well-th notes

By Hightower St. Louis on June 7, 2023

Weekly data-driven insights on the markets and economy

First Week of June 2023

Hot Pocket

Stocks rose again last week, supported by a strong jobs report and by a deal on the debt ceiling. The S&P 500 rose 1.88% during the week, boosted by a 1.46% return on Friday. Year-to-date, it has gained 12.37%.[i] However, the index’s return would be negative without the contribution of seven big tech companies.[ii]

Rating Longer

The market implied probability that the Fed’s target rate will be at least as high as it is now (5–5.25%) — rather than lower — by year-end has increased from 0.1% to 49.8% in just the past month as the U.S. economy surprises to the upside.[iii] In turn, two-year U.S. Treasury yields have increased by about 0.75% over the past month, a large move for shorter-dated bonds.[iv] Overall, the bond market’s year-to-date gain (2.17%) has been trimmed nearly in half since its high point in early April (4.15%).[v]

A Tight Fight

In the Fed’s fight against inflation, inflation may have scored again, with last week’s jobs report once again besting economists’ forecasts. Total nonfarm payroll employment increased by 339,000 in May,[vi] versus the 190,000 expected by economists.[vii] By at least one measure, this marks the 14^th consecutive month of U.S. job creation surpassing economists’ forecasts.[viii]

Laboring the Point

Recent research from the Federal Reserve Bank of San Francisco calls into question the very premise that a tight labor market causes inflation. It found that the employment cost index’s recent surge (4.9% year-over-year as of March month-end) explains only about 0.1% of recent elevated inflation readings.[ix]

Remotely Possible

About 1.2 million more women (about 4.2 million in total) and 0.5 million more men (about 3.7 million in total) with disabilities are in the workforce compared to pre-pandemic levels. This represents a nearly 50% rise since a 2.8 million low in 2014 for women and a nearly 30% rise since a 2.9 million low in 2014 for men. Researchers theorize that remote work may have helped drive this spike.[x]

Super Chatty

Since the launch late last year of ChatGPT, AI has been the topic du jour. The term was cited by 110 S&P 500 companies during their first quarter earnings calls. This is nearly 40% higher than the previous record of 78 (which occurred the prior quarter) and significantly above the five-(57) and 10-year average (34).[xi]

Cost to Coast

Insurance prices for commercial real estate, particularly in coastal areas, have soared recently. For example, the average price to insure multifamily properties in Florida, Texas and California rose by about 37%, 43% and 35%, respectively, from 2020 to 2022. The Miami-Fort Lauderdale-West Palm Beach market was among the hardest hit, with multifamily insurance prices rising nearly 56% on average.[xii]

Bye Bye Babies

The number of children in the U.S. shrank from 74.2 million (24.0% of the total population) to 73.1 million (22.1%) from 2010 to 2020. The share of those under the age of 5 dropped by -8.9%, representing 1.8 million fewer children.[xiii] Globally, the number of countries and territories recording fertility rates below 2.1 (the “replacement rate”) has grown from 98 countries in 2010 to 124 in 2021 — representing more than half of the countries the U.N. tracks — and is expected to reach 136 by 2030.[xiv]

Math Problem

Recent research on a previously observed gender gap in self-assessment of mathematics abilities (SAMA) suggests that only 14–26% of boys’ higher SAMA score is driven by objective skills and that 23% is driven by transmission of parents’ stereotyped assessments of their children’s abilities. There was no gender gap in SAMAs in families without stereotypical assessments.[xv]

Getting Whacked on Wacker

A pair of peregrine falcon parents are doing what any good falcon parent would do: whacking people on the head if they venture too close to their chicks, which are nested on Chicago’s busy Wacker Drive. One of their victims, a patent attorney, said it felt like a 16-inch softball hit his head. Falcons have been nesting at the building (101 S. Wacker) every spring since at least 2016.[xvi]

[i] FactSet total returns as of June 2, 2023.

[ii] Singh, Hardika, “Bearish Bets Against S&P 500 Are Surging, Despite Love for Big Tech,” The Wall Street Journal, June 4, 2023.

[iii] CME Group, CME FedWatch Tool, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html. Accessed June 5, 2023.

[iv] U.S. Department of the Treasury, Daily Treasury Par Yield Curve Rates, https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2023. Accessed June 6, 2023.

[v] As measured by the Bloomberg U.S. Aggregate Bond Index, FactSet total returns as of June 2, 2023.

[vi] U.S. Bureau of Labor Statistics, “Employment Situation Summary,” June 2, 2023, https://www.bls.gov/news.release/empsit.nr0.htm. Accessed June 6, 2023.

[vii] Lahart, Justin, “Super-Powered Labor Market Fights the Fed,” The Wall Street Journal, June 2, 2023.

[viii] Wigglesworth, Robin, “This US Jobs Market Absolutely Slaps,” Financial Times, May 5, 2023.

[ix] Shapiro, Adam Hale, “How Much Do Labor Costs Drive Inflation?” FRBSF Economic Letter, May 30, 2023, https://www.frbsf.org/wp-content/uploads/sites/4/el2023-13.pdf. Accessed June 6, 2023.

[x] Mendez-Carbajo, Diego, “More Workers with a Disability Have Joined the Labor Force,” The Federal Reserve Bank of St. Louis, June 1, 2023, https://fredblog.stlouisfed.org/2023/06/more-workers-with-a-disability-have-joined-the-labor-force/. Accessed June 6, 2023.

[xi] Butters, John, “Highest Number of S&P 500 Companies Citing AI on Q1 Earnings Calls in Over 10 Years,” FactSet, May 26, 2023, https://insight.factset.com/highest-number-of-sp-500-companies-citing-ai-on-q1-earnings-calls-in-over-10-years. Accessed June 6, 2023.

[xii] Yue, Emily, “Impact of Rising Insurance Costs in Major Coastal Multifamily Markets,” Trepp, June 5, 2023, https://www.trepp.com/trepptalk/rising-insurance-costs-coastal-major-multifamily-markets. Accessed June 6, 2023.

[xiii] Blakeslee, Laura, Zoe Caplan, Julie A. Meyer, Megan A. Rabe and Andrew W. Roberts, “Age and Sex Composition: 2020,” 2020 Census Briefs, United States Census Bureau, May 25, 2023, https://www.census.gov/library/publications/2023/decennial/c2020br-06.html. Accessed June 6, 2023.

[xiv] The Economist, “The Old and the Zestless,” June 3, 2023.

[xv] Adamecz-Völgyi, Anna, John Jerrim, Jean-Baptiste Pingault and Nikki Shure, “IZA DP No. 16180: Overconfident Boys: The Gender Gap in Mathematics Self-Assessment,” IZA Institute of Labor Economics, May 2023.

[xvi] Associated Press, “Peregrine Falcons Protecting Chicks and Dive-Bombing Chicago Pedestrians, WGN News, June 2, 2023, https://wgntv.com/news/chicago-news/peregrine-falcons-protecting-chicks-and-dive-bombing-chicago-pedestrians/. Accessed June 6, 2023.