🧭 The Weekly Scoop

Hey friends, US markets are closed on Monday for Labor Day. Enjoy the long weekend, and we’ll return with your regularly scheduled scoops on Tuesday, September 5th.

3 day weekend!

Welcome to our 162 new subscribers this past week! Take a second and share the scoop!

Here’s what you need to know this week.…

August is the Friday of the year for markets. No one takes Friday all that seriously because people start mentally checking out about halfway through the day. You never know if a Friday market reaction is serious until Monday. August is pretty similar. It wasn’t a great month for the market, falling about 2%. September is statistically one of the worst months of the year, perhaps because everyone returns from vacation in a bad mood. Either way, we’ll get a lot more data and a better sense of how investors are feeling next week.

We did get a decent amount of interesting economic data this week. The main headline reads: July was a great month for the economy, but the momentum faded a bit in August. It’s unclear whether this is the economy doing well with a little less energy or starting to do worse. One of the challenging parts of staying informed about the economy is that economic data is usually released on varying degrees of lag. So you’ll read articles speculating about the state of the economy referencing data that could be related to periods up to 3-6 months apart. In an economy as out of balance as we’ve seen, changing rapidly from month to month, paying attention and getting the timelines right is essential.

Trends to know:

• Mortgage rates have steadily increased for the past few months to multi-decade highs.

• Inflation has mostly been trending lower this year and was particularly optimal in June and July. No August data yet.

• Home prices have remained outrageously high.

• Americans broadly keep spending, but lower-income consumers are stretched. Built-up savings are dwindling, and student loan payments restart next month for millions of people.

• Business activity was strong in July but seems to have slowed a bit in August.

• The job market has remained stellar for workers, trending a little closer to normal where companies aren’t running so short-staffed.

It seems like the fall will be a more challenging economic period, but we’ll keep you updated on the trends as they unfold.

🐂 Reasons to be optimistic:

• Companies aren’t laying off many people right now. The Labor Department reported initial unemployment claims dropped for the third week to 228,000, roughly in line with pre-pandemic averages. Unemployment has been about as low as economists think possible, and there are still more than 1.5 available jobs for every unemployed person.

• Americans went on a spending spree in July, even though savings are dwindling. The Commerce Department reported that personal consumption expenditures jumped 0.8% in July as people spent more on goods like groceries and clothing and services like restaurants and healthcare. Real disposable income declined for the first time all year.

• Living costs aren’t rising as quickly. Policymakers’ preferred inflation gauge rose only 0.2% in July, much closer to a healthy economy's inconspicuous monthly rate of price increases. Overall, everything we spend on is still 3.3% more expensive than a year ago.

• Americans are feeling OK, but they’re worried about rising living costs. The University of Michigan’s Consumer Sentiment Index fell in August but remained near the highest level since December 2021. Consumers loved the recent inflation cooldown but still expect living costs to increase by 3.5% over the next year, averaging 3% increases yearly for the next five years. Typically, prices rise 1-2% per year, but everything has been out of wack since the pandemic.

🐻 Reasons to be pessimistic:

• Home prices keep climbing. S&P CoreLogic Case-Shiller reported median home prices rose by 0.7% in June, the fifth straight month of gains. High prices and high mortgage rates have made this the most unaffordable housing market since 1984, according to Black Knight Inc. The unappealing costs of a new home are not only deterring buyers but also sellers, limiting the supply of available homes and keeping prices high.

• Business activity slowed in August. The Dallas Federal Reserve’s Manufacturing Survey reported a decline in factory activity, fewer new orders, less optimism about future business conditions, and higher supply costs. Earlier surveys from the New York region shared many of the same sentiments, but things picked up around Philadelphia this month.

• The US economy didn’t grow as much this past spring as we thought. The Commerce Department revised its estimate of US economic growth from the second quarter to 2.1% from 2.4%. [🤓] It's still an improvement from the 2.0% pace of growth in the first quarter and above what policymakers think is normal. Businesses invested less in equipment and reduced inventories, but consumers spent more than initially measured. Consumer spending is the most important, powering two-thirds of the economy.

• Corporate hiring slowed in August. Payroll provider ADP reported private sector employment rose by only 177,000 jobs in August after increasing by 371,000 in July.

