The first episode of What's The Latest? Where we sit down every couple weeks and talk about whatever is current in the market, economy, or news. This week we talk about the increase to wages that we will see in 2023, how strong the consumer has been, will 4 day work weeks be a thing? Also the continued fight with interest rate fears that we keep battling and the state of the housing market.
Thanks for listening!
The first episode of What's The Latest? Where we sit down every couple weeks and talk about whatever is current in the market, economy, or news. This week we talk about the increase to wages that we will see in 2023, how strong the consumer has been, will 4 day work weeks be a thing? Also the continued fight with interest rate fears that we keep battling and the state of the housing market.
Thanks for listening!
Hey, what's going on guys, this is a life finance in between Podcast. I'm Eddie Thomas, this is brought to you by wealth management services in Hershey, Pennsylvania. And I hope everyone's doing well working into this last week of February is a little new episode new segment that we're going to try to start here, we're gonna see if it sticks. And it's gonna be called What's the latest. So what exactly is gonna be used twice a month, we're gonna come on here, or thereabout, and just talk about what's latest in the news, finance and economy wise, news wise, and really just cover whatever is kind of top of mind and what we're seeing. So this is episode one of this segment of this kind of series. And let's see how it goes. But let's kick it right off. Let's not waste any more time. And the first thing that I want to talk about that I've seen the news a bunch, and I think it actually builds really well long term is increasing wages for those working at these different companies. And the three companies I saw announced this over the last week and a half here is Home Depot, WalMart and delta. Now Home Depot just came out on the last earnings call, and said they're gonna dedicate$1 billion to increasing wages for their hourly paid workers throughout their their business. And they didn't really say what exactly the bumper was going to be if it was going to be $15 an hour to 18 and, or 15 and 19, or whatever it might be. They didn't say the exact numbers, but they did say we're dedicating $1 billion to this. And why is this a big deal if other companies follow suit? Well, it's actually the result of good leadership, and a tight labor labor market. So as much as these companies say this for the pat on the back, and in part, they do deserve the pat on the back. A lot of this comes down to the fact that the labor markets so so tight, right at that 3.4% unemployment mark, there's two jobs available for every one person looking companies still have a lot of turnover, employees can go find a job somewhere else that pays them a little bit more. So I'm not surprised to see that companies are now coming out and making it known that okay, hey, we're dedicating X amount to increasing your wages, and we're going to increase them by 5% 6%, whatever it might be, I'm not surprised at all. Now, the overall projection for 2023 is that employers will increase wages by 4.6%. And that's actually the highest it's been in 15 years. So since 2008, that's the highest increase we've had, and wage increase projection since then, which is awesome. I mean, you'd love to hear that. And what does this mean for the earnings bottom line going forward? What does this mean for the companies and us as investors, we'll break that down one by one for us, as employees as workers, it means we're gonna have more money in our pocket. And now again, we know we have inflation right now. But here's the thing. wage inflation is stickier, than the inflation we're seeing right now with gas prices and grocery prices and energy, and then the rest of those wage inflation doesn't go away. Meaning, it's going to be very hard pressed for your employer to give you a raise of 4.6%, this year, come back in 2024 2025, and say, Oh, very cool. Hey, I hope you enjoyed that for the year. But we're going to take that back, that just doesn't happen. What does happen is that wage increase gives you more money in your pocket now. And forever long term, as long as you're working there, right. And inflation over this time is going to come down, we already saw come down from 9%, back in June of 22, to now 6%, or 6.5%, in December of 22. And then 6.4% of January of 23. So we know inflation is coming down. If wage increase has the kind of legs that it's supposed to have in 2023. And we see this 4.6% Boom, you're gonna have people with more money in their pockets, which bodes well for the economy, which bodes well for workers going forward, which in turn bodes well for these companies, because they get a little bit of good grace, if you're looking to get a new job. And you see that, hey, Home Depot, delta and Walmart are promising four to 5% wages and Home Depot said they'll dedicate$1 billion to this, you're looking at them again, if you're looking for jobs in those sections. So again, this is awesome news. This, I think is going to be more and more frequent as time goes on. Because I think the labor markets going to continue to remain pretty