More People Working, Less Workers Participating, and How Best to Give

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December 4, 2022

ANOTHER STRONG LABOR REPORT: In November, the U.S. economy added another 263,000 net new jobs, and the unemployment rate remained at 3.7%. There are now over a million more jobs in the economy than there were pre-pandemic. Average earnings in November were 5.1% higher than a year before. The Labor Force Participation Rate decreased again, from 62.2% to 62.1%. For those in the prime working years, 25-54, the participation rate also decreased from 82.5% to 82.4%. With such a tight labor market, the direction of those participation rates is a bit confounding. These rates are below pre-pandemic levels.

THE FED WILL LIKELY RESPOND WITH ANOTHER RATE INCREASE: The jobs report referenced above was strong, but not so strong that it is likely to change the direction the Fed seems intent on going at their meeting mid-December. The Fed has been hinting that it will raise its key rate by 0.5%, a decrease in the 0.75% increments it had been using.

STOCKS RISE: Stocks began the week lower in response to widespread protests in China. They moved higher mid-week after Federal Reserve Chairman Jerome Powell stated publicly that the Fed is likely going to lower the pace of interest-rate increases beginning this month. Stocks wobbled again when the November labor report (referenced above) came in stronger than expected. Good news is bad news because if the economy stays too strong, inflation may not go down as quickly as the Fed likes, and rates will keep rising. It’s becoming a refrain that is making us all weary, but it is going to be the primary theme for the markets for a while to come.

LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.

BONDS CONTINUE TO RALLY: As you can see below, bonds, as measured by the Bloomberg U.S. Aggregate Bond Index, were in free fall from the beginning of the year until October 21, when the index was negative 16.74%, and absolutely horrendous time period for bond investments.

Since October 21, the index is up 6.36%.

So for 2022, it was really the first five months that destroyed the bond market. Since May 6, bonds are down just over 1% (but with more volatility during that time than we like to see.)

HOUSING INFLATION: One of the drivers of inflation has been the rapidly rising cost of maintaining a home. Home prices have moved up, as have mortgage rates. Rents rose dramatically during the pandemic. So where do we stand now? Housing services inflation now stands at 7.1% over the past 12 months. Housing inflation tends to lag other prices because of the slow rate at which the stock of rental leases turns over. The market rate on new leases is a more timely indicator of where overall housing inflation will go in the next year. 12-month inflation on new leases rose to nearly 20% during the pandemic but have been falling sharply since mid-2022. According to, the inflation rate is down below 6%. Other measures (Zillow, CoreLogic, RealPage) all have it below 10%. As long as new lease inflation keeps falling, housing service inflation should start to fall sometime mid-next year, but not before. This is a slower moving indicator, but one that seems to be heading in the right direction.

CHARITABLE GIVING: About 20% of all charitable giving in the U.S. occurs in December, more than double any other month. In the U.S., we give more to charity than any other country. Annual philanthropy as a percentage of our Gross Domestic Product (GDP) is 1.44%, nearly double that of Canada and triple that of the UK.

If you are considering giving to charity, we applaud your impulse. We encourage generosity. But we have a few thoughts to consider:

  • Give Thoughtfully, Not Impulsively.
Many try to tug at your emotions, and some are very good at it. Do not make impulse gifts out of emotion. You are probably getting all sorts of mail, email and other communications from charities asking for support. Be proactive in your giving, and take control. Decide how much you want to give away, and then determine to whom you will give it this year. This allows you to say ‘no’ to very worthy charities that just don’t get on your priority list. Several years ago, my wife and I decided to give more money to less charities. We wanted to make more meaningful gifts to charities that we determined were our top priorities. Since we went through that exercise, we have had to say ‘no’ even to very direct requests, because there is nothing left in our giving budget for the year. Be generous, but don’t be disorganized in your giving.
  • Give to Worthy Charities.
By being more thoughtful, it also gives you the time to do your research. Websites like Givewell and Charity Navigator and Guidestar can be quite helpful. Find out as much as you can about the charity. Visit it. Talk to people who have been impacted by the charity. Get a comfort level that the mission of the charity is consistent with your values and your purpose in life. You have worked hard for this money. Give it to a charity that is going to make a real difference.
  • Don’t Pay Unnecessary Capital Gains Tax.
If you have low basis property you have owned for a year or more, and that will generate capital gains upon sale, do not sell the property to create cash to give to the charity. This will cause you to incur capital gains tax. Instead, approach the charity and see if they will accept the low basis property directly as a charitable gift. For example, you have shares of XYZ stock that you purchased for $1,000, and now it is worth $3,000. If you sell the shares, and give the resulting $3,000 to charity, you will get a $3,000 charitable deduction (if you itemize), but you will have to report $2,000 in taxable capital gains and perhaps incur hundreds of dollars in tax. If you give the XYZ shares directly to charity, you get the same deduction, the charity then sells the shares, and no capital gains tax liability is generated.
  • Consider Utilizing Qualified Charitable Contributions from Retirement Accounts.
If you are 70.5 or older, you can make a qualified charitable contribution directly from your traditional IRA to a charity (up to $100,000). Even though you are distributing money from your retirement account, that amount will not be considered a taxable distribution. You do not get a charitable deduction. However, you are moving money out of your traditional IRA without incurring any income tax liability.
  • The Standard Deduction $300 Opportunity.
More people than ever are using the standard deduction instead of itemizing. If you use the standard deduction, you may still deduct up to $300 in cash donations each year.
  • The Standard Deduction and Stacking Charitable Gifts.
Also, if you use the standard deduction, you may want to consider “stacking” your deductions. In other words, if you normally give $10,000 per year to charity, and your total deductions are not enough to make itemizing worthwhile, consider giving several years of charitable gifts all in one year, with no gifts in the ensuing years. In the years that you make no gifts, you still have the standard deduction. In the year you make the stacked gifts to charity, you can itemize.
  • Donor Advised Funds.
If you do not want to give all your gifts to charity in a particular year, you can put all that money in a Donor Advised Fund. This allows you to make a deductible charitable gift in one year and pass the money to the actual charity in later years if you wish. To learn more about such funds, click here to watch a webinar done by Stonecrop Wealth Advisors on this subject. Please note, if you want to set up a donor advised fund for 2022, you must act immediately. It takes time to process a new account, so you would essentially have to get started right away, within the next week.

Even of you are itemizing, there are limits to how much you can give to charity in any given year, and it is different for cash and stocks you have held for a year or more. Of course, you should consult your tax consultant before embarking on any steps to control your tax liability.

If you have any questions about how you can best make charitable gifts now or in the future, please reach out. We would love to help you.

CONGRATULATIONS LOGAN AND DANIELLE!: As many of you know, Stonecrop’s Investment Director, Logan MacGray, earned his Chartered Financial Analyst certification last year. However, the local CFA chapter postponed their public celebration for the new recipients of this prestigious honor until this year. So last week, he got his public recognition at the Philadelphia Racquet Club. Congratulations go to both because all that studying required the steadfast support of Danielle. I am very proud of both of them.

Have a great week!

Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.

Douglas R. MacGray, J.D., C.F.P. ®
Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax
(610) 628 4545

“The world cares very little about what a man or woman knows; it is what a man or woman is able to do that counts.” Virgil

“I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want.” Philippians 4:12 (NIV)


(c) 2022 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.
*Bloomberg Barclays U.S. Aggregate: This is a measure of the U.S. bond markets.

Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.




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