Well-th Notes – Third Week of April 2023

By Hightower Great Lakes on April 20, 2023

Cool Enough

The S&P 500 and Nasdaq Composite rose 0.8% and 0.3%, respectively,[i] last week as investors digested cooler — but still formidable ― inflation readings. The consumer price index rose 5% in March from a year earlier (y/y), down from February’s 6% y/y rise and the smallest y/y increase since May 2021.[ii] Core inflation, which excludes energy and food, rose 5.6% y/y in March, a slight increase from 5.5% the prior month.[iii]  

High Contrast

Economists have raised their inflation expectations, with most forecasting that the midpoint of the target fed funds rate will reach 5.125% by the end of June. Only 39% of those surveyed expect a rate cut before 2024;[iv] however, the market-implied probability of a 2023 rate cut stands at roughly 68%.[v]

Banking Up Earnings

J.P. Morgan, Citigroup and Wells Fargo reported a combined $22 billion in profits during the first quarter — up by more than one-third y/y. The megabanks benefited from charging higher rates on loans without increasing rates paid to depositors by as much.^vii

Net interest income at J.P. Morgan, for example, was $20.8 billion, up 49% compared to last quarter.[vi] Also, J.P. Morgan and Citigroup estimated picking up about $50 billion and $30 billion, respectively, in new deposits following Silicon Valley Bank’s (SVB) collapse.[vii]

With a Little Help from the Feds 

After SVB’s collapse, banks significantly increased their borrowing, including through discount loans from Federal Reserve Banks (the 12 regional banks that operate as arms of the Fed). From the week ending March 8 to the week ending March 29, borrowing by small banks rose by 42.2%, or $175 billion, and borrowings by large banks rose by 47.7%, or $304.4 billion.[viii]

No Fun Refunds

The average refund for this tax season so far is down by -9.3% relative to last year, and the total amount refunded is down -10.6%.[ix] Lower refunds are due partly to the expiration of pandemic-era provisions and may be contributing to lower spending. U.S. retail and food services sales fell 1% in March (although they gained 2.9% y/y), with a notably steep -10.3% decline y/y at electronics and appliances stores.[x]

Pay to Play

Average babysitting rates in the U.S. rose 9.7% in 2023 and have risen nearly 30% over the past three years. The national average hourly rate is now $22.68 per hour for one kid and $25.37 for two. If you’re in San Francisco, you can expect to shell out $25.24 per hour for one kid and $28.31 for two.[xi]

Baby Steps

The gap between the number of childcare workers and the number of employed women ages 25 through 54, identified as being a core group primarily responsible for household childcare, peaked in April 2020 during the onset of the pandemic, when there were roughly 25% fewer childcare workers available than there were employed women. That gap has since gradually narrowed to about 6% as of early March.[xii]

(Office) Glass Half Empty

The average rate of occupancy in offices across 10 large cities in the U.S. was 48.5% during the first week of April. Houston had the most workers back in the office (60.9%) among major metro areas, whereas San Jose had the fewest (37.1%). The highest occupancy during the week was on Tuesday (56.5%), whereas Friday saw the lowest (32.9%) [xiii]

China Resort

China is increasingly becoming countries’ lender of last resort. Since 2000, it has extended a total of $170 billion in rescue loans through swap lines and $70 billion through bridge loans, which combined, corresponds to more than 20% of the International Monetary Fund’s total lending over the past decade. However, these loans are shown to be more opaque, carrying relatively high interest rates and targeting debtors of China’s Belt and Road Initiative.[xiv]

Hitting the Mound Running

The St. Louis Cardinals’ 20-year-old Jordan Walker, the youngest player in Major League Baseball, got a hit in each of his first 12 games, tying Eddie Murphy’s 1912 record for the longest hitting streak to start a career at age 20 or younger.[xv]

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[i] FactSet total returns as of April 14, 2023.

[ii] U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CPIAUCSL. April 17, 2023.

[iii] U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average [CPILFESL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CPILFESL. Accessed April 17, 2023.

[iv] DeBarros, Anthony and Gabriel T. Rubin, “Economists Turn More Pessimistic on Inflation,” The Wall Street Journal, April 15, 2023.

[v] CME Group, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html. Accessed April 17, 2023. CME FedWatch Tool estimates probabilities of changes to the fed funds rate, as implied by 30-day fed funds futures pricing data.

[vi] J.P. Morgan Chase & Co, First Quarter 2023 Earnings Release, https://www.jpmorganchase.com/ir/quarterly-earnings. Accessed April 17, 2023.

[vii] Benoit, David, Rachel Louise Ensigh and Gina Heeb, “There Was No Crisis for JPMorgan and Its Big-Bank Peers,” The Wall Street Journal, April 14, 2023, https://www.wsj.com/articles/jpmorgan-chase-jpm-q1-earnings-report-2023-47154f00. Retrieved April 17, 2023.

[viii] Federal Reserve Bank of St. Louis, “Recent Trends in Commercial Bank Balance Sheets, Part 3,” The FRED Blog, April 10, 2023, https://fredblog.stlouisfed.org/2023/04/recent-trends-in-commercial-bank-balance-sheets-part-3/. Accessed April 17, 2023.

[ix] IRS, “2023 Filing Season Statistics — Individual Income Tax Returns,” as of April 7, 2023, https://www.irs.gov/newsroom/filing-season-statistics-for-week-ending-april-7-2023. Accessed April 17, 2023.

[x] United States Census Bureau, “Advance Monthly Sales for Retail and Food Services,” April 14, 2023, https://www.census.gov/retail/sales.html. Accessed April 17, 2023.

[xi] Urbansitter, “2023 Babysitting Rates: National Average & by City,” based on a survey of 15,000 households,  https://blog.urbansitter.com/babysitting-rates/. Accessed April 17, 2023.

[xii] Federal Reserve Bank of St. Louis, “Childcare Labor Supply vs. Employment of Women,” The FRED Blog, April 13, 2023, https://fredblog.stlouisfed.org/2023/04/childcare-labor-supply-vs-employment-of-women/. Accessed April 17, 2023.

[xiii] Kastle, Kastle Back to Work Barometer, April 10, 2023, https://www.kastle.com/safety-wellness/getting-america-back-to-work/. Accessed April 17, 2023.

[xiv] Horn, Sebastian Andreas, Bradley Christopher Parks, Carmen M. Reinhart, and Christoph Trebesch,

“China as an International Lender of Last Resort (English).” Policy Research working paper; no. WPS 10380 Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/099450403272313885/IDU046bbbd8d06cc0045a708397004cbf4d2118e. Accessed April 17, 2023.

[xv] Langs, Sarah, “10 Stats that Stand Out from a Crazy Week of Baseball,” MLB.com, April 13, 2023, https://www.mlb.com/news/mlb-stats-of-the-week-ending-april-12. Accessed April 17, 2023.