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Mosaic Weekly Article 6.4.2022

June 06, 2022

The job market remains relatively strong and robust as evidenced by the May jobs data released on Friday morning. “Employers have added more than 400,000 jobs a month for 12 consecutive months, the longest period of such strong employment growth in records dating back to 1939. Competition for workers amid a severe labor shortage has driven up annual wage increases above 5% every month of this year. By contrast, wage gains averaged 3.2% in the 12 months to February 2020.”, according to the Wall Street Journal. Wage growth has helped to buoy consumer spending, but inflation is still problematic and has not been able to outpace the uptick in our everyday expenses. This is not a healthy mix as wage growth alone is not enough to offset the rising costs we are all bearing. Until we see inflation ease in a real and tangible way, the strain on our wallets will continue.

Energy prices, after easing slightly, are on the rise as again as well. As the war in Ukraine rages on, global energy demand is not decreasing. In fact, the opposite can be said as COVID related restrictions globally are subsiding. I’m afraid the prices we are paying at the pump will only increase as the summer months progress. I believe that OPEC alone cannot produce enough oil to fill the growing demand and help to offset the lack of supply from Russia. From a financial standpoint, our stock markets remained rather neutral to slightly lower for the week, based on the ever-changing headline risks. We also saw additional companies announce hiring freezes and a reduction in future employment needs based on their perceived economic uncertainties. It seems to be contained to certain sectors, like technology. But the hope is that as the broader landscape evolves, these seemingly “contained” issues do not become more widely systematic. This makes me feel even more certain that we are indeed in a temporary “bear” market rally as the path to certainty remains far from clear at this point.

Several Federal Reserve members have been very visible and vocal this week, confirming that significant interest rate increases are expected at the next several meetings. What I find significant is not the talking points, but rather the variety and frequency of members who have spoken (nearly every day this week). This tells me that visibility is ever important given the fragility of the current situation. Not an easy task by any means. All eyes will be focused on what the monthly CPI (consumer price index) number reads next Friday. This could show a continued trend of slightly lower readings, indicating that inflation has indeed already peaked. As consumers, we are yet to feel much ease in prices in general but there have been areas of improvement (certain retail segments, used car prices, housing inventory, etc.). As it stands right now, in my opinion, the financial world seems split 50/50 on when and if a recession will occur. While the data seems to be pointing in that direction, the strong employment numbers tell a different story. More convincing economic indicators may be needed before the “scales” tip in a true and meaningful way. I do know this for certain however, with four drivers in my household, all working and needing transportation, it is going to be an expensive summer in my house!

Have a nice weekend and enjoy.