Let’s start off the week with our weekly market review. The Russell 2000, a proxy for small business, was down about half a percentage point last week but is up nearly a percentage point in the last 30 days and down 1.15% for the year. The S&P 600, which looks at the smallest companies, was up last week and is roughly even for the year.
Consulting might be having a tough year. According to Business Insider, Accenture has cut its revenue forecast for 2024 as demand for consulting services slows. Other major consulting firms are also experiencing a decline in demand, and Deloitte has launched a reorganization to cut costs.
According to a report from the White House Council of Economic Advisers, the Biden administration believes that full employment has been achieved in the labor market, contrary to inflation-fighting economic orthodoxy. They argue that there is little evidence that tight labor markets have caused higher inflation. The report highlights the benefits of full employment, such as shrinking racial and gender gaps in employment and strong bargaining power for workers. The job market dynamics differ from pre-pandemic times, with strong inflation eating away at wage gains, but nominal wages have soared, and there are gains in real terms.
Consumer sentiment may be weakening based on indicators such as apparel, grocery, and restaurant sales. Companies like Lululemon, Darden Restaurants, and General Mills have reported signs of consumer softness. Rising gas prices are also impacting consumer feelings about the economy. While the National Retail Federation forecasts modest retail sales growth for 2024, Americans are starting to seek cheaper alternatives.
According to internet search data and reported in the Small Business Blog, the top businesses that Americans want to start in 2024 are cleaning, vending machines, dropshipping, e-commerce, consulting, clothing, ATMs, landscaping, pressure washing, and lawn care businesses. Interestingly, most of these businesses do not require previous knowledge, experience, or qualifications.
Why do we care?
I’m inclined to believe the big consulting shift is about prioritizing operational efficiency over growth. Couple that with some consumer sentiment softness, and it’s all representative of the vibes economy, particularly when you look at full employment. Note that we’re seeing conditions we have not seen before, so historical data is not necessarily representative.
My friend Karl Palachuk likes to remind everyone that you’re an economy of one—rather a useful perspective when the data is new. Data such as this should be used directionally—trend lines look solid yet not explosive.