Capital Markets Update #15

We got a decent amount of consumer data this week, apropos it’s not a bad idea to check in with how Americans are doing.

February JOLTS data was released Tuesday and showed a decline in job openings from 7.2MM to approximately 6.9MM jobs open.  At present, there are approximately 0.85 jobs open for each unemployed worker (BLS).  The number of individuals quitting their jobs declined slightly from 3.1MM to 3.0MM, however not enough to arouse any suspicion (both on a MoM or YoY basis) of a broader fear or greed complex taking hold in the job market.  Today’s quits rate, or the ratio of individuals voluntarily quitting their jobs to the number of total employed, dropped slightly from 2.0% to 1.9%.  Somewhat obviously, a higher quits rate signals a more liquid or advantageous job market for job seekers.  For reference, the 2016 – 2019 quits rate remained pretty stable around 2.1% - 2.3%.  Individuals quit en-masse during the pandemic, with the quits rate spiking to 3.0%.  If we were to be honest with ourselves, today’s quits rate is the lowest since 2015 (setting aside a few times it touched present levels in 2024).  Interestingly, despite the lower quits rate compared to pre-covid, today’s layoff rate of about 1.1% sits comfortably below 1.3% - 1.4% layoff rate pre-covid.   Maybe all the talking heads are right and the job market is roughly in balance.

We’ve always thought the Bank of America monthly Consumer Checkpoint release provides timely, accurate and thoughtful data analysis; this month is no different.  According to BofA, February 2026 YoY spending growth amongst credit and debit card-holding households reached its strongest level since January 2023 at 3.2% YoY growth.  At best, you could argue average YoY spending growth for the trailing 24-month period was around 1.5%, making February 2026 somewhat outstanding.  There’s no doubt tax refunds had something to do with this, meaning the data is likely to only get better over the next three months.  Thankfully, spending growth rose amongst all income cohorts, with lower income households experiencing 1.1% YoY spending growth while upper income households saw closer to 2.9% YoY growth (3-month moving average data).   However, the data still shows a meaningful disparity in job market demand for higher-income jobs vs lower-income jobs, reflected by the fact that higher-income wages grew at a 4.2% YoY after-tax rate compared to lower income earners experiencing 0.6% YoY after-tax wage growth.  BofA credit card default and payment data remains quite stable and supportive of a healthy consumer.  Median checking account balances for middle and lower-income Americans remain well above inflation-adjusted 2019 levels, up 50% nominally from 2019 or about 20% on an inflation adjusted basis (pre-refunds).

Our view is that real wage growth is the lodestar metric for any economy, seconded only by the unemployment rate.   Everyone has an estimate for wage growth – ADP, ISM, BLS, BofA, Fed, Census, etc.  You’d think the BLS data would be the best; the truth is it has been highly volatile post-covid, so we need to look beyond your basic monthly labor report for insights.   That said, we got the BLS data this morning.  According to the BLS March labor report, average hourly earnings were up a paltry 0.2% MoM.  This drop in wage growth unnaturally accompanied a drop in the unemployment rate from 4.4% in February to 4.3% in March.  It’s a strange and dissatisfying datapoint - inflation concerns aside, we will always be on the side of the American consumer making more money.  The Atlanta Fed publishes a 3-month moving average wage tracker and uses census data, which can be helpful in these instances.   According to the Atlanta Fed, median wage growth sits at approximately 3.7%, with job switchers capturing approximately a 4.4% bump in wages.   To be fair, these are moderate wage growth levels in the post-pandemic world, but they do compare favorably to 3.0% - 3.5% wage growth levels experienced from 2010 - 2019.  Its funny, it seems like eons ago, but we fail to remind ourselves that CPI tilted from a high of 3.5% in 2011 to a low of -0.02% in 2015.  So, if we were to impute real wage growth today and compare it to 2010 - 2029, we’re not far off whatsoever.  We’ve always thought that real wage growth of approximately 1.5% is about market, that’s where the Fed likes it.  Using the most recent February 2026 2.4% CPI print and a 3.7% YoY wage growth, real wage growth today sits around  1.3%.  That’s not bad and is likely representative of how we all feel about the labor market in general – unexceptionally and uncomfortably stable.  But stable, nonetheless. 

When the week started, we were sure we were going to write about capital investment in the US economy.  Once we got into it, we felt as if we had told that story in prior notes and you would get bored.  However, not to be deterred, here’s one interesting datapoint from our research: did you know that, according to the most recent BEA revision to Q4 2025 GDP, the US spends approximately $5.4T in private fixed investment (both residential and non residential) to generate approximately $30.8T in 2025 GDP.  Another way to say that is fixed investment accounts for approximately 17.5% of our total domestic GDP production.  Curious how the EU compares?  As of 2024, which is the latest data we could gather, the EU invested approximately $4.9T of fixed CapEx to generate approximately $16.5T in GDP (EU EuroStat data).  Effectively, fixed CapEx represents 30% of European GDP.   We are a service economy, everyone knows this axiom, but services require structures and fixed CapEx as well.  So, an interesting way to look at this is that America generates approximately 5.7 units of GDP for each dollar of fixed CapEx, compared to Europe’s 3.4 units of GDP yield on CapEx.