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May 6, 2024
JOB GROWTH SLOWS: In April, the U.S. economy added more jobs, but at a slower pace. 175,000 net new jobs were added, significantly less than the prior month. The unemployment rate inched up to 3.9%. Both manufacturing and construction jobs increased.
WAGE GROWTH SLOWS: Wages in the U.S. grew at a slower pace than the prior month, rising 3.9%. In March, that number was 4.1%. From the second half of 2022 until the end of 2023, average wage growth hovered at about 5%. This has helped keep inflation up. Although it is only four months, so far in 2024 average wage growth has slowed, rather quickly, to about 3.6% annualized. If these numbers are not revised, and do not turn out to be a fluke (i.e., they rise in the months ahead), it should affect the direction of inflation and interest rates.
TOTAL JOB OPENINGS DECREASE: The number of total job openings in the U.S. economy decreased in March to the lowest level in more than three years at 8.5 million vacancies. This is down from 8.8 million in February and the lowest since February of 2021. 8.5 million jobs is still high (before 2021, there were never more than 8 million), but it is down from the peak of 12.2 million in March of 2022.
FED DOES NOT TOUCH INTEREST RATES:
"The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
The Fed met last week and announced no changes to interest rates, which was predicted by virtually everyone. Prior to the meeting, I began to see some commentators talk about a possible rate increase later this year if higher inflation persists. But in Fed Chair Jerome Powell's comments, he stated that an interest rate cut was still more likely than an increase. Of course, he left all options on the table, and stated that the data will dictate, but hearing the so-called "easing bias" of the Fed cheered investors.
EMPLOYMENT DATA AND FED COMMENTS FUEL A RALLY: The April labor data indicates an economy with just enough cooling. It was enough to spark a rally. Some strong corporate earnings reports sustained the rally, led by Apple which jumped 6% on Friday after it announced earnings.
LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.
EUROPE EKING ITS WAY OUT OF RECESSION: The Eurozone's four largest economies are driving growth which caused the entire region to enjoy a 0.3% growth rate in the first quarter, its best in a year and a half. Average inflation held at 2.4% annualized. Germany, France, Italy and Spain all performed better than expected in the first quarter. The European Central Bank is predicting annual growth of 0.6% this year and 1.5% next year.
GIVING STOCK TO CHARITY: Only 6% of people who donate to charity give stocks. Donating stock is a fairly simply way to reduce capital gains tax. When you donate appreciated stocks that you have held for more than a year, you generally receive a tax deduction for the fair market value of the stock. Once the charity receives the stock, it can usually liquidate the stock tax free. The gain in the stock is absorbed by the charity, not the donor, and thus that tax liability can be avoided. You can also use a donor advised fund to execute this strategy.
R.I.P. DR. B: During my first days as a college freshman, I was walking on campus with friends. I told them that I was not active enough in high school, and that I was going to "join stuff" in college. As I said that, we saw a sign that said, "Choir Auditions, Walk In." True to my statement, I walked in. There was Dr. Alton Bynum, the Chairman of the Music Department and the Choir Director. Unbeknownst to me at the time, Dr. Bynum was the son of Alabama sharecroppers who only wanted him to work on the farm. He actually had to run away at the age of 13 to complete his education. He worked his way through eventually getting his Ph.D. despite growing up dirt poor. Dr. Bynum accepted me into the Choir and eventually the school's more elite choir (the "Chamber Singers"). Of all the professors at the school, he was the one who took a personal interest in me, making sure I was okay during some difficult times, being an encouragement, pushing me. I was not a person with musical ambitions, and I majored in Political Science, and yet it was this music professor who had the most profound affect on my life. He was a strong-willed man who worked to get the best out of his students, and yet he was a person with a gentle spirit who deeply cared about each of us, and we all knew it. On tours, we got to see him interact with his wife, and I think that model has made me a better husband. Dr. Bynum passed away at the age of 91. We all encounter people from time to time who have an outsized impact on the trajectory of our lives. Dr. Bynum was one of those people. Rest in peace Dr. Bynum.
Have a great week!
Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.
Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
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SOURCES:
JOB GROWTH SLOWS: https://www.bls.gov/news.release/pdf/empsit.pdf
WAGE GROWTH SLOWS: https://theovershoot.co/p/is-nominal-wage-growth-starting-to
FED DOES NOT TOUCH INTEREST RATES: https://www.wsj.com/economy/central-banking/fed-chair-jerome-powell-projects-optimism-but-inflation-data-are-in-the-drivers-seat-2e729027?mod=article_inline AND https://www.federalreserve.gov/newsevents/pressreleases/monetary20240501a.htm
TOTAL JOB OPENINGS DECREASE: https://www.msn.com/en-us/money/markets/us-job-openings-fall-to-85-million-in-march-the-lowest-level-in-more-than-3-years/ar-AA1nZhsW
EUROPE EKING ITS WAY OUT OF RECESSION: https://gritcap.io/p/big-mac-small-growth
(c) 2024 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved
*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.
*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.
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