I’m excited to go meet my friends’ new baby this month. She will be almost three months old, so hopefully she will still have that great baby head smell. Her parents think I’m some sort of great pal, showing up to wash dishes and do laundry, but it’s all a ploy to get a fix of baby huffing.
I remember (somehow through the fog of postpartum sleep deprivation) when my kids were this age, and they would grow visibly larger over the course of a nap. I also marveled at developmental leaps, often preceded by a very sleepy or cranky day – they went to bed with a four-word vocabulary and the next day they said twenty.
Our economic recovery seems similarly lumpy. We discussed the changes in growth and inflation indicators in our economic webinar last month – that they seem huge and alarmingly fast, but in fact, it is in comparison to a miserable year-ago number that they are so large.
This month we were told to expect a million new jobs reported for April, and got a quarter of that. Meanwhile, some employers report an utter lack of available labor (at prevailing wage rates – a material factor). Aggregated economic data lack the nuance of our day-to-day experiences of the onslaught of news and personal gains and losses as jobs are lost and won, housing prices go on a tear, and cybercriminals “inadvertently” shut down fuel pipelines.
Economic output grew strongly in the first quarter, in line with expectations cited previously. The unemployment picture is a bit messier – we created over a quarter million jobs, but the unemployment rate held fairly constant, because people re-entered the workforce.
The latter is a good thing – people are feeling optimistic or safe enough, or have the childcare they need, to go look for work again. We are still seeing inequity in employment rates, shown in this graph of unemployment rates by reported race.
Civilian unemployment rate, seasonally adjusted, BLS.gov
I mentioned wage rates earlier – with our already patchy childcare system turned on its head and many jobs presenting a greater danger than they did pre-pandemic, the amount employers will need to pay to entice workers has seemingly risen beyond formerly prevailing wages. This is a shift in the supply curve of labor – very simple in terms of economic theory. Very messy if you’re trying to staff your bar.
Equity markets charged boldly forward through April, with the S&P 500 hitting an all-time high (which was subsequently passed in May) of 4211.47 on April 29.
Apparently our next-door neighbor asked my fiancé “hey what’s the market going to do?” the other day. My answer to him was, “tell her we can talk about it over a cup of tea.”
The real content of my answer, however, will continue to be as unsatisfying as ever. “I don’t know. No one knows. If they tell you otherwise, they are selling something that you should not buy. Stay diversified and keep your costs down.” Hopefully the tea will help soften the blow.
Another example of my party-pooper philosophy is the many times I have told family, friends, or even strangers to keep their emergency fund, house down payment, or next semester’s tuition in cash. No one likes this answer.
They want me to tell them about the next Dogecoin when it’s pennies a unit, and when it will spike to over a dollar. That might be fun, but is it worth gambling your housing on whether I’m right? It seems there is always a get rich quick story, such as a neighbor who “bought bitcoin when it was $10 and now she’s retired.” I’m delighted for that person, but there are also folks who bought speculative investments that never went anywhere or lost all their value.
It’s fine to put an entertainment-value amount of money into a fringe investment idea, like a cryptocurrency that was built as a joke. If it will entertain you for an hour, I suggest a reasonable bet would be the amount you would be willing to spend to see a stand-up comic special. By this point in the conversation, the person who asked me the question is either relieved to not have to figure out what this genius money making plan will be or has entirely tuned me out.
Explaining why short-term market prediction is a losing game is a whole blog post of its own – in fact, an entire academic field continues to argue back and forth about it. What we can do, and strive to do, is understand the fundamental economic environment in which businesses and governments are operating and think about how that might affect our clients. We focus on what clients *can* control –expenses, real estate decisions, tax planning, career paths, diversification, risk mitigation – so they are less dependent on what they can *not* control – market returns, pandemics, elections, mortality. We are here to help with the decisions that help you make your life work as best it can. For the other things, well, I make good tea.
Summary of the “Numbers”
|Reference||What it measures||Latest numbers||Source|
|GDP (Gross Domestic Product)||Goods and services produced on US soil||Rose at an annual rate of 6.4% in the first quarter of 2021||Bureau of Economic Analysis (bea.gov)|
|Unemployment Rate||Share of people “in the workforce” who are totally unemployed||Moved little in April, staying at 6.1% (seasonally adjusted)||Bureau of Labor Statistics (bls.gov)|
|S&P 500||US large and mid-sized company stocks||Total return +5.2% (April)||S&P Dow Jones Indices|
|Russell 2000||US small-cap company stocks||Total return +2.1% (April)||FTSERussell.com|
|MSCI EAFE||Large-cap stocks in Europe, Australasia, and the “Far East”||Rose +3.0% (April)||MSCI (msci.com)|
|Barclay’s Aggregate Bond Index||Intermediate-term, investment-grade US bonds||Returned +0.8% (April)||Morningstar (performance. morningstar.com)|
|US 10-year Treasury Yield||What interest you can earn from a 10-year Treasury note||Rose 0.09%, from 1.65% to 1.74% (April)||Federal Reserve Bank of St. Louis|
 Outside, more than six feet apart, I promise.
Interested in more monthly economic updates?