Today's Scoop:

Hey friends - almost Friday. Look out for your Weekly Scoop tomorrow.

Here’s what you need to know today…

1. Companies haven’t ramped up layoffs yet.

2. Inflation keeps trending lower.

3. Wages aren’t keeping up with rising living costs.

S&P 500: 4,349.61
1Mo: -3% | 1Yr: +19% | 5Yr: +57%

The market drifted sideways and lower today as investors hoped inflation would go away more quickly than it is.

Layoff rates are still very low. The Labor Department reported initial unemployment claims stayed the same last week at 209,000, lower than economists expected. Unemployment is historically low, and there are still more than 1.5 available jobs for every unemployed person.

Inflation seems to be trending in the right direction, except for gas prices. The Bureau of Labor Statistics’ Consumer Price Index rose 0.4%, driven mainly by rising rent and energy costs. [🤓] More than half of the month’s increase in living expenses came from higher shelter costs, which rose 0.6%. That means tangible inflation is likely lower than it seems. Government home pricing statistics are always a little stale and use funky calculations. More real-time indicators have shown home and rent prices rising much more slowly or decreasing in most areas. Gas prices were another major contributor to the higher living costs. When stripping out more volatile food and gas prices, core CPI rose only 0.3%. Overall, living costs are still 3.7% higher than a year ago. It seems most things are returning to a more normal, inconspicuous level of price inflation.

Wages aren’t keeping up with rising living costs. The Labor Department reported real average hourly earnings for all employees declined by 0.2% in September. Wages had started catching up earlier in the year, but that trend has reversed recently. The average amount workers earn each week buys them less stuff than it did one year ago.

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Why is the Consumer Price Index (CPI) important?

The Consumer Price Index (CPI) is one of the main ways economists track inflation. Inflation is the rate at which things get more expensive. The CPI looks at a set basket of stuff your average consumer spends money on and tracks how much it costs each month. The rate of change is inflation.

One important thing to know: inflation is most often quoted as an annual number, like "inflation rose 3.7% in September," but the annual number might not always be the best reference in unusual times like the past two years. If we're trying to understand whether living costs are still surging, the monthly rates of change are most helpful. If prices rose by 0.6% in one month and 0.4% in the next, inflation declined, regardless of the change over the past twelve months. The annual number helps us remember the pain we've experienced, but monthly numbers help us understand what's happening today.

Prices rarely go down. It's normal for things to get more expensive. You'll never be able to buy a Coke for a quarter again, but that's okay. Low inflation (~1-2% per year, 0.0-0.2% per month) is standard and almost unnoticeable. High inflation, like we saw last year, with prices of essential goods going up nearly 7-10% per year, is a problem. It's unmanageable, especially if our incomes aren't rising in tandem. Low inflation, where incomes keep up or outpace rising living costs, is the goal for economic policy, not zero or negative inflation.

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Rising Rates & Job Uncertainty: Step one in personal finance is always to make sure that you have an emergency savings in cash. Whether you think it’s enough to stash 3-6 months of income or 3-6 months’ worth of expenses, you need to have it ready.

Use Raisin (formerly SaveBetter) to ensure your savings account pays you at least 5%. Interest rates have gone up A LOT, but the big banks don’t need your deposits. They can keep paying you less than 1% and not worry. See where what a savings account pays at smaller banks here.