Jobs and Factory Activity, the Yield Curve, the World Cup, Your Banking and This Week in 1776
The Economy Headlines This Week
Job Openings Rise While Hiring Falls
Available positions increased to 7,600,000 in April, up from 6,900,000 in March.
Factory Activity Expands for Fifth Month – The Institute for Supply Management Purchasing Managers Index – ISM PMI – was 54 for May, the highest since May 2022.
Prices continue to increase, as do new orders.
The employment index did grow but remains in contraction, meaning that bosses are still expecting to hire fewer people, perhaps just a bit more than expected last month.
Companies are doing more with less. I’m guessing that’s not news to small business owners.
Private Sector Hiring Picks Up – ADP’s report showed private companies hired 122,000 workers, above the expected 110,000 and the previous month’s 105,000.
U.S. Hiring Gathers Steam – 172,000 jobs were added in May, up from 115,000 last month. Experts predicted 80,000.
This is the third straight month of strong payroll gains.
BTW, this is from the Labor Department report, not ADP.
The Yield Curve
It’s been a while since we talked about the yield curve. In fact, it was back during the pandemic that shall not be named that we had an inverted yield curve.
That’s where short-term rates are higher than long-term rates.
Let’s look at U.S. Government treasury rates:
30 day – 3.71%
90 day – 3.72%
6 month – 3.80%
1 year – 3.84%
5 year – 4.32%
10 year – 4.58%
30 years – 5.03%
That is what is called a normal yield curve, meaning short-term investments have a lower interest rate than longer-term investments; the problem is that it’s been so long since we have seen a normal yield curve that it’s making headlines.
The good news is, it’s a normal yield curve. The bad news is, it’s a normal yield curve.
Meaning, the financial gurus are NOT expecting rates to go back down. Uh-oh.
That’ll suck some money out of the stock market. Oh, wait, it has already started.
In an inverted yield curve where short-term rates are higher than long-term rates, the message is that the higher rates won’t be sticking around for long. That is NOT the case this time.
Amazing what increased energy costs can do.
The World Cup is Here!
The USMNT – United States Men's National Team – plays its first game Friday at 5 p.m. against Paraguay at SoFi Stadium, or as the FIFA website calls it, Los Angeles Stadium.
Strict bribery, er, sponsorship rules forbid the use of branded stadium names.
The first match of the tournament is Mexico vs. South Africa, noon on Thursday.
The FIFA ticket price is $3,840. Hey, at least they are available.
Tickets are also available for the USA match this week. The FIFA site lists them at $1,120 each in the nosebleed section of SoFi Stadium – sorry, Los Angeles Stadium.
StubHub has them for $995.
You can get field-level seats for $1627. For $700 more, I think I’d get down to the field level. Look, if you are willing to spend $995, what’s another $700 for a way better seat? Just sayin’.
Your Business Banking
I was speaking to a group of CEOs this past week, and some were not aware of some products they should have as part of their banking product menu.
ACH Block – Your bank can set it up where only specific entities are able to initiate an electronic debit out of your account or block it entirely. That helps eliminate ACH fraud.
Positive Pay – This is where you upload a database of the checks you have written that includes the check number, dollar amount, and the payee. The bank then has that information in its system, so when the checks are presented to the bank, all three pieces of information must match: check number, dollar amount, and payee. If they do not match, the bank will email you to request permission to pay or reject the items.
Purchase Cards: This is simply using a bank credit card to make your vendor payments, hence the name. This eliminates checks, reducing the risk of someone lifting a check from the mail and forging it or accessing the bank account number. However…
With more merchants tacking on a 3% credit card charge, you may want to go back to writing checks.
Make sure to ask if you get a discount if paying early via check or ACH. If you get a 2% discount for paying within 10 days, that could be a 5% swing for some vendor payments. Whatever happened to the ‘ole 2% 10/Net 30 on that invoice?
That’ll pay for the company Christmas party.
Finally, keep your payroll account separate and fund it only with your payroll expenses. Better yet, just have Paychex or another payroll service handle the whole thing. The checks are drawn on them, so the fraud risk has been taken off you.
Just some hints from your friendly retired banker.
This Week in 1776 – 250 Years Ago
The Continental Congress continues to manage routine matters, such as supplies and logistics for the Revolutionary War. But momentum is building for independence.
A Founding Father by the name of Richard Henry Lee of Virginia, 44 years old, makes a motion in the Continental Congress on Friday, June 7, 1776, as follows:
Resolved: That these united colonies are, and of right ought to be, free and independent States, that they are absolved from all allegiance to the British crown, and that all political connection between them and the state of Great Britain is, and ought to be, totally dissolved.
With the motion made, John Adams seconded the motion, and that opened formal debate, and on Monday, June 10, the Committee of Five was assembled to draft a declaration, even though a vote had not been made. You may have heard of some of the committee members: Thomas Jefferson, John Adams, Benjamin Franklin, Roger Sherman, and Robert Livingston.
The voting on that declaration would not happen until July 2.
On Saturday, June 8, British forces decisively defeated an American force attempting a surprise attack on Quebec. This was another setback for the Americans that ultimately forced them to give up on invading Canada.
While the idea of independence continues to gain momentum, some States still need to think about it.
It’s just a matter of time…
Employment is showing some good momentum, and inflation is being pesky, albeit driven by energy costs. The premise is that once the Strait of Hormuz is regularly passable, energy costs will drop, but it’s going to take time. The point is, there is no reason for the Fed to decrease rates. In fact, the bet is that rates will increase at least once this year. However, we still have 7 months left, so fingers crossed.
Folks, this is a huge year for Independence Day Celebrations, so make your plans!!
