The Markets

Employment was top of mind for financial markets last week.

Economists and investors hoped May employment information would provide insight to the state of the United States economy, as well as clues about when the Federal Reserve (Fed) may lower the federal funds rate again.

Employment data arrives in two reports that offer different perspectives on the employment situation. Last week, the trends were similar – new jobs creation slowed from April to May – although the number of new jobs reported was quite different. Here’s a brief overview:

+37,000 new jobs per the ADP National Employment Report. Mid-week, this supplemental report showed fewer new jobs were added in May (37,000 new jobs) than had been created in April (62,000 new jobs).

“That was a big miss vis-a-vis what economists were expecting, and so we saw a negative market reaction initially. But if you talk to economists, guess what, they say that ADP number is not a very good predictor of the [Bureau of Labor Statistics] number, and they really give it much less weight, if any weight at all,” reported Julie Hyman of Yahoo!Finance.

+ 139,000 new jobs per the Bureau of Labor Statistics (BLS). On Friday, the government’s Employment Situation Summary reported more jobs were created than economists had anticipated. However, jobs growth slowed from April (147,000 new jobs) to May (139,000 new jobs), and initial estimates for March and April were revised lower.

“While the headline number came in higher than expected, previous months were revised lower — a pattern which has been repeating itself for a while now and which has prompted a lot of head-scratching,” reported Tracy Alloway and Joe Weisenthal of Bloomberg. The pair cited a source who believes one reason for the revisions is that key data about U.S. business closures and business openings arrives after the initial report is issued.

The unemployment rate, which is determined by a survey of households, remained steady at 4.2 percent in May. “…the household survey found a 625,000 decline in the labor force, which helps the jobless rate since those not in the workforce aren’t counted as unemployed,” reported Randall Forsyth of Barron’s.

So, what did the report tell us about the economy and prospective Fed rate policy? “Not as bad as feared but not as good as it looks. That’s what the latest employment data show. But for financial markets, the numbers suggest that the Federal Reserve may be slower to lower interest rates,” reported Forsyth.

By the end of the week, major U.S. stock indexes were all in positive territory year-to-date, reported Connor Smith of Barron’s. Yields on longer maturities of U.S. Treasuries moved higher over the week.

ABOUT BORROWING AND LENDING. In the United States, many people engage in short-term borrowing. They use credit cards to acquire goods or services – springing for a dinner out, charging the cost of a new video game, or purchasing a replacement refrigerator. Then, they pay the money back. If the credit cardholder doesn’t reimburse the card provider in full each month, then they will owe interest on the money they’ve borrowed. Buying on credit is fast and convenient, and it can be quite profitable for the lender.

In China, the payment system can work differently. It’s more of a “pay now and buy later” approach where buyers lend their money to companies, reported The Economist. 

“When you get a haircut or eat at a restaurant, the seller encourages you to pay in advance for multiple transactions. You might pay upfront for ten haircuts, or put 1,000 yuan ($140) on a pre-paid card, and the business will, in return, give you extra credit to spend… The bonus the firm adds to the customer’s deposit rises with the size of the initial outlay, and can be large. Customers putting down 10,000 yuan can receive an extra 2,000 yuan to spend in the store. If they use the money within a year, that amounts to an annual “interest” rate of 20 [percent], paid in kind.”

See what you know about borrowing and lending by taking this brief quiz.

1. If the Chinese system seems familiar, it may be because it’s similar (in some ways) to gift cards. In 2024, Americans spent more than $300 billion on gift cards, according to a source cited by Charles Passy of MarketWatch. However, many Americans don’t use the gift cards they receive. That can make gift cards very profitable for companies. In 2024, a popular coffee retailer reported it had a significant amount of money stored in unredeemed gift cards and did not expect most of the cards to ever be redeemed. How much money was it?

1. $379 million
2. $985 million
3. $1.77 billion
4. $4.56 billion

2. When people buy bonds, they agree to lend their money to a government or organization. In return, the government or organization agrees to repay the loan and pay a specific amount of interest. Imagine that you lend your child $2,000 to buy a car. In exchange, they promise to repay you $200 a month (until the debt is repaid) and to mow your lawn every week. In this example, the lawn mowing would:

1. Probably never happen.
2. Represent the repayment of principal.
3. Represent the payment of interest on the loan.
4. Be your reward for being a wonderful parent.

3. A credit score offers insight to a person’s financial circumstances at a specific time, and helps financial institutions decide whether to lend to a person or not. The practice began in 1989 when the first credit-scoring algorithm was created. How many credit scores can a person have?

