CREDIT

Hiring Hit Record in 2021 Despite Slower Gains in December U.S. hiring moderated in December with 199,000 new jobs to close out a record year for job gains ahead of Omicron disruptions. The unemployment rate falling to 3.9% and robust wage growth suggest the economy will grow solidly this year.

Employers added 199,000 jobs in December, below average monthly job growth of 537,000 in 2021, the Labor Department said Friday. (…) Last month’s payroll gains left the U.S. economy with about 6.4 million more jobs than at the end of 2020—a greater increase than in any year on record—but the nation remains 3.6 million jobs short of pre-pandemic levels. (…)

The unemployment rate fell to 3.9% last month from 4.2% in November. Many employers are ramping up pay as they compete for a limited pool of workers. Average hourly wages increased 4.7% in December from a year earlier, holding well above wage growth of roughly 3% preceding the pandemic and playing a part in historically high inflation. (…)

Friday’s jobs report captures hiring activity that occurred before the Omicron variant spread rapidly in late December. Though the variant has taken a toll on some businesses’ revenue, many employers are clinging to the workers they have as consumers continue to spend. Jobless claims, a proxy for layoffs, clocked in at 207,000 last week, near the lowest level in five decades. (…)

In December, about 1.7 million workers were employed but absent from work because of sickness, the Labor Department said. Ms. Pollak estimates that about 4.6 million workers could report absences due to illness in January if the nation logs an average of one million new coronavirus cases per day in the week of the January jobs report survey. (…)

• Behind Variant’s Haze, a Booming Jobs Market Weak headline numbers conceal strong labor market likely to pick up where it left off after Omicron surge

The Labor Department on Friday reported that the economy added a seasonally adjusted 199,000 jobs last month. That was well short of the 422,000 economists had expected, though any disappointment was tempered by upward revisions to the previous two months that added 141,000 jobs to the nation’s employment count.

The unemployment rate fell to 3.9% from 4.2%, driven lower, in part, because the survey of households it is based on showed faster employment growth than the survey of employers the jobs figures are based on.

On balance, then, it was a solid report, showing a degree of tightening in the job market that could set the Federal Reserve to start raising rates in the first half of this year. (…)

The reference week upon which the Labor Department bases its jobs figures ended Dec. 18, and over that seven days the Centers for Disease Control and Preventionrecorded about 924,000 new cases. And the survey the unemployment rate is based upon ended Dec. 11, when there were 832,000 cases. By contrast, over the past week there have been over 4 million cases, and next week—the reference period for the January jobs figures—might be even worse. (…)

So one can imagine a January employment report that shows job growth has slowed markedly, and that the number of people participating in the labor market has slipped. Taken on its own, that would be a signal that the job market has deteriorated.

But the Omicron surge is a temporary thing and, while the country could be in for several more very difficult weeks, it will wither like past surges. (…)

• Omicron and the Week America Is Calling In Sick An estimated five million Americans could be stuck at home because of Covid-19, leaving many businesses short-handed.
• Jobs Report Likely Keeps Fed on Track for Rate Rise in March A swift drop in joblessness is further evidence of a tighter labor market

(…) Minutes of that meeting, released Wednesday, showed most officials think the economy will reach conditions consistent with maximum employment soon, and some already believed that goal had been reached last month. Friday’s report isn’t likely to change that calculus. Officials have said they would raise rates once that condition is met.

The minutes also twice referred to labor markets as being “very tight,” which suggests greater conviction that the economy will need higher interest rates to slow down growth and prevent overheating. (…)

The share of people ages 25 to 54 who were working in December ticked up to 79% and has climbed a full percentage point since August. That rate reached 80.5% in February 2020 before the coronavirus pandemic struck.

Even though overall job growth was slower than economists had projected in December, strong wage growth is likely to matter more to the Fed. Average hourly earnings rose 0.6% last month, bringing yearly wage growth to 4.7%. (…)

“There’s a real risk now, I believe, that inflation may be more persistent and…the risk of higher inflation becoming entrenched has increased,” Mr. Powell said last month. (…)

The most important facts:

• Aggregate weekly payrolls (employment x wages x hours) are up 9.8% YoY. On a sequential MoM basis, they rose a strong 0.8% in December and +9.1% annualized in Q4.

