May 11th, 2022
It turns out that April was a great month for job growth in the U.S and unemployment levels remain near pre-pandemic levels. But a strong jobs market doesn’t necessarily mean a strong overall economy. Rising mortgage rates and inflation continue to foster recession fears. Here’s a closer look at last week’s economic news and what investors should pay attention to over the coming days.
What Everyone’s Been Buzzing About
April Jobs Report: The U.S. Labor & Statistics reported that the U.S. economy added 427,000 jobs in April which shows that the job market is continuing to recover at a solid clip. The unemployment rate remained at 3.6% for the second month in a row, which is oh-so-close to the record 3.5% level that was set shortly before the pandemic began.
Mortgage rates continue to climb: Last Thursday, the Fed made the decision to raise interest rates by half a percentage point. And lenders responded by lifting mortgage rates yet again. As of writing, the average 30-year mortgage rate is 5.38%. That’s the highest rate we’ve seen since 2009. The goal is that these rising rates will work to cool inflation and the housing market which has been running too hot for too long. But in the meantime, buying a home just became even more expensive if you’ll need to take out a mortgage on the purchase..
Free internet is coming to millions — and, no, it’s not a scam: On Monday, the Biden Administration announced that it would be partnering with a variety of telecom providers, including AT&T and Comcast, to provide free internet to some 48 million households. The providers have promised to provide $30/mo internet plans to low-income and rural households. And these plans will be fully covered by a $30 federal subsidy that was included in the 2021 Infrastructure Bill.
Musk says businesses may have to pay to use Twitter: Like most other social media platforms, Twitter is a free service that solely makes money through advertising. But that could change down the road. The company’s soon-to-be-new owner, Elon Musk, has said that while Twitter will always remain free for personal use, there may be a “slight cost” for commercial/government users down the road. Twitter’s stock price jumped on the news, but has since retreated along with the overall stock market.
Rivian’s stock price is in freefall: In 2021, Rivian was often touted by investors as one of the budding companies in the EV industry that had the best shot of becoming a true Tesla competitor. Behemoths like Ford and Amazon purchased shares of Rivian stock. But the company’s larger-than-expected losses have spooked investors. One of Rivian’s stock lockup periods ended this week and Ford responded by dumping 8 million shares. The news caused Rivian to drop 20% on Monday — and the company has plummeted over 70% since the beginning of the year.
What To Keep Your Eye on This Week
Latest inflation numbers: April’s Consumer Price Index will be released today. It can’t be emphasized enough how desperately U.S. consumers need price growth to slow. Last month, inflation jumped by 1.2%. This month, the median forecast is a more modest increase of 0.2%, thanks in large part to the Fed’s recent rate hikes.
Is cryptocurrency at an inflection point?: Cryptocurrency investors will be anxiously monitoring their accounts this week. Bitcoin and Ethereum extended their losing streaks over the past 7 days, with both now down trading approximately 50% below their 6-month highs. True cryptocurrency believers expect prices to rebound soon. But if Bitcoin’s price was to drop below 30,000 (a key resistance level for the currency), things could quickly spiral into a legitimate crypto crash
Here are two stories and a podcast episode from around the web that our team found interesting:
- Rising Rates Will Cool the Housing Market. But a Crash is Unlikely. (The Washington Post)
- Will Gas Prices Ever Go Down? (Kiplinger)
- The Day Russia Adopted the Free Market (Planet Money podcast)
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