In this week’s issue of Steady Investor, we explore current events impacting the market, such as:
• Stocks affected by cooling labor market
• Rise in innovation and entrepreneurship
• Latest trends in the U.S. labor market
Stocks Bolstered by Signs of a Cooling Labor Market – The U.S. jobs market showed signs of cooling last month, and that’s been good news for stocks. The Labor Department reported that in July, job openings in the U.S. fell by 338,000 to 8.8 million, which is the lowest level of openings since March 2021 (see chart below).1
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Why are falling job openings good for the stock market? Two words: The Fed. A key sticking point for the Federal Reserve has been trying to cool the labor market since few job openings have put upward pressure on wages. When job openings soared to a record 12 million in March 2022, workers had many options for work, which meant they could easily switch jobs for higher wages or negotiate with employers for better pay. Both actions are inflationary since higher wages lead to higher input costs, upward pressure on prices for goods and services, and more demand in the economy. With the somewhat tighter labor market, the “quits rate,” which measures resignations as a share of overall employment, has normalized at 2.3%. At the height of the tight labor market, the quits rate hit a record 3%. This is factors as good news for the Fed, whose mission is to cool the economy and the jobs market. That makes it good news for investors, who want to see the Fed’s monetary tightening campaign come to an end.
The Land of Innovation and Entrepreneurship – The U.S. economy is far from perfect, with nagging inflation and a weakening housing market. Entrepreneurs and innovators don’t seem to care. Americans are opening new businesses at a blistering clip, with a record number of national business openings posted in the first six months of 2023 (according to Yelp Economics). Every month to start the year has seen at least 15% more new businesses compared to the same month in the previous four years, with 25% year-over-year growth from 2022 and 46% more businesses than the same period in 2019. Of particular strength in new business openings has been in services and hospitality, arguably as Americans put the strong jobs market and higher wages to work. Hotels and travel companies are up 39%, home services up 37%, auto up 27%, and event services up 27%.4
The Latest Trend in the U.S. Labor Market: “Quiet Cutting” – In the spring of 2022, a trend emerged in the U.S. labor market known as “quiet quitting.” The labor market was so tight – with job openings far higher than the number of Americans seeking work – that some in the labor force ‘quietly’ started applying themselves less, either because they were anticipating making a move or because they felt confident that they could easily find another job. Though jobs are still plentiful in many areas of the economy, many technology firms have been seeking ways to cut costs and have been cutting back on the number of jobs they created during the pandemic boom. This has led to what is now being called “quiet cutting,” which means eliminating positions but keeping the workers. Companies like Adidas, Adobe, IBM, Salesforce, and others are engaging in corporate restructurings that sometimes mean eliminating departments or jobs, but they are also eager to keep the talent and avoid paying severance. That has meant some employees are showing up to work to an unexpected announcement: your job is gone but we have a different one for you.5
Protecting Your Retirement Portfolio Through Economic Downturns – As we wait to see how influential events, such as the ones above, can affect the economy in different ways, we recommend protecting your investments in the meantime and creating a retirement portfolio that meets your financial goals.
To help you do this, I recommend reading our guide, 7 Secrets to Building the Ultimate DIY Retirement Portfolio.6 It provides a step-by-step blueprint of our customized investing process to potentially help you build a sound retirement portfolio of your own and pursue long-term investing success.
If you have $500,000 or more to invest, get this guide to learn our ideas on the step-by-step process of building and maintaining a retirement portfolio that will potentially help you reach your goals and enjoy a secure retirement.