• The problem for the FOMC is that the critical number-of-jobs component rose only 0.13% MoM in December (+1.6% a.r.), +3.0% in Q4 and +2.0% a.r. in the last 2 months while hours worked stalled. The offset is from the wage component, up 0.6% MoM in December (+7.3% a.r.), +6.2% a.r. in Q4 and +5.8% in the last 2 months.

• This could help sustain nominal consumption but could also feed into longer-term inflation.

Neel Kashkari, a FOMC voting member, summarized the Fed’s dilemma in a blog post last week:

Two Opposing Risks

(…) If the macroeconomic forces that kept advanced economies in a low-inflation regime are ultimately going to reassert themselves, the challenge for the FOMC will be to recognize this as soon as possible so we can avoid needlessly slowing the recovery, while at the same time protecting against the risk of entering a new, high-inflation regime. This strikes me as an especially difficult challenge for policymakers. (…)

He also wrote:

Given the remarkable uncertainty in the economic outlook and these two-sided risks to monetary policy, it is important that the FOMC remains data-dependent and that the public understands policy is not on a pre-set course.

But the Fed was supposed to be data dependent in the last 2 years. Yet, it totally misread labor supply which proved much lower than expected (covid-19, retirements), and it kept expecting (really hoping) that goods demand and prices would quickly fade.

Given all the pandemic distortions, being data-dependent is looking into the rear-view mirror in a foggy night with a curve coming up.

The buzz word now is “soft landing”. In my 47-year career, I don’t recall how many times we all expected the Fed to perform a soft landing. I also do not remember a single successful episode.

John Mauldin:

(…) The current bunch and their predecessors spent the last 10+ years avoiding hard decisions that might upset someone (someone being Wall Street and the stock market), and now they’re trapped. The real question isn’t whether they will fail, but in which direction. (…)

I hope Powell sees that stopping inflation is his number-one job because that affects Main Street. If he chooses Wall Street over Main Street, he will destroy the Fed’s inflation fighting credibility and provoke a major outcry against the “elite” protecting Wall Street insiders. Forget that many of them own stocks. All they will see is that a government (and most people see the Federal Reserve as the government) chose the wealthy over the middle class and Main Street. I cannot even begin to say how big a mistake this will be. Like Titanic-level disaster. (…)

Biden to Mauldin on Friday:

If car prices are too high right now, there are two solutions: You increase the supply of cars by making more of them, or you reduce demand for cars by making Americans poorer. That’s the choice. Believe it or not, there’s a lot of people in the second camp. You’ll hear them complain that wages are rising too fast among the very middle-class and working-class people who have endured decades of stalled incomes. Their view of the economy says the only solution to our current and future challenges is to make the working families that are the backbone in our country poorer or keep them in the state they’re in. It’s a pessimistic vision, and I reject it. I reject the idea that we should somehow punish people because they finally have a little more breathing room. America doesn’t need to settle for less. (…)

But stopping inflation means killing demand. In the last 60 years, it always took a recession to stop inflation:

What affects Main Street most, inflation or recessions? Does Powell want to cause a recession in the current U.S. political environment?

The Fed is in a tough spot and the market is getting nervous.

The December FOMC minutes revealed an unexpected urgency: “Participants judged that the appropriate timing of balance sheet run-off would likely be closer to that of policy rate lift-off than in the Committee’s previous experience”.

• Thursday, St. Louis Fed President James Bullard, voting this year, said the FOMC could start raising interest rate as soon as March and shrink the central bank’s balance sheet as a next step in response to surging inflation.
• On Friday, San Fran President Mary Daly, also a voting member, said: “I would prefer to adjust the policy rate gradually and move into balance-sheet reductions earlier than we did in the last cycle. (…) I would not prefer to do it simultaneously (…) “you could imagine adjusting the balance sheet” after “one or two hikes.”

The path is set but Nordea adds this important variable:

(…) most of US household (76%) and business loans (71%) are fixed-rate based and thus linked to long-term rates. Hence, to tighten the historically loose financial conditions, which the Fed now seems very eager to do, they need long term rates to rise.

