👷♂️📈 U.S. Added 250k+ Jobs, Good Thing or Bad?
Happy Wednesday all,
This is Rickie checking in with you this week. I just flew back home from Mexico and came back about six shades darker than when I first left.
It’s interesting because I’ve been working with Humphrey writing for the newsletter and editing/animating on the YouTube channel for almost three years now, but I haven’t formally introduced myself yet. I figured this week would be a good time to briefly introduce myself and answer any questions for those interested.
I am a 24-year-old accounting and finance graduate, and while I previously worked as an accountant and an investment analyst, I now wear many hats as part of Humphrey’s team trying to make financial education accessible for everyone. If you have questions about the writing process or suggestions for the newsletter, leave them in the comment section! It’s been a pleasure to write to you every week, and we hope to keep improving what we have here!
Enjoy this week’s Hump Days!
- Humphrey, Rickie & Tim
The Weekly Brief
White House Debt-Ceiling Meeting Fails to Yield Breakthrough as Deadline Nears (WSJ)
President Biden and House Speaker Kevin McCarthy made little progress in the face of the first-ever default by the federal government, which could come as early as June 1st, but were able to set plans for a new round of talks. Republicans have demanded deep spending cuts in exchange for raising the debt ceiling, but Biden and Democrats maintain that the limit should be raised without preconditions.
Why Does It Matter?
Biden insists that the nation wouldn’t default but that “politics, posturing, and gamesmanship” will continue in the coming weeks as the June 1st deadline nears. The congressional leaders meet again with Biden on Friday.U.S Trade Chief to Meet China Minister in Sign of Warmer Ties (Bloomberg)
U.S. Trade Rep. Katherine Tai Plans to meet with China’s commerce minister in Detroit later this month. This would be the most senior in-person encounter between the two nations since the U.S. shot down an alleged Chinese spy balloon. Tensions have escalated over the U.S.’s support for Taiwan and export controls restricting China’s access to high-end technology, but this meeting, along with a previous meeting between Chinese Foreign Minister Qin and U.S. Ambassador Burns, signal that communication is set to resume.
Why Does It Matter?
It seems as though relations are improving since the spy balloon incident. This upcoming meeting could pave the way to clearing a backlog of canceled engagements, including a phone call between Biden and Xi and a visit to China by Secretary of State Anthony Blinken.Home Prices Fell in Third of the U.S. During First Quarter (WSJ)
Home prices in Q1 fell in more parts of the U.S. than they have in over a decade, with nearly a third of metro areas posting annual price declines, according to the National Association of Realtors. California had the largest concentration of housing market declines, with San Francisco posting a 14.5% decline in single-family existing-home sale prices. San Jose saw median prices fall 13.7%, and Austin, Texas and Boise, Idaho posted more than 10% declines.
Why Does It Matter?
The decline in home prices is to be expected as higher mortgage rates have quieted home-buying demand, and supply has been limited. What we’re seeing is that prices are lower in expensive markets and higher in affordable markets. This makes sense, given the flow of people away from major corporate cities such as San Francisco to more affordable areas of the U.S. with the popularity of remote work.Hump Days Scoop
Late last week, the April jobs report was published by the Labor Department, which showed that despite the slowing economy and the collapse of multiple banks, non-farm payrolls (which make up 80% of the U.S. job market) grew by 253,000, soaring above Wall Street estimates which came in at 180,000. The unemployment rate is currently at the lowest level in 50+ years, putting a lot of pressure on the Fed to reel in the labor market to cool inflation.
As described by employers, the labor market remains “stubbornly tight,” so this week, we discuss some takeaways and what the latest jobs report means for our economy.
What were the major takeaways from the latest jobs report?
U.S. payroll gains accelerated unexpectedly, with the figure of 253,000 beating all but three of the 77 forecasts in Bloomberg’s survey. The increase was led by health & education + leisure & hospitality, which collectively comprised nearly 100,000 jobs.
Average hourly earnings increased by 0.5%, the biggest increase in wages since July.
The likelihood that the Fed will cut rates again in the coming months declines, and the report strengthens the “higher rates-for-longer” scenario. S&P climbed 1% as the chances of near-term recession also declined with such a hot jobs report.
Is the current unemployment rate a good or bad thing?
The unemployment rate came in at 3.4% against the estimate of 3.6% and is tied for the lowest level since 1969. That is the lowest unemployment rate we’ve seen in 54 years!
While many reporters lately have used the low unemployment rate to push the narrative of a negative outlook (such as hot inflation), it is nothing more than just a figure that can be used to push whatever narrative that you want.
As of recent, low unemployment has been an area of concern in the context of the Fed’s attempts to cool our economy down. We’ve reported in the past that the labor market has been “resilient” regarding the Fed’s rate hikes, meaning that despite the Fed’s attempts to slow the economy, the labor market keeps adding new jobs. However, low unemployment is a good thing. When not contextualized by inflation, many political figures call upon low unemployment as a beacon of pride because low unemployment means that people have money to spend and the economy is flowing freely.
Are they “good jobs”? Or are they all part-time?
You’ve likely heard people online say this before.
“Unemployment is only low because there’s an abundance of part-time jobs. No one is hiring full-time anymore. There are hundreds of thousands of new jobs but the quality is terrible.”
This kind of rhetoric has become a political jab at whoever is in office to say, “Yeah, we have a bunch of new jobs, and unemployment is low, but they’re bad jobs,” and rarely is this statement ever backed by facts. Lucky for us, though, we can call upon data to see the quality of the jobs being created. One figure that tells us a lot and disarms the “bad jobs” argument is the Full-Time Prime Age (25-54) employment-to-population ratio. As shown in the diagram below, the ratio plummeted as a result of the ‘08 Financial Crisis and the Covid-19 pandemic but has since recovered and blown past pre-pandemic highs.
What this ultimately means is that the labor market is strong, and beyond that, it is high quality.
Chart of the Week
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