. Under the terms of the deal, Exelon will pay $27.25 a share in cash. The combined company will have about 10 million customers and a rate base of about $26 billion.

Sources:
1. http://www.cnbc.com/id/101636985 – CNBC
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/1un5C6I – ConocoPhillips
4. http://nyti.ms/1iStUvQ – NY Times Dealbook

Planning Tips

Tips for Saving Money with your Smartphone

Millions of Americans now use smartphones and are finding that these devices really live up to their name when it comes to shopping. Here are some tips for how your phone can help you make smarter spending decisions by putting information, special offers, and other resources in the palm of your hand.

Compare prices – Even if you do not feel like downloading multiple apps, your smartphone’s browser can be a handy shopping tool. But apps may be the best tool for price comparison that smartphones have to offer. One of the easiest ways to score the best price is to use a bar code scanning app. For example, Amazon Mobile scans the bar code of an item and searches for prices on Amazon.com. RedLaser is another popular price comparison app. Scan your item, and the app compares prices from thousands of online and in-store retailers. RedLaser will even map out the retailers near you.

Match prices – Price matching is nothing new, but bar code scanning apps like RedLaser make it much easier. In addition to pointing you toward the best price, you can also use these apps to get a price match. Target and Best Buy will price match their main competitors as well as online stores like Amazon. Other popular retailers who will also match online prices include: Wal-Mart, Sears, Staples, and Fry’s Electronics. In many cases, all you have to do is show the retailer your phone. If a retailer refuses to price match, you can always order the item online then and there.

Find coupons – Your smartphone can help you find coupons, too. RetailMeNot is a coupon database app that allows users to share coupons and coupon codes, and can even send you deals based on your smartphone’s location. To use a mobile coupon offered by the app, simply flash the coupon at the register. Coupons.com offers its own mobile platform, too. You can digitally add available coupons to a store loyalty card linked to the app. Other couponing apps include: Yowza, SnipSnap, Coupon Sherpa, and Grocery Smarts.

Get organized – Since nearly every retailer, department store, and supermarket offers a loyalty program these days, your wallet may be filled with loyalty cards. Key Ring and CardStar are apps that organize all of these cards in one place on your smartphone. Many apps can also help you organize your grocery trips, too, like ZipList which searches recipes and adds the recipe ingredients to your list. The app also pinpoints items on sale and provides coupons. Remember The Milk is another popular option in this category.

Earn points and rewards – A handful of apps reward you just for shopping. For example, users of an app called Shopkick can check in at certain retailers and earn points. Once you accumulate a certain number of points, you can trade them in for gift cards. Similar apps include CheckPoints and Surveys On the Go (which requires you take surveys during shopping trips).

Sources:
1. http://bit.ly/1nWipeH – US New & World Report
2. http://bit.ly/1fIWEgf – Lifehacker.com
3. http://bit.ly/1oh4FIF – GeekWire
4. http://bit.ly/1mss2SK – Bankrate
5. http://bit.ly/1nWixeb – Money Crashers
6. http://bit.ly/1lPdl9A – The Manilla Folder
7. http://bit.ly/1ifrKX5 – AARP

Please don’t hesitate to give us a call if you need help with any component of your financial planning.