1. One
2. Three
3. Fourteen
4. Hundreds

4. When people buy homes, the mortgage rates received are based on a specific benchmark. When the benchmark rate is higher, so is the mortgage rate. What is the benchmark for the 30-year mortgage rate?

1. The 5-year average return of the Standard & Poor’s 500 Index
2. The Federal Open Market Committee federal funds rate
3. The 10-year U.S. Treasury note rate
4. The Big Mac Index

Weekly Focus – Think About It
“The pleasure of rooting for Goliath is that you can expect to win. The pleasure of rooting for David is that, while you don’t know what to expect, you stand at least a chance of being inspired.”
 – Michael Lewis, Author

Answers: 1) c; 2) c; 3) d; 4) c

Sources:

https://mediacenter.adp.com/2025-06-04-ADP-National-Employment-Report-Private-Sector-Employment-Increased-by-37,000-Jobs-in-May-Annual-Pay-was-Up-4-5#:

https://mediacenter.adp.com/2025-04-30-ADP-National-Employment-Report-Private-Sector-Employment-Increased-by-62,000-Jobs-in-April-Annual-Pay-was-Up-4-5

https://finance.yahoo.com/video/private-vs-govt-jobs-where-214534342.html

https://www.bls.gov/news.release/empsit.nr0.htm (report and Table B)

https://www.bloomberg.com/news/newsletters/2025-06-06/america-s-data-disaster-is-already-here? or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-09-25-Bloomberg-Americas-Data-Disaster%20-%205.pdf

https://www.barrons.com/articles/jobs-report-fed-rate-cuts-ff1b6878?refsec=economy-and-policy&mod=topics_economy-and-policy

https://www.barrons.com/livecoverage/stock-market-news-today-060625?mod=hp_LEDE_C_2 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-09-25-Barrons-The-Bottom-Line-of-the-Jobs-Report%20-%207.pdf

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2025 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-09-25-Barrons-Stocks-Rally-In-Wake%20-%208.pdf

https://www.investopedia.com/how-do-credit-cards-work-5025119#

https://www.economist.com/china/2025/05/29/chinas-crazy-reverse-credit-cards or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-09-25-Economist-Chinas-Crazy-Reverse-Credit-Cards%20-%2010.pdf

https://www.marketwatch.com/story/people-are-spending-300-billion-a-year-on-this-product-some-experts-say-they-should-stop-7c73aaff#

https://www.marketwatch.com/story/the-bank-of-starbucks-coffee-retailer-has-1-77-billion-in-unredeemed-gift-cards-138df8f5

https://www.econlib.org/library/Topics/Details/bonds.html

https://www.creditkarma.com/credit/i/how-many-credit-scores-do-i-have

https://www.fanniemae.com/research-and-insights/publications/housing-insights/rate-30-year-mortgage

https://www.goodreads.com/author/quotes/776.Michael_Lewis

The Markets

Consumers were feeling cautiously optimistic.

When people talk about the United States economy, they’re usually referring to gross domestic product (GDP), which is the value of all goods and services produced in here. For the first quarter of this year, U.S. GDP was nearly $30 trillion. That’s a huge number. It would take 14 years for a military jet flying at the speed of sound and reeling out one-dollar bills to release $1 trillion.

The American consumer is the powerhouse of the U.S. economy. Consumer spending accounts for two-thirds of GDP. Spending not only supports economic growth, it also provides insight to the health of the economy. That’s because the purchases consumers make reflect consumer sentiment, the job market, inflation, stock market performance, and a myriad of other factors.

Last week, a lot of consumer-related data was released.

Early in the week, the Conference Board reported that its Consumer Confidence Index bounced back “from a near five-year low”, reported Nazmul Ahasan of Bloomberg. “Consumer confidence rebounded in May following five straight months of declines as a series of new tariff deals improved Americans’ views on the economy… Consumers were less pessimistic about business conditions and job availability in the next six months, and became more optimistic about their future income prospects…Americans were also feeling better about their investments, thanks to the stock market’s May recovery” reported Sabrina Escobar of Barron’s.

The University of Michigan’s Consumer Sentiment Index (UMCSI) also showed a change in sentiment, although the improvement was less pronounced than that of the Conference Board’s Index. The final UMCSI reading for May showed consumer optimism stabilized from April to May. “Consumer sentiment was unchanged from April, ending four consecutive months of plunging declines. Sentiment had ebbed at the preliminary reading for May but turned a corner in the latter half of the month following the temporary pause on some tariffs on China goods,” reported Surveys of Consumers Director Joanne Hsu.

Late in the week, the Bureau of Economic Analysis reported that personal income rose 0.8 percent in April, while prices increased 0.1 percent. The boost in income did not lead to higher spending, though. Consumers spent modestly more in April. Spending was up 0.1 percent, a slower pace than the 0.7 percent rise in March. Americans chose to save in April, socking away more than $1 trillion – almost five percent of disposable income in April.

