Weekly Market Recap
Show me the money
Week in review
- Australia business confidence surges to all time high
- U.S. CPI inflation increases to 4.2% y/y
- U.S. job openings jump to over 8 million
- RBA May policy meeting minutes
- Australia consumer confidence
- Australia labour market report
Thought of the week
Last week equity markets were rumbled as inflation fears resurfaced. The large shortfall in the U.S. April jobs report would have normally placated markets that the status quo was not about to change. But the jobs number was part of the cause, as workers may be incentivised not to look for work as long as unemployment benefits are artificially high. This reduction in supply at a time when labour demand is rising could generate inflation through higher wages. There is some evidence of this already as the number of open jobs is well above its pre-pandemic level while there are still 8 million fewer people employed in the U.S. than before the pandemic began. The lowest wage at which a worker will accept a new job in the U.S. has been rising for over a year and spiked sharply for the lowest income bracket (see chart). The consequence is that if this economic constraint continues, inflation may not be as transitory as the U.S. Federal Reserve anticipates.
U.S. workers’ reservation wage has risen sharply
Lowest wage acceptable for a new job (000s)
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