The Rally Meets Reality
from Mind the Macro Hosted by Michael Roberts and Jeff Baldwin
In this episode, we discuss the latest labor market releases, deteriorating consumer balance sheets, and Friday's decline in equity markets. While payroll growth exceeded expectations and the unemployment rate held steady at 4.3%, the composition of employment gains, the timing of the Memorial Day holiday, and several other details within the report continue to suggest a less encouraging picture of the economy. Meanwhile, consumer debt continued to rise, with revolving credit balances, much of which consists of credit card borrowing, increasing at an annualized rate of 10% in April after rising 9% in March. These figures are particularly troubling given that the personal savings rate remains near historic lows and credit card delinquencies have climbed to levels not seen since the Global Financial Crisis. Consumers appear increasingly reliant on borrowing to sustain spending, a dynamic that has rarely ended well. Friday's sell off in equity markets served as a reminder of the fragility underlying the recent rally. Weaker than expected revenue guidance from Broadcom, renewed concerns about inflation, and rising expectations that the Federal Reserve may be forced to raise interest rates before year end all contributed to the decline.
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