Dow rose 168, decliners slightly ahead of advancers & NAZ went up 133. The MLP index remained in the 229s & the REIT index was up 2+ to 271. Junk bond funds crawled higher & Treasuries had selling, lowering yields. Oil slid back, going under 71, & gold added 1 to 1980 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The number of Americans filing for unemployment benefits last week surged to the highest level since 2021, evidence the historically tight labor market is softening in the face of rising interest rates. The Labor Dept reported initial claims last week surged by 28K to 261K, well above the 2019 pre-pandemic average of 218K claims. It marks the steepest level for jobless claims since Oct 2021. Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, fell slightly to 1.76M, a decrease of 37K from the previous week. For months, the labor market has remained a strong point in the cooling economy, defying expectations for a slowdown despite the aggressive interest-rate hike campaign by the Federal Reserve, chronic inflation & declining economic growth. The gov reported last week that employers added 339K jobs in May, nearly double what had been projected. At the same time, a separate report based on a survey of households offered a slightly different picture of the labor market. The report indicated the unemployment rate climbed to 3.7% from 3.4%, even though the labor force participation rate remained unchanged last month. It was the highest jobless rate last Oct & the biggest increase since the early days of the COVID-19 pandemic. Still, the outlook for the labor market remains hazy. Economists widely expect unemployment to climb higher as a result of steeper interest rates, which could force consumers & businesses to pull back on spending.
Jobless claims jump unexpectedly to highest level since 2021
US wage growth has slowed sharply over the past year & is on pace to return to pre-pandemic levels by early 2024, according to new data from career site Indeed. The wage tracker, based on salaries for job advertisements listed on Indeed, showed that salaries were up 5.3% in May compared with the same time one year ago. That is a marked drop from Jan 2022, when wages were up about 9.3%, suggesting that employers are facing less competition for new hires. Based on the current trajectory, wage growth will likely return to its pre-pandemic range of about 3-4% late this year or early in 2024. While the deceleration is broad-based, it is most pronounced in low-wage sectors. Posted pay for that group tumbled to 5.6% in May from 12.5% at the start of 2022. "Broadly speaking, it is clear that the largest slowdowns in wage growth are happening in typically lower-paying sectors," wrote Indeed labor economist Nick Bunker. He said, "After growing much more quickly than wages in other segments over the past several years, wage growth for low-wage and middle-wage sectors was identical in May." Among the industries that are seeing a rapid decline in wages is the software industry, which has been at the forefront of high-profile layoffs & hiring freezes. Job postings in that sector have plummeted by nearly 60% over the past year & posted wage growth is currently less than ½ of what it was in Nov.
Wage growth slowing sharply in US, Indeed says
Even in a housing market that has slowed significantly due to rising mortgage rates, the supply of homes for sale is about ½ of what it was in 2019. The shortage is hitting some buyers more than others. The popular 30-year fixed mortgage rate hovered in the high-6% range in May. At that level, buyers with an annual income of $100K, slightly above the national median, could afford a house with a maximum price of about $341K. But just 39% of the homes for sale were listed at or below that price point in May, according to a new report from Realtor.com with the National Association of Realtors. In a balanced market of supply & demand, 64% of homes should be affordable to buyers who make $100K a year, given the size of that population. As a result, the market currently lacks about 285K of those listings. Just 5 years ago, those same earners could afford 2/3 of homes for sale. Home prices & mortgage rates were significantly lower. The lack of affordable homes heated up competition in the market this spring, which reversed the cooldown in home prices that started last summer. At the higher price ranges, too many homes are for sale for the number of Americans who can afford them. In fact, for every home listing above $680K, the market is lacking twice as many homes under $341K. The prices in the existing home market is pushing more buyers to new construction, which, ironically, used to come at a price premium. Homebuilders have been offering incentives such as upgrades or temporary mortgage rate buydowns. Those, however, are decreasing as builders see more demand & gain more pricing power.
There’s a shortage of houses for people earning less than $100,000
Gold futures edged higher in early trade, steadying after feeling pressure the previous session in response to rising Treasury yields. Gold for Aug rose $1 to $1960 an ounce. The Federal Reserve is expected to hold its policy interest rate steady when it meets next week, pausing after a series of rate hikes that have taken the fed-funds rate from near zero to 5% to 5.25% since Mar 2022. However, expectations that a pause won’t be for long lifted Treasury yields yesterday, putting pressure on gold. Higher Treasury yields raise the opportunity cost of holding non-yielding assets.
Gold steadies after falling to one-week low
Oil futures declined, pressured after a media report that said the US & Iran were nearing a deal that would help alleviate sanctions on Tehran. Prices, however, settled above the session's lowest levels as the US called the media report “false.” Jul West Texas Intermediate crude fell $1.24 (1.7%) to settle at $71.29 a barrel.
U.S. Oil Futures Decline, But Settle Above The Session’s Lowest Levels
While the S&P 500 rose to a high, Dow is still 2500 below its recent highs. Today the advance/decliner ratio is negative, i.e. a majority of stocks went down. The rise in the unemployment claims is getting worrisome. Next week the Fed will speak, &, as usual, many will be listening.
Dow Jones Industrials
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