tight. The economy is going to continue to do well, people are going to continue to spend money. So when you look at all those things, these companies have to compete for those people that are still looking for jobs or switching jobs. And the way you do that, as you increase your wages, that's the number one factor that people care about. Of course, there's other factors, but you're not going to go and work somewhere for $10 less and do the same job. And that's really what these companies are looking at. On top of that, I kind of mentioned earlier, we're going to have a strengthening consumer. And that's a second thing that we've been seeing. This is all based on a Bank of America research that came out in the last couple of weeks. But spending for consumers and 2023 so far is up. And credit and debit card spending is up 5.1% From January 23, to what January 22 gave us. And so why is this good? Why is this a big deal? It gives us the ability to say that, okay, the consumers are still incredibly strong, we're still spending money, we're still employed, we're still boosting the economy, we're still doing the things we want to. And this is across both goods and services. So we're seeing that, hey, even with inflation, peaking at 9%. And even with inflation still at 6.4%. And gas prices still being a bit elevated, and grocery prices and eggs been as high as they are, we're still in a good spot and spending money, which if he looked back at some of the talking heads over 2220 22, all of them were saying how the consumer is going to falter, the consumer can't spend this much money, the consumer is going to go through their savings. And I'm not saying that's for sure not happening in the background. I don't think it is I think consumers are just in a really strong spot. But right now the consumer is continuing to push the economy forward. And I think we're going to continue to spend on goods and services, because you're seeing the wedge wage increases, because you're seeing accelerated spending, this is all good. And this is what a strong economy does. So yes, short term that might bleed into some of the conversations we're about to have and give us some negative impact. But long term, it's really, really good. And the other thing we've had this year, which kind of ties into the increased spending is Social Security just got an 8.7% Bump year over a year for cost of cost of living adjustments, pretty much when inflation goes up, Social Security gets more money paid to them per month, or those collecting Social Security does, because they got to keep up with the accelerated prices. So that's about 70 million people that just got an 8.7% Raise month over month. That's not too bad. And yeah, people are gonna go spend that because they should. And that's what we're seeing. And I think this is going to continue to show a strong labor market, a strong consumer strong economy going forward, which is only good news for us long term. Now, we're workers, we just got this, this pay bump, we're still spending money. And out of nowhere, right now, there's a lot of conversation, there's a lot of conversation about four day workweeks. Sounds good, too, too good to be true. But when we look at it, what just happened? What the data just showed us is last year, from June of 2022, to December of 2022, there was 61 companies in the UK, that decided to take on this experiment of four day work weeks. And so it was roughly 3000 employees that got to the kind of partake in this experiment to see what it looks like between June and December. And right now, if you're working your five days a week for your traditional 40 hours, you almost can't even imagine what an extra day off would look like, because it's been five days a week forever, sometimes more. So what this looked like for them was it was 100% of the pay. So even though they're working one less day, they're still getting the same pay they had from working five days a week 80% of the time. So when you have five days, you take one day off, that's eight, that's 20% taken off. So you have 80% of the time, four days a week. And they found it was 100% of the same output. Meaning employees were getting done in four days, what they usually get done in five. And it sounds a little weird doesn't sound right. But I'll tell you why. And what they've said, in this research, pretty much what businesses saw was improved productivity, improved morale, and improved team culture. And the reason they saw this is because employees reported having better mental health, lower stress, better sleep, lower negative, less negative thoughts, and more exercise, and just overall more time to do the things they want to do. So if you're an employee, you could put yourself in these 3000 Lucky soul shoes just a second. But if you're looking at them, and you had four days a week that you knew you had to work yet, say you had to go in at nine, you left that five for four days a week, and it was no longer five, you're gonna like your company a little bit more, you're gonna like your spot a little bit more, you're still gonna pay the same amount, you're gonna love that that's not changing. So, of course, you're gonna go in, you're gonna want to put a little bit more effort in because now you know