If the Fed’s Job Is to Tame Inflation, Workers Will Feel More Pain

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The gradual cooling of recruitment by some of America’s biggest employers contrasts sharply with the double-quick actions of the Federal Reserve in trying to get rampant inflation under control.

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Take Alphabet,
for example. CEO Sundar Pinchai said earlier this month that the Google and YouTube owner would slow the pace of hiring this year, and asked existing staff to work with “more hunger than we’ve shown on sunnier days.”

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The company’s approach in tackling tough times will no doubt interest the Federal Open Market Committee on the day it is expected to increase interest rates by 75 basis points.

So far, economic black clouds have yet to loom over US employment. Another 372,000 jobs were added in June, far more than economists had projected, and the unemployment rate held steady at 3.6%.

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But the status US employment currently enjoys as one of the most resilient datapoints is under threat, although it may take time to turn as Microsoft,

Apple,
and more ease back on hiring.

Alphabet doesn’t expect its recruitment slowdown to become apparent until 2023 and remains committed to this quarter’s round of graduate hires.

General Motors starts from a different point, having gone through a restructuring in 2019 and 2020. But the largest US car maker is still curtailing some hiring, with CEO Mary Barra running “many different scenarios” in case conditions change.

The conclusion appears to be that stronger companies are soft-pedaling on jobs while challengers are being forced to cut. Witness Shopify‘s
total of about 1,000 workers, or 10% of its workforce.

Head count cautiousness is as commonplace this reporting season as earnings misses that are greeted with investor relief for not being worse.

If job one for the Fed is to get inflation under control, it looks like more slack will return to the US jobs market as a result.

,James Ashton

*** Join MarketWatch reporter Alessandra Malito and AARP expert David C. John today at noon as they discuss how near-retirees are faring with record-high inflation, and what this all means for an older workforce and generation hoping to retire. Sign up here.

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Alphabet and Microsoft Show Slowing Growth Trends

Alphabet saw the slowest quarterly sales growth rate since 2020, weighed by economic factors that are affecting the market for digital advertising. The Google parent’s 2022 revenue will be difficult to compare to last year’s pandemic-growth-fueled results, according to CFO Ruth Porat.

What’s Next: Microsoft shares rose late Tuesday after the company gave its upbeat outlook, saying it expects double-digit growth in both revenue and operating income for its 2023 fiscal year, both as reported and in constant currency.

,Liz Moyer

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PayPal Has Finally Attracted an Activist

Shares in PayPal have slid more than 60% this year as people returned to their prependemic spending habits. Its shrinking value, from a $350 billion company at its peak to one valued at about $89 billion, has prompted an activist to come knocking at the door of the payments company.

What’s Next: It was reported earlier this month that Elliott has taken a stake in Pinterest,
In a recent report, Piper Sandler analyst Thomas Champion said he could imagine Elliott pushing Pinterest to sell itself—Microsoft and PayPal had been rumored suitors.

,Carleton English

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Home Price Gains Are Cooling, but Pace Still Hot

Home prices in the US aren’t rising as fast as before, but they are still rising, up another 19.7% in the 12 months ending in May, according to the S&P CoreLogic Case-Shiller Index. That is compared with 20.6% annual growth the previous month. But new home sales are tumbling.

What’s Next: It would take 9.3 months to clear the current inventory of homes available for sale now, the highest since 2010. Amherst Pierpont chief economist Stephen Stanley expects home price appreciation to slow further after 300,000 homes currently under construction are finished.

,Shaina Mishkin and Janet H. Cho

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Shopify Cuts 10% of Jobs as E-Commerce Demand Slows

Shopify is cutting 10% of its jobs, or about 1,000 workers, as customers pare back their pandemic-driven online shopping habits, according to an internal memo by CEO Tobi Lütke that was first reported by The Wall Street Journal. Shopify reports earnings today.

What’s Next: Lütke said Shopify’s customers, who are entrepreneurs and small-business owners, are typically the hardest-hit during recessions. “Most are already feeling it,” he said in the memo. “We again have a clear objective in these challenging macro economic times.”

,Janet H. Cho

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South Korea’s SK Group to Invest $22 Billion in US

South Korea’s SK Group, the nation’s second-largest conglomerate after Samsung,
announced $22 billion in new investments spread across the US semiconductor, electric-vehicle battery production, and biotechnology sectors.

What’s Next: Biden said Samsung is planning a $17 billion advanced chip factory in Texas, and Hyundai is investing $10 billion in US manufacturing, including an advanced automotive factory in Georgia. He soon expects to sign the $280 billion CHIPS Act passed by the Senate.

,Janet H. Cho

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Dear Quentin,

I am struggling with the ethics of a highly personal situation. I am in a second marriage and have been married for 13 years. We signed a prenup and agreed that any financial accounts created before our marriage would remain separate property, and go to our respective families and kids.

I came into the marriage with a lot more money, and these premarital investments have grown significantly for me. I am thinking of starting to give monetary gifts from these accounts to my family. If I do this, my current wife will be very upset, even though this honors our agreement.

Ethically speaking, can I start giving money from these accounts to my family and kids without telling my current wife? I want to start reducing the size of my estate. I would also like to state that we have three types of accounts—mine, hers, and ours—and I would obviously only dip into accounts that are mine.

What do you think?

—Second Husband

Read The Moneyist’s response here.

,Quentin Fottrell

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Barron’s Member Message: Check out the Barron’s Shop, where you can find gifts for the Barron’s readers in your life. Explore the collection.

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—Newsletter edited by Liz Moyer, Camilla Imperiali, Rupert Steiner

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Credit: www.marketwatch.com /

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