Thursday's Scoop: Coasting☀️

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 crept higher last week.

2. American workers started earning more for their productivity this year.

3. International policymakers have started lowering borrowing costs.

Unemployment Rate: 3.9%
^{Still near the lowest rate in 50+ years}

Layoffs crept higher last week but are still very low. The Labor Department reported initial jobless claims rose slightly last week to 229,000 but remained fairly low relative to history. The number of people receiving unemployment benefits for consecutive weeks also rose slightly, indicating that finding a job has grown more challenging. Another report from placement firm Challenger, Gray & Christmas said planned corporate layoffs dropped 1.5% from April. So far this year, layoff announcements from big firms are 7.6% lower than last year. 

American workers started getting paid for their increased productivity this year. The Labor Department reported hourly compensation rose at a 4.2% annualized rate in the first three months of the year, or 0.4% when adjusting for inflation. Worker productivity, measured by economic output per hour, rose more slowly, at a 0.2% rate. Productivity has significantly outpaced real hourly earnings over the past year, as workers increased productivity by 2.9% but only earned 0.6% more when adjusting for inflation. Wages haven’t kept up with productivity over the last several decades.

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

European policymakers have started reducing borrowing costs, signaling confidence that inflation is under control. The European Central Bank cut its key interest rate to 3.75%, down from a record high, marking the first reduction since 2019. This move reflects a strategic shift away from peak restrictive policy aimed at slowing borrowing and spending as the euro zone's cost of living stabilizes. US policymakers are expected to follow suit later this year, potentially lowering interest rates as they grow more confident that prices have stopped climbing faster than usual. This trend of lowering rates is gaining momentum globally, with Canada, Sweden, and Switzerland also making similar moves to stimulate their economies. Savings accounts will pay less interest, but borrowing on credit cards, mortgages, and auto loans will get a little cheaper.

The Market: ⬇️ -0.02%
S&P 500: 5,352.96
1Mo: +3% | 1Yr: +25% | 5Yr: +86%

The market drifted lower from its new record high on Thursday as investors processed more signs of a slowing economy. With more data indicating that the economy is no longer overheating and accelerating the rising cost of living, investors expect US policymakers to follow international central banks in easing their restrictive policies and lowering the cost of borrowing.