Major U.S. stock indexes finished the week higher. The Standard & Poor’s 500 Index and Nasdaq Composite Index delivered the best monthly performance since November 2023, reported Connor Smith of Barron’s. Yields on longer maturities of U.S. Treasuries finished the week lower.

TOO VERBOSE? For centuries, maps were essential navigation tools. In recent years, travelers have come to rely on global positioning systems (GPS) that require them to follow directions rather than read a map. While GPS may seem simpler, it has occasionally led both real and fictional people astray. In a memorable episode of The Office, Michael Scott argues, “Maybe it’s a shortcut, Dwight. It said go to the right…The machine knows!” before driving into a lake.

Now, a new app wants people to navigate using words instead of latitude and longitude. The inspiration for the new approach was a numerical miscommunication.

“[The app’s co-founder] was running a business providing the music for events such as weddings in venues such as pretty, rural villas. But the problem with pretty, rural villas is that they tend to be quite hard to find. Street numbers work only if there are streets. Postcodes cover vast areas of the countryside. And in much of the world there is no formal address system at all. [The co-founder] took to giving directions in latitude and longitude. Then at an event in Italy, a lorry drove to n 42.804509, e 12.683829 rather than n 41.804509, e 12.683829. The difference in numbers was tiny: a single digit. The difference to [the co-founder] was vast: his sound system was two hours north, rather than somewhere east of Rome,” reported The Economist.

To improve users’ ability to find locations, the new app divided the world into trillions of three-meter squares and assigned each one a unique combination of three words. Users click on a square to find the three-word address. For example,

• The Hollywood sign in Los Angeles is located at “incomes.amount.formed”,
• Yellowstone National Park can be found at “flashed.faded.eggshells”,
• The Statue of Liberty is “planet.inches.most”,
• Graceland is “part.coin.soil”, and
• The Gateway Arch is “roses.bonus.model”.

The company says three-word addresses make precise locations easier to communicate, so it’s easier to meet up with friends, find a destination, or get help in an emergency. However, choosing words to identify locations was not simple or straightforward. The company “employs linguists who manually go through each country’s dictionary, removing rude words lest they offend (“bottom” appears in the English version but not “bum”) and homophones lest they confuse (English loses “sun” and “son”). Complicated words are not removed entirely but do tend to be exiled to less populous places (“dodecahedron”…often ends up in the ocean).”

The new approach to navigation gives a whole new meaning to Mark Twain’s observation: The difference between the almost right word and the right word is really a large matter.

Weekly Focus – Think About It

“I’ve had a lot of worries in my life, most of which never happened.”
 – Mark Twain, Humorist

Sources:

https://www.investopedia.com/ask/answers/what-is-gdp-why-its-important-to-economists-investors/

https://fred.stlouisfed.org/series/GDP

https://www.imaginationstationtoledo.org/educators/diy-activities/what-does-a-trillion-dollars-look-like

https://fred.stlouisfed.org/series/DPCERE1Q156NBEA

https://sgp.fas.org/crs/misc/IF11657.pdf

https://www.bloomberg.com/news/articles/2025-05-27/us-consumer-confidence-jumps-most-in-four-years-on-trade-truce or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-02-25-Bloomberg-US-Consumer-Confidence-Jumps%20-%206.pdf

https://www.barrons.com/livecoverage/stock-market-news-today-052725/card/consumer-confidence-rebounds-in-may-Cbc4s1Q53oQfamXZKeaJ or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-02-25-Barrons-Consumer-Confidence-Rebounds%20-%207.pdf

https://www.sca.isr.umich.edu

https://www.bea.gov/sites/default/files/2025-05/pi0425.pdf

https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-02-25-Barrons-DJIA-S&P-Nasdaq%20-%2010.pdf

https://www.barrons.com/livecoverage/stock-market-news-today-053025?mod=hp_LEDE_C_1 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-02-25-Barrons-S&P-500-Finishes-Session-Flat%20-%2011.pdf

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202505

https://www.imdb.com/title/tt1031459/characters/nm0951838

https://www.economist.com/britain/2025/05/29/what-on-earth-is-what3words or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-02-25-Economist-What-On-Earth%20-%2014.pdf

https://what3words.com/about

https://what3words.com/incomes.amount.formed

https://what3words.com/flashed.faded.eggshells

https://what3words.com/planet.inches.most

https://what3words.com/part.coins.soil

https://what3words.com/roses.bonus.model

https://www.goodreads.com/author/quotes/1244.Mark_Twain? [Pages 1 and 3]