Today's Scoop:

Hey friends - hope you had a nice weekend. Catch up with our last Weekly Scoop, and don’t miss our Explained about the moral debate around stock buybacks.

Here’s what you need to know today…

1. Used cars are finally getting cheaper.

2. Unemployment is low, and wages rose in June.

3. Consumers expect inflation to fall but stick around longer.

S&P 500: 4,409.53
1Mo: +2% | 1Yr: +14% | 5Yr: +57%

The market floated upward today on mixed feelings about the economy and inflation. Signs of a strong jobs market and rising wages might encourage policymakers to restrict the economy further. [🤓]

Used cars are finally getting cheaper. The Manheim Used Vehicle Index dropped in June for the third straight month by 4.2%, one of the steepest declines on record. Pandemic disruptions led to shortages in new cars and sent used car prices soaring over the last few years. Prices are close to 2021 levels now.

Unemployment is low, and wages are rising. The Labor Department on Friday reported total employment rose by 209,000 in June, averaging 278,000 per month over the first half of the year. That’s well below last year’s averages but in line with pre-pandemic levels. Unemployment is still near 50-year lows at 3.6%. Wages rose 0.4% in June. Average hourly earnings are now 4.4% higher than a year ago.

Consumers expect inflation to stick around. The Federal Reserve's Survey of Consumer Expectations revealed Americans believe living costs will rise by 3.8% over the next year and rise by 3% per year on average over the next 3-5 years. Expectations are important because they can become self-fulfilling.

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How the Federal Reserve Works

The Federal Reserve, aka the Central Bank, aka The Fed, is in charge of our whole money system. When the economy is struggling, the Fed lowers baseline interest rates to make it cheaper for consumers and businesses to borrow and spend (lower rates on business loans, mortgages, credit cards, car leases, etc.)

The Fed also pumps more money into the system by buying bonds with new dollars that it essentially speaks into existence. The additional cash keeps the pipes flowing as the borrowing and spending heats up, stimulating economic activity.

Once the economy's strong enough to stand on its own, the Fed starts to raise interest rates and pull back some of that money to ensure the econdoesn'tsn't overheat. Inflation is the Fed's heat gauge. The gauge was reading very hot but had been cooling lately. Everyone's watching how long the Fed will keep restricting the economy with high rates if inflation keeps cooling. The Fed hopes to get living costs under control without sparking mass unemployment.

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