🎙️ The Tables Have Turned

U.S. GDP growth has further confirmed the economy’s resiliency.

The economy grew at an annualized rate of 2.8% in the second quarter, surpassing expectations and accelerating from 1.4% in the first quarter.

Consumer spending and business investment were major drivers. Meanwhile, inflation has kept cooling, with the PCE price index (excluding food and energy) rising 2.5% from a year earlier, helping open the road to a September rate cut.

All told, the strong economic growth, coupled with easing inflation, suggests the economy remains pretty strong despite (relatively) high interest rates. The Fed will hold its next policy meeting on July 30-31.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• The end of the hottest job market in a generation

• Brazil's agricultural growth outpaces the U.S.

This, and more, in just 5 minutes to read.

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In The News

💼 The Hottest Job Market In a Generation Is Over

The extraordinary, “once-in-a-generation” job market that Americans have enjoyed — particularly 2020, 2021, and 2022 — has officially come to a close. 

The exceptional period of job opportunities and record-low unemployment, which enabled workers to secure new positions, increase their earnings, and reimagine their professional paths, gives way to more ordinary circumstances. Yes, the job market remains robust in many aspects. But challenges have emerged. 

What to know: Unemployment figures rose to 4.1%, surpassing the 4% threshold for the first time since 2021. Although the rate is still considered low by historical standards, it’s an increase from 3.4% in early 2023. 

• The trend of workers frequently changing jobs has really slowed down, and many recent graduates — even from big-name schools — are struggling to enter the workforce. The ratio of available positions to unemployed individuals has returned to the pre-pandemic level of 1.2, down from over 2 in 2022.
  

• While the risk of job loss remains minimal, hiring has fallen below pre-Covid levels. Economists describe this job market as having achieved equilibrium, though some express concern that conditions may continue to deteriorate.
  

• One chief economist noted in The Wall Street Journal, "The labor market cooled back to a strong place. This is a good labor market. But it’s not clear if the cooling is done.”

Covid shock: Economists argue that the unprecedented dynamics that fueled the boom—an economy that shut down and then rapidly rebounded during a pandemic—were always destined to be temporary.

An economist at the job-search site Indeed commented, "To be honest, I'm not convinced that labor market was ever sustainable. It was a product of a massive Covid shock. It was remarkable to witness, but it was never going to persist indefinitely."

Case study: “As soon as a position is open on LinkedIn, within an hour over 100 people have applied,” said one HR professional who has been job hunting for more than a year. Her savings are running out, and she isn’t confident in her prospects. “One HR professional who was trying to help me land my next opportunity, she wound up getting laid off.”

Why it matters:

In 2021 and 2022, some workers changed jobs multiple times yearly, increasing their earnings each time. Those days are over, for the most part. 

Prosperous times: The period of prosperity was enjoyable while it lasted. Wages surged as employers competed for workers during a nationwide labor shortage, reaching a peak year-over-year growth of 5.9% in March 2022, according to federal data.

• Unions capitalized on the opportunity to negotiate improvements in pay and benefits across sectors, including UPS drivers, auto workers, healthcare professionals, and brewery employees.

Final thoughts: Wage growth has since moderated, reaching 3.9% year-over-year last month, which is still higher than the roughly 3% observed in the months preceding the pandemic.

• The U.S. economy continues to add jobs each month at a healthy clip—206,000 in June—extending an impressive streak of 42 consecutive months of employment growth. That alone indicates a good market.
  

• But it’s worth noting that last month's hiring concentrated on specific sectors, such as healthcare, construction, and government work. Other occupations, including certain white-collar jobs, have plateaued or declined following rapid gains during the pandemic. It might be years — or decades — before that Covid-era job market returns. 

Read more 

More Headlines

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🚗 Elon Musk thinks there's one real reason to own Tesla stock

🏠 Sales of $100 million homes set to double this year

📝 Short seller Andrew Left charged with fraud by prosecutors, SEC

🤑 Barclays reaps hedge fund riches in battle of the prime brokers

🇧🇷 Brazil's Agricultural Growth Outpaces the U.S.

Just as the U.S. becomes less agricultural-dependent, Brazil’s agriculture industry is on the rise. 

Brazil credits its affordable labor, year-round harvests, and strong connections with major buyer Beijing for its ability to challenge the U.S.'s long-standing position as the top global supplier of essential crops. And now, Brazil has a new asset in its quest to surpass American agriculture: Generation Z.

Forget tech, farming is cool: Young Brazilians are abandoning careers in the service sector and manufacturing to join their parents in the now-trendy family farming business, boosting the country's growing stake in the food supply chain. 

• Many are drawn to the industry's rapid growth, extensive use of technology, and history of producing billionaires. The average age of a Brazilian farmer has fallen to 46 years old.
  

• In contrast, American farmers have never been older. The discrepancy is not solely due to the countries' overall median ages, which the U.S. government reports are within four years of each other.
  

• The number of U.S. farms fell by about 14% between 1997 and 2022, during a period of high crop prices when US farmers should have been particularly prosperous.
  

• “Young people are beginning to see farming as an opportunity rather than an obligation,” said a leader who oversees a program within Brazil’s national agriculture confederation that trains young people for leadership roles in agribusiness.

Other aging nations, such as Japan and Italy, face similar shifts as their populations age. But with the U.S. and Brazil collectively supplying over half of the world’s corn and nearly 90% of its soybeans, their demographic changes will impact global food supplies and prices. 

Why it matters:

Brazilian soy and corn farmers typically sell their crops at a discount compared to U.S. farmers, mostly because of a weaker currency and lower labor costs. This puts U.S. farmers at a disadvantage on the global stage.

Political punch: An aging rural population is the latest challenge for a country that has been losing its agricultural dominance for years. This dominance has been a vital source of political power, especially with China, the largest agricultural importer. 

• Already the leading exporter of soybeans, Brazil is now on track to surpass the U.S. in corn exports as well. As the U.S. agricultural trade deficit widens to a record $32 billion in fiscal 2024, American households face increasing risks of supply-chain disruptions and price spikes from distant disasters.

Infusing farming with tech: Conversely, farming in Brazil is on the rise, and the new generation is eager to participate. 

• As Gen-Z and millennial farmers enter the sector, they’re using precision agriculture, which allows operators to monitor and analyze their fields and make data-driven decisions.
  

• Young Brazilians are also experimenting with new crops and machinery, enhancing yields. They’re incorporating irrigation, reducing chemical pesticide use, and adding GPS monitoring as they assume leadership roles on farms previously run by the older generation. The cycle continues.

Read more

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Quick Poll

On Wednesday, we asked: Do you own Alphabet stock directly? Why or why not?

— Results were split. Among Alphabet shareholders, one said: “I have owned it for several years. It has been a great performer.” The stock is up 21% this year and 170% in the past five years.

— People who aren’t shareholders noted that it’s too expensive for them right now. “Waiting for the dip,” one wrote. “Being in India, I prefer to invest through Mutual Funds (Direct Plan) in Nasdaq, allowing me to have fractional ownership through SIP. The returns are about 19% since 2020.”

See you next time!

That's it for today on We Study Markets!

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