May 6, 2023 | Jobs Report, JOLT’s, Apple Stock, Consumer Spending and 401K Loans

Smart Investing with Brent & Chase Wilsey

Jobs Report
The jobs report showed nonfarm payrolls increased 253,000 in the month of April, which easily topped the estimate of 180,000. On the negative side, the prior two months saw revisions to the downside that totaled 149,000. Gains continue to moderate in the report as the April gain was below the 6-month average of 290,000, but with an unemployment rate of 3.4% I can't see payroll growth accelerating at this point. Areas that were at the top of the report included professional and business services (+43,000), health care (+40,000), and leisure and hospitality (+31,000). The growth in leisure and hospitality slowed substantially considering the 6-month average has been an addition of 73,000 jobs per month. The industry remains 2.4% or 402,000 jobs below pre-pandemic levels. No major industry saw a contraction in the report, but one negative was temporary help services declined by 23,000 in the month and since its peak in March 2022 it is down 174,000. One other area that continues to remain a concern was wage inflation. Average hourly earnings in the month increased 4.4% over the last 12 months. This increased from last month's reading of 4.2%, but compared to last April's 5.8% gain it was a nice deceleration. Overall, this report continues to feed my belief that the economy is in ok shape and inflation should continue to slow.

JOLT’s
While the headline Job Openings and Labor Turnover Survey (JOLTs) shows a slowdown, it is again important to compare to pre-covid level given the strange economy over the past few years. Job openings declined 384,000 in the month of March to 9.6 million. This is down 1.6 million when compared to the end of 2022 and is the lowest level since April 2021. While this may sound negative, there are still 1.6 job openings per available worker and in February 2020 job openings stood at just 7 million. Layoffs also increased in the report by 248,000 to a level of 1.8 million. Again, while this may sound troubling, it is important to note that in February 2020 layoffs were 1.97 million.

Apple Stock
If you have made money investing in Apple, congratulations. I must say though I was not impressed with the most recent earnings from the company. The company saw sales decline 2.5% compared to last year and EPS was flat. Service revenue, which has been a nice growth catalyst for Apple in the past, saw sales grow just 5.4% compared to last year. The company also still has a huge reliance on iPhone sales with that component of the business making up over 54% of total revenue in the quarter. Some may point to excitement over Apple's $90 B stock buyback plan and its 4.3% increase to the dividend. Unfortunately, due to Apple's size the buyback plan would only amount to about 3.2% of the shares outstanding and the dividend yield would be just 0.55%. With Apple trading at about 26.5x estimated 2024 earnings the stock is just too expensive for lackluster growth.

Consumer Spending
We see different areas in the economy that appear to be slowing down, but that would definitely not be true for consumer spending on travel and entertainment. Both Visa and MasterCard stated during their earnings last week that this category continued to grow in the first quarter. Also, proving this fact is domestic airline ticket prices in the US increased to $393.85 at the end of 2022, that was an increase from $327.13 one year earlier. If you’re doing the math, that’s about a 20% increase. A recent look of people passing through the Transportation Security Administration (TSA) checkpoints on April 27 was up 11% from one year ago to 2.52 million people. The consumer is still spending. They are just spending in different areas, I guess they feel they have enough TVs and furniture in their homes now.