The Economy Is Cooling
🚀 The quick version: The economy continues to show more evidence that things are slowing down (but in a good way).
Let’s explain:
U.S. Manufacturing and Service sectors take a breather. These two sectors combined represent about 85% of the U.S. economy and this past week both showed signs of softening. The Manufacturing ISM and Services ISM for July (these are monthly surveys Wall Street looks at to take a temperature of these sectors) both came in slightly weaker than expected. Perhaps most importantly, the surveys also showed that what companies in both sectors were paying for inputs (i.e. their inflation) was also lower which is a positive for people who will eventually buy their products or services (you and me). As their prices come down, typically ours will follow.
Jobs report adds to cooling narrative. The official government jobs report for July (this data is always released for the prior month on the first Friday of the next month) also indicated some slowing with the U.S. adding 187K new jobs in July vs. estimates of +200k. On the positive side, wage growth ran above expectations (came in at +4.4% vs. last year) which means that people are finally earning wages above inflation (the latest inflation reading was +3.0% for June but we will get the July figure this week). The rising wage growth is one thing we are watching moving forward as a potential negative sign inflation may get worse again (if people have more cash they can pay more for stuff increasing demand and eventually prices), but for now we are not worried about it and it’s nice to see peoples’ wages finally growing more than their costs.
👪 How it affects your family: The main point we want to make is the above shouldn’t alarm you. Everything continues to point to a gradually slowing (but still strong) economy that should see lower inflation levels than we have seen into the near future.
As this picture of the economy comes more into focus with each data point we get, here is a list of things on our mind that could be useful for any family to think about:
Being careful with the stock market. We don’t ever want to get into the business of forecasting short term stock market moves (we can guarantee we will be wrong), but with a cooling economy as we listen to companies and look at the market, it currently looks rich on the fundamentals. We would say, however, if you are investing for the long term, don’t pay any attention to these thoughts, but if you are looking to invest for the short term, we would look for near term indicators to change in order to find a better time to jump in or add to positions.
Thinking about earning extra income. Just because the economy is cooling doesn’t meant your earning power has to. According to recent survey work from Bankrate, nearly two in five (39 percent) of U.S. adults now have a “side hustle” to earn extra income (CNBC this past week highlighted an Etsy seller earning $169,000 per year). This got us thinking that any parent has the capability to do this, and so we created a list of 25 ways parents can make money from home to help get the ideas juices flowing.
Watching your employer carefully. With companies slowing job growth and in some cases downsizing right now, if you think your employer may be next it’s worth knowing about the Worker Adjustment and Retraining Notification (WARN) Act. It requires companies with 100 employees or more to file notification with the state at least 60 days before they start announcing big layoffs. All you have to do is search for WARN Act (your state) and you will find a .org or .gov website that shows all companies in your state laying off workers (here is an example from our home state of FL). Once you see this it may give you some extra time to look for a new job and not be caught by surprise.
