My Investing Muse ( 08Apr24) - Layoffs, Baltimore, Minimum Wage & Fed Fund Rate
My Investing Muse ( 08Apr24) - Layoffs, Baltimore, Minimum Wage & Fed Fund Rate
Layoffs news
Global management consulting firm McKinsey has offered to pay hundreds of senior employees to voluntarily leave the company and look for other jobs. UK managers were given the option for a 9-month job search period. - India Today
Citigroup will lay off 430 employees across different divisions in New York, the bank disclosed in filings with the State Department of Labor on Monday. - Reuters
A 70-year-old California-based less-than-truckload carrier Tony's Express ceased operations Thursday, leaving over 200 truck drivers, warehouse workers and office personnel without jobs, paychecks and paid time off (PTO). - FreightWavew
We continue to learn of more layoff news in the past week and we can expect more to follow in the coming weeks.
Baltimore Bridge Tragedy
It is estimated that the current claims and damages at the Baltimore Bridge tragedy could cost approximately $5 billion. There needs to be other workarounds for shipping routes and supply chain operations. With 8,000 workers affected by this accident, the government needs to clear the accident site so that work can resume for the port.
Minimum Wage
The new $20 minimum wage for fast food workers in California is set to start Monday as per AP News. Is this why inflation should continue to climb in the coming days?
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Several states have already increased their minimum on 1st Jan 2024. More will be announced soon. California starts with a new minimum wage on 1st April 2024.
When one sector enjoys pay increments, others would demand likewise. Wage demand spirals from envy, need, want or a mixture of factors. Inflation should flex soon with the Middle East tension sending oil prices up. What use if there is more pay without more value?
ADP shows the median year-over-year pay increase for job switchers was 10% in March, the highest rate of growth since July 2023. Meanwhile, job stayers saw an annual wage gain of 5.1% during the month. - Yahoo Finance
Chipotle’s chief financial officer estimated that the burrito chain would boost prices by “a mid-to-high single-digit” percentage as a result. “We are definitely going to pass this on.” - Yahoo Finance
This could lead to a series of wage adjustments. This would be inflationary in impact. With each such increase in pay, the Federal Reserve may need to review the interest adjustments. While the market hopes for a Fed pivot, there are concerns that inflation and wage increases need to be met with interest rate hikes instead.
Fed Fund Rates
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Relationship between interest rate and recession. From recent history, a recession can take place after a Fed pivot.
Conclusion
With Iran and Israel having more tension in the Middle East, the price of crude oil surges. Some analysts mentioned the possibility of crude oil hitting $100 per barrel. This should lead to more inflationary pressures.
With the CPI data release in the coming week, there could be more volatility in the market. Let us consider some hedging as we head into the Q1/2024 earnings season.
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