12/15/24

Weekly Market Recap

Two key economic indicators were released last week: inflation and jobless claims. Inflation for the month of November rose by 0.3%, bringing the annual rate to 2.7%. While this is still slightly above the Federal Reserve’s target of 2%, it is much closer than it has been in the past two years. For the first week of December, jobless claims increased to 242,000, slightly worse than most economists had anticipated. This suggests some softening in the labor market. The unemployment rate currently stands at 4.2%, which, while not alarming, has risen from 3.7% a year ago. In summary, unemployment is rising, and the labor market is gradually weakening, but it remains strong overall. The Federal Reserve will announce its next interest rate decision on Wednesday, and the market strongly expects another 25-basis-point cut. This move will likely be supported by the slight weakening in the labor market and the inflation rate of 2.7%. While inflation remains slightly above the Fed's target, they are hesitant to sacrifice the labor market. With their dual mandate of full employment and stable prices, the slight softening in the labor market should justify the anticipated rate cut.

Chart of the Week

Our chart of the week highlights a straightforward trend: the percentage of employees represented by unions from 1947 to 2022. As we know, union membership has significantly declined. I’m not here to debate whether this is good or bad but simply to acknowledge the trend. One major consequence is that fewer people will have defined benefit pension plans as they approach retirement. This shifts the responsibility for retirement savings onto the individual. As a result, saving 10% to 15% of one's income for retirement is more important than ever. While most workers will receive Social Security, it typically replaces only about one-third of a person’s retirement income needs. As fewer people have pensions to rely on, the situation will worsen for those who don’t save diligently for their retirement.

Written by:

Ben Rones, CFA®

Senior Analyst at R&R Financial

The commentary in this newsletter is for informational purposes only and should not be taken as personalized investment advice

Chart of the week Source: Bureau of Labor Statistics, NBER, J.P. Morgan Asset Management.(Left) Prior to 1983, union membership data are sourced from “Spurts in Union Growth: Defining Moments and Social Processes” by Richard B. Freeman, and from the Current Population Survey thereafter. (Right) Strikes data are sourced from the Work Stoppages program. Guide to the Markets – U.S. Data are as of September 30, 2024