With changes in many of the major economic variables, we thought it would be a good idea to address the changing backdrop in our newsletter this month.
One of the key dynamics in play is the labor market. Unemployment hit 3.5% in July, which is just about as low as it historically goes. The August ADP job report showed new job growth above forecast, overall 2023 has seen 1.8 million new jobs. However, there are still fewer people working than before the pandemic. The labor market is looking good, but risks remain.
The Fed now faces a delicate balancing act, the question of how to keep stubborn inflation in check without raising rates to the point of causing a recession. The situation seems encouraging, with CPI at 3% as of June 2023 and GDP growing at a 2.4% clip in the second quarter. Although Fed rate hikes have been fast and furious, it does seem they have achieved their intended effect, with consumer sentiment and manufacturing returning to healthy levels. The Fed does indeed have their work cut out for them.
As of June 2023, LIBOR, or the London Interbank Offered Rate, will no longer be published due to lack of reliability and vulnerability to manipulation. Going forward, the SOFR, or Secured Overnight Financial Rate, will be used for pricing of derivative instruments, consumer and business loans, and structured notes.
We welcome the fall as a time for many important wealth tasks, such as planning out charitable contributions, finalizing business records for tax returns, and strategically choosing company benefits during open enrollment. As always, our door is open for any questions you may have and we encourage you not to hesitate to reach out.
Blancato, Philip. Osaic. (4 August, 2023). Market View Weekly.
First Trust. July 2023. Talking Points. https://www.ftportfolios.com/Commentary/MarketCommentary/2023/8/4/a-recap-of-july-2023
Guggenheim Investments. (30 June, 2023). The Transition Away from Libor: Goodbye Libor. https://www.guggenheimpartners.com/perspectives/portfolio-strategy/the-transition-away-from-libor-2023