Client Update

If the U.S. economy is in recession, it sure is a peculiar one.  The most jobs report, for June, showed an increase of 372,000 people employed in America, and average hourly earnings are up 5.1% from a year ago.  This increase is way above what most economists were expecting; indeed, one of the memes making the rounds among the financial press is a pre-written article by one of the major news services in advance of the report, with XXXs standing for the actual numbers, which, describe a significant decline in the new jobs created by the economy as bad news for the President and Americans in general.

The Bureau of Labor Statistics reported that the unemployment rate remained steady at a historically low 3.6%, but perhaps more significantly, the number of discouraged unemployed workers not seeking employment, plus the people holding part-time jobs due to adverse economic conditions, dropped from 7.1% to 6.7% over the one-month period.

What happened?  The leisure and hospitality industry is recovering, gaining 67,000 new jobs, but those gains were small compared with the 96,000 new education and health services jobs and 74,000 new jobs in professional and business services.  There are signs that the U.S. manufacturing sector is bringing jobs home, with 29,000 new factory workers hired.  Meanwhile, government jobs fell by a total of 9,000 salaried positions.

Economists are predicting that the strong job growth will give the Federal Reserve Board some cover for raising the Fed Funds rate, despite a two-quarter decline in the U.S. GDP that would normally discourage a rate rise.  That may be bad news for most investors—at least in the short-term—since higher bond rates tend to create hurdles for stock prices.  But the good news is that it appears that the U.S. job market has fully recovered from the employment decline created by Covid.  That’s something none of us could have produced a couple of years ago.

This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice.

There is evidence all around you that many people spend money irrationally—to make them feel better, to satisfy their mid-life crises, to show off a lifestyle that they cannot really afford in order to ‘keep up with the Joneses.’  All of these behaviors are rooted in our brains, but how?

What is the actual reason why spending money feels so good?  This may be especially important as money is tight due to pandemic-related layoffs and market declines, and as bored people find recreation in spending financial resources that they should probably be hoarding.

The Gizmodo science website recently posed this question to a number of researchers, and their answers were interestingly different and diverse.  One pointed to ‘acquisition utility’ which many of experience when we see something, we want priced below what we expected the price to be.  This could be renamed the bargain hunting syndrome, the satisfaction of finding or negotiating a bargain—and the pleasure that comes from finding something at a bargain price seems to be hard-wired into the human mind—perhaps generating the same feelings that a hunter-gatherer might have felt when she found ripe fruit on the ground, without having to expend the usual energy to feed herself.

The researcher also explained “retail therapy”—where depressed people will go on a shopping spree to cheer themselves up.  Buying and making purchase choices helps restore a sense of personal control over your life at times when it seems like the outside world is robbing us of it.  Does feeling out of control of our circumstances sound familiar today?

Another researcher addressed the ‘keep up with the Joneses’ behavior by saying that paying for an expensive bottle of wine or a high-end brand item can send positive social signals about ourselves, boosting others’ opinion of our wealth, and therefore reflecting positively on our personal social esteem.