that I still have to get the same thing I've done in five days at least and four. But I know when I wake up on Monday, that I'm not going until Friday. I'm going till Thursday. And if I'm gonna go till Thursday, I can put a little bit more effort in day to day because it's gonna make me feel good getting that stuff done. And I know my company's reward me with an extra day off. So of course you have better mental health, lower stress, better sleep, more exercise, that's not surprising. And what's awesome about this is of these 61 companies 92% to them are keeping it permanent 92% of the 61 companies are keeping at the point where they're gonna afford it work weeks, and 90% of the employees wanted to keep it first of all the 10% that wanted to go back to five days a week, want to talk to you? What are we talking about. But 90% of employees want to keep it 55% of them said they had higher productivity. And 15% of these employees said they'll never going to accept a job that isn't four days or four days a week of work, which for right now might be a little more difficult. If you leave your job, I don't know if you're going to find that. But the writing's on the wall, that it's actually a pretty positive thing. For mental health or business productivity, it seems like everything comes together, and it's better for both the business and the employee, which you meet, which we don't really see too, too often. You only see the only thing increasing productivity is more hours. And that's what we just kind of associate that if you're there longer, you're gonna work more. And apparently, that's not always the case, you weren't cut one day off a week, you're there less, and you're still working the same. So we'll see, we'll see if this spreads to the States. I think I saw Bernie Sanders, in the past week said he supports four day work weeks, I'm not sure you're gonna find anyone who doesn't support a four day work week, at least in some capacity. Give us like, two weeks, two weeks in the month or four days, the other two or five days, let's ease into this if we want to do it that way. But now, the data came out of that research was actually phenomenal. We'll see if it spreads. But I think I thought it was really cool that you eliminate 20% of the days and you still have 100% of the output that you would have. Just think about it in your own job. If you had one less day, would you try harder? Would you stay maybe a little longer per day, if you know you had that extra day off if you had Friday off. Or if you'd like sleeping in on Mondays you had Monday off. I could see it, I can see how it work. So not too bad. But back to the market, back to the economy. Back to finance. This past week or two has been pretty rocky in the market. No, we had a phenomenal start to the year, phenomenal, NASDAQ was up nearly double digits, s&p was up, Dow was up slightly, a great, great start. And now in this past week or two, we've had the market kind of a little bit of a panic, it feels. And the big reason why. And we've talked about this through all of 2022. And we're still talking about now is continued interest rate fears. reason people are panicking is because as data comes out, traditionally good data, we've talked about this before. Traditionally, when you have low unemployment, that's a good thing. When you have consumer spending money, that's a great thing. When you have people looking for jobs and filling jobs and increasing wages, this is all only a phenomenal, phenomenal thing. But for right now with inflation, where it is people are saying keeping those data points and saying, Hey, maybe now is not the time, which I disagree with anytime you could have people spending money. Anytime you could have people spending money, making more money, having more jobs, being overall better off financially, that's a positive thing. Inflation or not, that's a positive thing. And I understand the inflation argument, but that's a positive thing. But the media, the talking heads, the overall market feels like if we keep moving in that direction, interest rates are going to stay higher, longer, meaning the Feds gonna keep raising interest rates. So we're gonna get to a point where mortgages stay around six or 7% credit card mermaid high interest, new loans are always high interest. And that's a concern. Now, I think what we're seeing is a lot of short term negative thoughts. Not letting us see the long term positive impact, that people having jobs spending money and growing the economy actually gives us. And just now just in the past couple days, we had the personal consumption expenditures data come out. And all that is, is the Fed looks at how much people are spending. It's just a measure of spend for consumers. And that rose 0.6% in January from December, and 4.7%. Year over year. So meaning people in January were spending point 6% More they were in December, and people in January of 2023, we're spending 4.7% More than they were back in January 2022. And the reason this spooked people is because one we're still in a fragile market and a lot of mindsets of saying okay, well we just came off a really bad year. We don't want to see that again. And then the bad news that people see they're gonna think okay, here we go again. And