The worker shortage has empowered a labor movement. Calling it a worker shortage doesn’t quite capture the problem. It’s more of a worker over-demand. The stimulated economy had businesses running beyond what the available resources could supply, humans included. More Americans are working now than before the pandemic, but there are still nearly nine million open job postings. This imbalance has given labor the upper hand in a way we haven’t seen in years. Unionization has been on the rise, with employees organizing at major corporations for the very first time - from Starbucks to Apple and Amazon. Strikes and contract negotiations raged on this week.

Click to dig in & vote your reaction, see how others feel

• American Airlines flight attendants authorize a strike for better pay

• Chevron faces global gas disruption from worker strike 

• General Motors raises union worker pay by 25%, but that’s just the start

• Warner Bros pushes back Dune 2, Godzilla, and more over actor strikes

• American Airlines pilots get a 46% pay and benefits bump

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

🏡 For your home

7.3% = Average 30-year mortgage rate

That’s up from 7.1% a month ago and up from 5.8% a year ago. _{Mortgage Bankers Association, 8/25/23}

$406,700 = Median existing home sales price

That’s down from $410K a month ago and up from $399K a year ago. _{National Association of Realtors, 7/31/23}

💼 For your work

228,000 = Layoffs Last Week (Initial jobless claims)

That’s down from 232,000 the week before and in line with pre-covid averages. _{Labor Dept., 8/25/23}

187,000 = New jobs added in July

That’s up from 185,000 in June and in line with pre-covid averages. _{Labor Dept., 7/31/23}

3.5% = Unemployment rate

That’s down from 3.6% in June and still near the lowest rate in 50+ years. _{Labor Dept., 7/31/23}

8.8M = Available jobs

That’s down from 9.2M in June and well above pre-covid averages of ~7M. _{Labor Dept., 7/31/23}

Who’s hiring: Information technology and transportation

Who’s firing: Healthcare and business services

👜 For your wallet

3.2% = Cost of living increase (1-Year Inflation)

Living costs are 0.2% higher than the month before. Normal inflation sees prices rise by 0% to 0.2% per month, 1-2% per year. _{Bureau of Labor Statistics, 7/31/23}

3.6% = Groceries cost increase (1-Year inflation)

Groceries are 0.3% more expensive than they were a month ago. _{Bureau of Labor Statistics, 7/31/23}

$3.82 = National Average Gas Price/Gallon

That’s up from $3.78 a month ago and down from $3.84 a year ago. _{AAA., 8/31/23}

💰For your savings

0.43% = Average interest banks pay on a savings account_{, FDIC, 8/21/23}

5.50% = Interest rate banks earn on their savings accounts_{, Federal Reserve, 7/26/23}

The Federal Reserve has raised baseline interest rates from 0% to 5.50% in the past year. Make sure your bank is paying you higher interest on your savings.

💸For your investments

+1% = This past week’s change in the US Stock Market

-2% past month, +13% past year, and +55% over 5 years. _{S&P 500 Index, 8/31/23}

4.11% = The yield on the 10-Year US Treasury Bond

Yields are -3% this past week, +2% this past month, and +28% over the past year. _{US Government Bonds, 8/31/23}

-1% = This past week’s price change for Bitcoin

-11% in the past month and +30% in the past year. _{Coinbase, 8/31/23}

-1% = This past week’s price change for Ethereum

-11% in the past month and +6% in the past year. _{Coinbase, 8/31/23}

Gross Domestic Product (GDP) is how we track how much stuff the economy is producing. The actual number (~$27 trillion) doesn't matter as much as the direction and magnitude. We track the growth rate of real GDP (inflation-adjusted) to know whether the economy is expanding or contracting from the previous quarter.

The reporting style can be a bit confusing. The main number you hear will be an annualized growth rate (+2.1%) of the quarter, representing how much the GDP would increase/decrease if the economy hypothetically grew at that rate for an entire year. It's different from how much our production increased/decreased quarter-to-quarter (+0.5%) and not representative of the growth/decline over the past year (+2.5%). Annualizing the past quarter’s change makes the backward-looking number a little more forward-looking.