Today's Scoop:

Slump ⛅

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Here’s what you need to know today…

Big Picture

  1. Hiring keeps slowing.

  2. Americans are getting paid less for their increased productivity.

  3. Insurance companies are consuming government funds meant for affordable housing.

The Market: ⬇️ -0.4%

S&P 500: 4,549.34
1Mo: +4% | 1Yr: +16% | 5Yr: +73%

The market drifted lower for the third straight day as investors shifted from celebrating an economy that's no longer overheating to worrying about an economy that could slip into recession.

Companies aren’t hiring as much as they were earlier this year. Payroll provider ADP reported just 103,000 jobs added in November, well below economists' estimates. Most of the gains came from the transportation, education, and health sectors. Additionally, annual wage growth slowed to 5.6%, the smallest level of increase in over two years. This reflects a potential challenge for American workers, who are not seeing their wages increase enough to keep up with the high cost of living.

Americans are working longer hours and more productively but getting paid less for it. The Labor Department reported labor productivity increased in the third quarter at the fastest rate since 2020. Output increased by 6% while we worked 1% longer hours. Unit labor costs, what businesses pay for our marginal productivity, decreased by 1%. When adjusting for the cost of living, wages rose only 0.4% on average over the prior twelve months.

Major US life insurance companies are funding their corporate profits with cheap government-backed loans meant to help increase affordable housing. Reuters reported insurers like MetLife, TIAA, Corebridge, Brighthouse, and Equitable have been borrowing hundreds of billions of dollars in low-cost loans annually from Federal Home Loan Banks (FHLBs) and investing the money for significant profits. They argue that they support housing by including mortgage financial securities in their investment portfolios. However, this practice has not made homes or loans more affordable. The companies retained access to the funding via a loophole in a 90-year-old law. Read more

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Company Scoops 🗣️🌎💰

 

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Johnson & Johnson

Cancer Powder

Johnson & Johnson hopes to avoid trial and settle lawsuits with 50,000 people who claim its Baby Powder caused cancer and that its executives have known since the 1970s.

The healthcare giant aims to limit its damages by filing for bankruptcy.

Wells Fargo

Looming Downsizing

The nation's fourth-largest bank plans to lay off many more employees in what could cost close to $1B in worker severance.

Wells Fargo has already cut 5% of its workforce in 2023, totaling over 11,000 jobs.

IBM

Quantum Leap

IBM introduced a new quantum computing chip, a new type of super-fast computer that uses special connections to fix errors.

This is a huge step toward developing computers that work way faster and more practically than what we have today.

Ford

Electric Business

Ford is teaming up with Xcel Energy to install 30,000 electric vehicle charging ports for fleet customers by 2030, seeing strong EV demand for businesses.

The automaker has pulled back some of its consumer EV investments amidst slow sales.

McDonald's

Super Sizing

The world's largest restaurant chain plans on getting 25% bigger, opening 10,000 new locations globally by 2027, and expanding its loyalty rewards program.

McDonald's will be opening more than half of these locations in China.

(These links only work for 24 hours while the story is live.)

 Inside Scoop 🤓

Why do economists talk negatively about rising wages?

There are several different ways to look at inflation. Inflation is the rate of change in the price or value of something. One of the most commonly discussed is consumer price inflation, which looks at how quickly the stuff we buy is getting more expensive. There's also asset price inflation, which could include the rise in the value of real estate, stocks, or other assets.

These things are interconnected, but an important one that economists and policymakers watch particularly closely is wage inflation, aka wage growth. Wages are a huge portion of corporate expenses, so as costs rise, businesses raise prices for their goods and services. As workers earn more income, that's more money to spend on the same amount of goods, pushing prices up. So, while rising wages seem good, economists are trained to see it as a two-sided risk to overall inflation.

The unique problem facing the economy right now is that wages have fallen so far beyond the cost of living. Income needs to catch up so consumers aren’t so strained.

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