Monday's Scoop: Complacent 🌤️

Hey friend - welcome back to Monday.

Insiders, catch up with our Weekly Scoop. If you’re not an Insider, refer, open, vote, or upgrade to unlock your status!

Here’s what you need to know today to inform your work, spending, and investments…

1. Wages soared in May.

2. Hiring surged last month, and it may be thanks to higher immigration.

3. Americans are starting to feel better about the economy.

Unemployment Rate: 4.0%
^{Still near the lowest rate in 50+ years}

Hiring surged last month, and it may be thanks to higher immigration. The Labor Department reported employers added 272,000 more workers last month, way more than economists expected amid a slowing economy. Economists consider around 150,000 new jobs per month to be normal. The unemployment rate rose slightly to 4.0%, the highest level in over two years, but not far from record lows. The increase in the unemployment rate was driven by a decrease in the labor force participation rate to 62.5%. Rising unemployment and lower workforce participation are negative trends that conflict with surging hiring. The divergence may be caused by an influx in immigration that hasn’t been captured by the Household Survey, which is responsible for the unemployment and participation rates and uses adjusted 2020 census data to scale its numbers. The Establishment Survey, responsible for the hiring numbers, tracks direct payrolls and verifies numbers annually with tax filings. It may be picking up a surge in immigration. Overall, hiring in May was more widespread across industries than in over a year.

Wages surged in May, hopefully gaining ground on the rising cost of living. The Labor Department reported that average hourly earnings rose 0.4% in May after only 0.2% growth in April. Wages have climbed 4.1% over the past twelve months. American income levels still have some catching up to do with the rising cost of living of the past few years. The increased wage growth is a welcome sign for workers, but economists worry that rising incomes could lead to more inflation. Policymakers have restricted spending and business activity with higher borrowing costs in an effort to stop the economy from overheating and inflating prices. Wages rising more than 2-3% per year can signify that the demand for workers exceeds the supply, and that imbalance can be indicative of an overheating economy.

Inflation Rate: +3.4% (YoY), +0.3% (MoM)
^{Policymakers aim for 2% YoY inflation (April CPI)}

People seem to be feeling a little better about the economy. The New York Federal Reserve’s May Survey of Consumer Expectations revealed increased optimism across the economy. People aren’t as worried about inflation, expecting the cost of living to rise only 3.2% over the next year, lower than the last reading. Inflation expectations are important because they can be self-fulfilling, as businesses raise prices in anticipation of higher costs and consumers spend more to get ahead of rising price tags. Workers also reported a lower expected probability of losing their jobs in the next 12 months. People don’t expect to spend more but feel more optimistic about the potential for higher income and better investment returns. Consumer spending powers the economy, so it’s crucial to track sentiment.

The Market: ⬆️ +0.3%
S&P 500: 5,360.79
1Mo: +3% | 1Yr: +24% | 5Yr: +86%

The market drifted higher on Monday as investors hoped that recent data showing more robust hiring, improving wages, and greater optimism will help the economy grow without overheating and causing more inflation. Investors await the May inflation report and Federal Reserve policy decision on Wednesday.