Weekly Headings

July 28, 2023

Hi Intentional Community!

It’s hard to believe we are getting ready to head into August already.   As much as the heat is zapping a good part of the country, many of you are probably getting in final summer vacations and starting to think about back to school activities. We here at Intentional also had the opportunity to spend time away with our families in July. Thank you for allowing us to get some needed rest, fun, and collect new memories. We are ready and energized for the rest of the year!

This week Larry Adam focuses primarily on the labor market and sprinkles in a few market predictions. Here are our biggest takeaways from the attached Weekly Headings:

• The labor market continues to remain strong, with wages up and unemployment down. That said wage increases appear to be tapering off, those leaving for their jobs has slowed, and job openings are dwindling. It’s unlikely that the tight labor market will negatively impact corporate P&Ls. For one, companies have raised their pricing along with these wage increases. Second, as inflation eases the wage pressures should as well. With talks of strikes dominating recent headlines, Mr. Adam reminds us that the media likes to make things sound more ominous then necessary.   In looking at historical trends, strike activity may be up since last year, but unionized workers only comprise ~10% of the workforce today. That’s down from 20% in 1983 and in reality the current number of workers currently on strike are ~.01% of total employment.
• The housing market remains strong. Although New Home Sales declined month over month, it is trending upwards this year.   Existing Home Sales edged higher as well supporting the view that the housing market is still facing a shortage of existing homes for sale.      
• The latest Fed hike may not be the last one per Mr. Adam. He and his team believe another 25 bps rate increase is possible. Something to watch in the coming weeks, but the Fed’s stance seems to be easing with less talk about recession and interest rates and policy both sufficiently restrictive. This points to the possibility that rate cuts will begin before inflation falls to the 2.0% target.