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- Wednesday's Scoop: Energized 🌤️
Hey friend - I love the Olympics, so you’re going to get some updates here:
The US is back on top for medals but lags in golds.
Women’s team gymnastics yesterday was unreal.
Ping-pong isn’t getting enough attention IMO.
Peacock’s “Gold Zone” is pretty sweet for real-time watching.
No spoilers, but the USA vs. Canada mixed doubles tennis quarterfinal was a nail-biter worth watching.
Here’s what you need to know today to inform your work, spending, and investments:
🌎 Big picture
Policymakers are almost ready to make borrowing a little cheaper.
Companies are cutting back on hiring.
Wages aren’t rising as quickly, but they’re catching up to the cost of living.
How are you feeling about the economy? |
💼Work trends
Unemployment Rate: 4.1%
Not far from 50-year lows
Companies aren’t hiring as much lately. Payroll provider ADP reported that private-sector companies added just 122,000 net new hires in July, the lowest increase since January. The lower hiring demand also means a slowdown in salary increases. Year-over-year wage growth slowed to 4.8% for people who stayed in their jobs, the smallest since 2021. Switching companies is still the fastest route to higher income, though. People who changed jobs in the past year have grown their wages by 7.2%. This report aligns with the ongoing trend of a slowing economy.
Incomes are catching up to the cost of living. The Labor Department’s Employment Cost Index, policymakers’ preferred compensation gauge, rose at a 0.9% rate in the second quarter, slightly lower than the 1.2% at the start of the year. Wages and benefits overall have grown by 4.1% over the past twelve months, faster than the cost of living. When adjusting for inflation, compensation increased by 1.1% in the past year. As companies cut back their hiring plans, wage growth has slowed, but any real income growth is a welcome sign for consumers strained by years of high inflation.
👜Cost of living trends
Inflation Rate: +3.0% (YoY), -0.1% (MoM)
Policymakers aim for 2% YoY inflation. (June CPI)
Policymakers are almost ready to make borrowing a little cheaper. The Federal Reserve kept baseline interest rates unchanged at the July policy meeting and has not yet made explicit plans to cut rates. However, policymakers believe there has been modest progress in slowing the rising cost of living down to the Fed’s 2% annual inflation target. They would be willing to cut rates as soon as September if inflation continues to slow.
The growing confidence that inflation is under control has been balanced by increased concern about the job market. Last year, policymakers were largely ready to push the economy into recession to stop inflation. Now, Fed members increasingly emphasize their responsibility to minimize unemployment. Federal Reserve Chairman Powell expressed confidence in the current state of hiring but warned that risks of rising unemployment are real. If all goes to plan, policymakers hope to slowly reduce borrowing costs on things like mortgages and auto loans over the next year without reigniting inflation or fueling more layoffs.
🤓 Inside Scoop: How does the Federal Reserve control the economy?
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 heat 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 economy doesn't overheat. Inflation is the Fed's heat gauge. The gauge was reading very hot after the pandemic, so the Fed started raising interest rates to cool things down.
📈Investment trends
The Market: ⬆️ +1.6%
S&P 500: 5,522.30
1Mo: +1% | 1Yr: +20% | 5Yr: +88%
The market had its best day in months on Wednesday after policymakers expressed confidence in the economy. The Federal Reserve believes inflation is nearly under control and primed investors to expect its first interest rate cut in September. Lower interest rates are good for the stock market because they make it cheaper for businesses to borrow while reducing the relative attractiveness of other investment options that pay interest.
🏭 Companies worth watching
👍👎 APPROVAL RATINGS
Vote and practice your board member voice. It accelerates your comprehension and comfort with these topics. (+2 pts)
 Delta Air Lines | Seeking Compensation Delta Airlines has hired a law firm and plans to seek compensation from Microsoft and CrowdStrike over a cyber outage that led to over 6,000 flight cancellations and stranded hundreds of thousands of passengers. The airline estimates it lost over $500M from the outage.
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 Boeing | Turbulent Operations Boeing announced a new CEO to replace Dave Calhoun amid mounting regulatory scrutiny and significant second-quarter losses driven by production failures. Aerospace veteran Kelly Ortberg will face the challenge of turning around the troubled plane manufacturer.
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 Intel | Slashing Workforce Intel plans to cut thousands of jobs to support its ambitious turnaround strategy amid slowing sales and waning market share. The California-based chip maker will focus more on research and development, investing billions in new factories.
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💭Broader perspectives… (+ 2pts)
Do you think the price inflation of the past few years has permanently changed some of your purchasing habits? |
 Kraft Heinz | Losing Sauce Kraft Heinz continues to suffer from consumer pushback from recent price hikes, reporting selling less of its snacks and condiments while continuing to raise prices. The packaged food giant hopes promotions and new products can help bring back customers.
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 Meta Platforms | Ad Monster Facebook-parent Meta continues to dominate in digital advertising, reporting surging profits and revenue again by selling more ad impressions at higher prices while slashing operational costs. The social giant's metaverse division is still far from profitable, losing $4.5B in three months.
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🛠️ Recommended resources (+2 pts)
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