Thursday's Scoop: Friction☀️

Hey friends - almost Friday!

Insiders, look out for the Weekly Scoop tomorrow.

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

1. Layoffs jumped last week due to strikes and storms.

2. Inflation seems to be under control.

3. Wages are finally gaining ground on the high cost of living.

Unemployment Rate: 4.1%
^{Relatively low, but up from record lows.}

Layoffs jumped last week, partly due to the aftermath of Hurricane Helene and furloughs tied to the ongoing Boeing strike. The Labor Department reported that 258,000 new unemployment claims were filed, a significant jump from the previous week and above economists' expectations. The spike was especially noticeable in states like North Carolina, Florida, and Washington. The disruption from Helene and Milton is likely to impact jobless claims for weeks to come, making it a little more difficult to understand what’s happening in the jobs market.

Inflation Rate: +2.4% (YoY), +0.2% (MoM)
^{Policymakers aim for 2% YoY inflation. (September CPI)}

Inflation still seems to be under control. The cost of living rose only slightly in September, with the Consumer Price Index (CPI) increasing by 0.2% for the month. While prices rose a little bit more than economists expected in September, it was still the same relatively low pace as July and August. Overall, the cost of living is 2.4% higher than a year ago, the slowest annual change since early 2021. Falling gas prices helped to offset the pain at the grocery store, where the cost of eggs, butter, and other cooking ingredients jumped last month. Core inflation, which excludes more volatile food and energy costs, increased by 0.3%, mainly driven by home and rent prices. Policymakers have expressed more comfort with where prices are right now.

Paychecks gained more buying power last month as wages gained ground on the cost of living. The Labor Department reported that average hourly earnings grew by 0.4% in September, twice the pace of inflation. Over the past year, inflation-adjusted wages have climbed by 1.5%, meaning that our paychecks can buy more than they could before. The cost of living had been rising much faster than average wages for the past couple of years, but as inflation has started to cool, incomes have been gaining ground. However, amid higher wages, employers have been cutting back hours. Over the past year, pay has improved, but with fewer hours worked, inflation-adjusted weekly earnings have grown only 0.9%. Overall, it’s a positive trend for workers.

The Market:⬇️ -0.2%
S&P 500: 5,780.05
1Mo: +5% | 1Yr: +33% | 5Yr: +95%

The market drifted lower from its record high on Thursday as investors worried about inflation. The cost of living rose slightly more than expected last month, but not more than the past couple of months. Policymakers just started lowering borrowing costs under the assumption that inflation was mainly under control. So, any hint that inflation might reaccelerate gets investors worried that policymakers will keep borrowing costs high for longer.