Catching up (GDP, PCE, Jobs, Unemployment), theme parks vs. travel and the Olympics
Well, I guess the staff of your favorite weekly email won’t be going on vacation again anytime soon; we missed three calls from the Fed, and everything went to hell in a handbasket.
I’m just kidding about that last line; I don’t take Fed calls, and I never pick up their voicemails. And the economy is not going to hell in a handbasket. But the staff will be taking time off at Christmas.
Let’s summarize what happened while the Russell Report was on hiatus.
First, GDP for the second quarter was up 2.8%. Wow – that was a bit of a surprise and good news leading into vacation week. The previous quarter was 1.4%, and expectations were not much higher.
The US economy is stronger than expected, leading to expectations that the Fed will not drop rates sooner than November. Remember, the Fed is looking for signs of a weaker economy, like weaker job reports.
During Vacation Week, the PCE came out – Personal Consumption Expenditures Index – and it went from 2.6% in May to 2.5% in June.
Inflation continues to come down. The Fed likes that. So much so that Fed Chair Jerry said that rate cuts may be on the table for September, depending on the data they receive.
And then they received the data.
The data being new jobs created. That number came in at 114,000. Sounds just fine except expectations were for 175,000.
Oh, and the unemployment rate ticked up to 4.3%, up from 4.1%.
Cue the dramatics. That would be Wall Street, aka the stock market, emphasizing the fact that the sky is falling for sure this time. It wasn’t helped by some decisions by the Bank of Japan, but the market was looking for any reason to have it’s programmed trading kick in.
And kick-in it did.
Finally, the new unemployment claims number came in, and… it was lower than expected at 233,000. This was down from the previous month’s 250,000. Cue the rise in the stock market because the sky is not falling. False alarm.
So, after NOT reporting on economic changes over the last three weeks, I am pleased to report that despite all the noise and dramatic news, not a lot has changed. Some things go up, and some things go down.
However, just a heads up…
It’s worth noting that there are a fair amount of headline companies declaring bankruptcy. Big Lots, Chicken Soup for the Soul (that includes Red Box), Red Lobster, Buca di Beppo, Rubio’s, and so on.
According to S&P Global Market Intelligence, 346 companies went the way of reorganization or liquidation in the first half of 2024. That’s the highest since… wait for it… 2010. Cue the dramatic soundtrack.
Most of the companies are labeled ‘consumer discretionary’, meaning they exist at the whims of consumer discretionary dollars. Many also had a lot of debt, and when rates go up, so do payments.
That’ll squeeze your margins.
Summarized, prices continue to rise at a decreasing pace, and the job market is showing signs of continued weakness. And the consensus is that there will be a rate drop this year. Whether it’s in September or November is up in the air.
What is absolutely ridiculous is calling for a rate decrease on a two-day performance of the stock market. That’s like buying a new fleet of delivery trucks because one of your drivers had engine problems and missed a delivery for your largest customer.
Speaking of Slowdowns
Remember what I said about your US dollar going much further this year in Europe?
Some people are taking that to heart.
Disney and Six Flags reported softer results from their theme park revenue.
Comcast, the owner of Universal Studios, reported a 10.6% decline in revenue in its parks division.
Evidently, the folks with money to spend are going overseas as destination tourists, and the lower-income consumers are feeling enough stress to cut down on theme park spending.
As an example, a day at Disneyland will run you $250 per person, assuming you will pay to skip the line.
In a classic example of economics, the second-tier amusement parks are holding their own as substitutes for higher-priced Disney and Universal theme parks.
Just another example of a slowing economy.
Some Notes on the Olympics
Wrestling got my attention this year. I think it was the brevity of each match and some American rising stars – watch for Amit Elor in the freestyle class in the future, the youngest wrestler to ever win a gold medal at the age of 20. Speaking of age, the oldest wrestler was a Cuban in the heavyweight class. Mijain Lopez is 41 years old, 6 feet 5 inches tall, and 290 pounds. He won his 5th gold medal and is the only person to have won 5 gold medals in the same event. After he won his last match, he removed his shoes and placed them in the middle of the mat, signifying he would not be competing again.
Gymnastics leave you on the edge of your seat with huge successes from the American team. Track & Field was wonderful to watch; years of effort, coupled with past defeats, energized the American competitors. If only we could hang on to a baton.
American women’s soccer had a change in management with an English coach, and they also won gold. The old guard was out, and the new guard was happy to play without drama. Every single player sang the national anthem at the medal ceremony, something Americans just don’t do enough of.
Final Note: There are way more stories of grit, determination, and come-from-behind successes than I can even touch on. A common theme seemed to be that no matter how many world championships a participant had won, it seemed to be more valuable to win Olympic gold than anything else. It is the ultimate stamp of validation.
Next up is Los Angeles, where the Olympics will be held in 2028. I worked the games in 1984, one of the best jobs I ever had. Maybe this time, I’ll make it to a venue and watch some events.
There are four and a half months until year-end. I expect that you will be on the podium when your score for 2024 is tabulated. Keep practicing!