that's not the case but that's unfortunately how humans work. And this just like I said before, the idea that the feds are going to keep keep interest rates high along under all this really is all this data really shows us and then the expenditures and spending going up a little bit. It just confirms that the feds gonna go to the five to 5.25% rate that they said they were going to go to. This doesn't drastically change anything, we knew they were going to get there, the beginning of the year saw people see the Fed say, Okay, we're only going to do 25% Raise 2.25% raises from now on, and that we have a good grasp grasp on inflation. And people took that and ran with it. Okay, well, now we're just in the point where we're sure we're spending a little bit more, and rates are gonna go up, but they're only gonna go up to what we thought they were not even two months ago. So this isn't really bad data, This just confirms what we already kind of saw coming. So I'm not sure why the markets reacting as it is, I think it's just a lot of people panicking for really not great, great reasons. But again, we did see the market kind of falter on this continued interest rate fear because of inflation. Again, if we look long term, everything we're seeing is really good. If we look short term, yes, people are going to panic on short term news. That's not what we do. This is why we do long term investing. This is why we do long term goals. This is why we don't worry about what people are thinking day to day. Because right now it's just people panicking give us more buying opportunity. Based on news that's really good for the economy long term. So there's really not much reason to panic over that. And that's kind of what we're seeing. But I had to bring that up because the market kind of faltered on it. Last point here for the day. And this is another thing that's showing a little bit of weakening. And that's the housing market. And that's sales. Now, sales are down 37%, year over year. So January 23, showed that 37% of sales a January 22. And price increases are slowing as well. And now they're only up 1.3% year over year. So a house in January 23, on average costs 1.3% More than it did of January 22. And people are saying, Oh man, this means the housing markets crumbling. And this means we're showing weakness. And this is all bad, about 2008. This doesn't show any of that. It's exactly what we would have thought would happen. Cielos were really greedy for a couple of years when mortgage rates were two to 3%, because borrowing money was pretty much free at that lower rate. So you're able to charge much more for your house. And we also had low inventory. So sellers couldn't go anywhere, they had to buy your house or they weren't getting what they needed to move. Now, we have mortgage rates of six to 7%. And now houses are staying on the market longer. And now supply is finding its way back to a medium. It's not where it was, but it's finding its way back because people aren't buying houses as quickly. So really what's happening with this data is you'll see people look in and see that the exact numbers I just said it's a lot as terrible as it gets. And it's not, it's just the housing market bouncing. So the big headline with this should be housing market studies itself from an unbelievable rip, it just had over a two year span, that it maybe shouldn't have happened. But it did. And like all things that's gonna come out and bounce and even itself out over the remaining couple years. And we're starting to see that we're starting to see sellers have a little bit more flexibility. I mean are sorry, not sellers, we're starting to see buyers have a little bit more flexibility, and a little more bargaining power, which is what you want, you want a good balance between sellers power and buying power. So not one party can just control the entire market, like we just had sellers do for two years. So again, positive news. And it's going to be good going forward. We're not in any 2000 need situation. People are making money on unemployment super low, we have the fact that it was tough to get a mortgage over the last couple of years, even though there's such low rates, the banks made sure you had the income coming in to continue to do so. So we're not in a 2008 situation. And ultimately, economy and markets actually in a really good spot, and so is unemployment. But this was the first episode of What's the latest, again, gonna try to make this bi weekly if we can, but everyone's gonna I'm just gonna pop on here and kind of go through what's, what's going on recently and then kind of give the idea of a couple points. So thanks for listening. Hope you tune in again for some more. And we'll have some more coming out here in the future. I guess I've got one. Securities offered through securities America Inc. Member FINRA slash SIPC. advisory services offered through securities America advisors Inc. Wealth Management Services and securities America are separate entities. The opinions and forecasts expressed are those of the author and may not actually come to pass this information is subject to change at anytime based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan past performance does not guarantee future results