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Job numbers just threw the Feds a curveball

Massive job gains vs rising interest rates. Who blinks?

May 09, 2023

Good morning guys. This is what makes macroeconomics fun. Fed increases interest rates, banks are troubled but consumer demand gets mitigated followed by loss in job numbers. You reduce rates, corporate investments go up, consumer demand increases and so does inflation. Right? April’s job report is indicating otherwise.

Alright so today we’ve got:

  • Unemployment rates hit record lows.

  • Elon Musk is building not one, but 2 Utopias.

  • Tiktok is giving it all to operate in the US market.

    Let’s do a walkthrough.

The Big Picture

With rising inflation, Federal reserve has been raising interest rates at historical highs. Another indicator the Feds have been using to keep raising the interest rate knob has been job growth. Even with interest rates at a staggering 5%+, the jobs report in April says otherwise. Unemployment rate fell to 3.4%, the lowest since 1969.

Unemployment rate graph. Source: Tradingeconomics.com | B.L.S.

US added 253,000 jobs since January. Wages grew 4.4% compared 4.3% last March. DOW added 550 points while the S&P500 grew by 1.85%. The report adds to the difficult situation the Federal Reserve is in as Jerome Powell might consider raising rates again although the possibility is low.

Sector Sweep

Tech

  • Elon Musk is building an old school company town in Snailbrook, Texas about 45 minutes from Austin. It will have SpaceX, Boring company offices, modular homes and their own school. He’s also doing something similar with Starbase, TX in Boca Chica which is expected to be a spaceport of the future.

  • Since 2017, SEC has been regulating crypto securities as it argues they fall under it’s purview. Among the 76 cryptocurrencies identified as securities, SEC has made fraud allegations on 37 of those coins.

  • Following mass tech layoffs and severe correction in technology company stocks, employees from META, Amazon, Netflix and Alphabet have seen sharp drop in their earnings.

  • Princeton and tutor.com are being acquired by a Chinese private equity firm. tutor.com has active contracts with the US military and this acquisition is being closely monitored.

Transportation

  • 22000 workers are nearing a union contract with ports from California to Washington State.

Energy

  • Six companies referred to as Big Oil : Eni, Shell, BP, Total Energies, Chevron and Exxon Mobil have reported $150 billion in cash in their recent earnings. Chevron and Exxon Mobil have paid out $14.8 billion in dividends in the first three months of this year to investors.

Real Estate

  • Few California cities are still employing Covid restrictions on landlords as they control rent and curtail evictions. These measures are a step to control homelessness, as data shows that eviction filings went up 80% in 2022 YOY.

Media

  • For the top 4% of creators on TikTok, the company is launching a new product - Pulse premiere. Top creators will be given 50% of the ad revenue by TikTok. The news comes amidst data privacy concerns the Biden administration has raised on the platform.

Finance bro term of the day: Stock Buyback

Stock buyback are simply when a company buys it’s own stocks from the profits. This is to encourage investor sentiments and create value for them. When the interest rates and taxes were low post 2017, large number of companies employed in stock buybacks. Another reason for companies to do this is to simply boost their share prices.

That’s all for today folks. Do keep a lookout for our weekly email about stock deep dives and personal finance strategies this Saturday.

BTW, do tell us how we did. Just hit us with a reply.

Cheers!

Memetic Universe

Tale of 2 markets in the same segment.

April 2023 Jobs report deep dive: