Thursday's Scoop: Concerned 🌥️

Hey friend - 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. The economy started the year much more slowly than hoped.

2. Inflation jumped in the first few months of the year.

3. Layoffs are still very low.

Unemployment Rate: 3.8%
^{Still near the lowest rate in 50+ years}

Companies still seem to be avoiding layoffs. The Labor Department reported that initial unemployment claims fell to 207,000 last week, around average for a healthy economy. Continuing claims from those who have been out of work for consecutive weeks also dropped again, a good sign that people can find jobs. Unemployment is historically low, and there are still more than 1.4 available jobs for every unemployed person.

Americans aren’t spending as much as economists thought, raising concerns about the economy's health. The Commerce Department reported real US gross domestic product (GDP) grew at an annualized rate of only 1.6% in the first quarter, the slowest pace in nearly two years and less than half as fast as the fourth quarter. Consumer spending, which powers two-thirds of the economy, slowed as Americans added less incremental money to their pocket after taxes and inflation. The personal savings rate fell to 3.6%, about half of what it was pre-pandemic. Government spending declined as defense bills pushed into the next quarter. Overall, the economy showed signs of strength, but the slowdown raises concerns about how long consumers can keep consuming at higher prices.

Inflation Rate: +3.5% (YoY), +0.4% (MoM)
^{Policymakers aim for 2% YoY inflation. (CPI)}

The cost of living accelerated in the first few months of the year. Policymakers’ preferred inflation gauge, the personal consumption expenditures (PCE) price index, rose 3.4% after climbing just 1.8% in the fourth quarter. Excluding volatile food and gas prices, the so-called core PCE rose 3.7% compared to 2.0% at the end of the year. Policymakers have been restricting spending and investment with higher borrowing costs, trying to get inflation closer to 2%. It looked like they had achieved their mission at the end of the year, but this acceleration raises concerns that borrowing costs will remain high for even longer.

The Market: ⬇️ -0.5%
S&P 500: 5,048.42
1Mo: -3% | 1Yr: +25% | 5Yr: +72%

The market tumbled lower on Thursday after economic data confirmed investors' worst fears of a slowing economy and rising inflation. Corporate financial updates haven't done much to reject that narrative, with most consumer-facing companies reporting continued price increases amid slowing sales. Microsoft and Google gave the market a shot at life after closing, showing Big Tech is still doing great.