What remains to be decided is the composition of the Fed’s balance sheet. Most of the Fed’s balance sheet is composed of short-term securities. If the run-off is conduced such that it reflects the average maturity of holdings, this would make steepening more likely since longer-term securities would be unwound more swiftly. Moreover, steepening could occur if the Fed relies more on the balance sheet run-off instead of rate hikes when normalising monetary policy. Some FOMC members seem to prefer such an outcome since this “could help limit yield curve flattening during policy normalization” which “could adversely affect interest margins for some financial intermediaries” and in turn increase financial stability risks.

Treasury yields jumped from 1.40% post-FOMC to 1.77%. Equity markets needed to read the minutes to realize what’s coming, shrinking 2.4% in the last 3 sessions as long duration stocks were dumped. Meanwhile, Financials, in need of a steeper curve, rose 1.5% to cap a remarkable 9.3% gain since December 20.

Scenarios:

1. Current consensus: whatever happens to employment and inflation, Americans use their “excess savings” and increase their spending on services while goods consumptions fades . Everything lands softly and the Fed gradually and gently adjusts its monetary policy. (See further below about “excess savings”)
2. Stagflation scare: Inflation remains high through June (KKR sees Core CPI averaging 5.7% in the first half) adding to pandemic-affected employment. A squeezed consumer retreats, inventories swell as supply chains improve and ships finally unload. Manufacturing orders and shipments stall. Stagflation scare. The Fed opts to fight inflation, rates rise, the curve steepens. Harder landing.
3. Similar to #2 but the Fed opts to protect the economy and differs any tightening:
1. Goldilocks returns: inflation fades rapidly in mid-year, wages behave well, capex, housing and exports offset any slowdown in consumption.
2. The ugly: the Fed fumbles everything, price and wage inflation remain high and …

Certainly not exhaustive but what is clear is that inflation is always an important actor that is proving difficult to direct. Paul Krugman goes Goldilocks but asks the critical question: “So can we unwind inflation fairly gracefully? The Fed thinks we can. So do most independent forecasters. So do I, although of course we could all be wrong.”

Since just about everybody has been wrong so far, the odds of a “graceful unwind” can’t be high, can they?

• Granted, goods inflation will fade as demand gets satiated and supply recovers. But Goods are not the problem.
• The inflation problems are:
• Foodflation, not only in the U.S. but across the world.
• Energyflation, not only in the U.S. but across the world.
• Wageflation, particularly in the U.S. where labor supply is particularly tight.

CPI-Food-at-Home is up 9.6% from its February 2020 level, +8.7% annualized since March 2021, +12.7% a.r. in the last 3 months.

CPI-Energy is up 23.8% from its February 2020 level, +23.0% annualized since March 2021, +45.2% a.r. in the last 3 months.

Private average hourly earnings are up 9.8% from their February 2020 level, +6.8% annualized since March 2021, +8.6% a.r. in the last 3 months.

The world food and energy trends each have their own particular demand/supply characteristics currently heavily influenced by factors such as weather, geopolitics and ESG. No Fed!

Wages in America started to accelerate with the pandemic angels, then labor shortages amid booming demand fueled by extraordinary loose fiscal and monetary policies. Sprinkle fast rising minimum wages, aggressive compensation policies by the huge pandemic-benefitting consumer goods companies (Amazon, Costco, Target, Wal-Mart, UPS and Fedex), and superimpose the “Great Retirement” and ill-timed or ill-conceived immigration policies (see chart below).

The result: 2.3 million fewer people in the labor force against 3.6 million more job openings. Econ 101.

Lastly, merge this largely policies-induced labor supply/demand mess with food and energy reflation, add rapidly rising housing costs (house prices, rents) and, last but certainly not least, stir all of that with the renaissance of labor unions and COLA clauses (Approval of Labor Unions at Highest Point Since 1965 [68%]) and you get what really looks like a nascent wage-price spiral.

Neel Kashkari last week:

In my discussions with large global companies, one noted a meaningful increase in the long-term wage increases it is negotiating with its unionized workforce. This company reported that prior to the pandemic, it would typically sign three- to five-year contracts at a 3 percent annual wage increase. Now it reports signing three- to five-year contracts at 7 to 10 percent annual wage increases. That is a stark example of how even transitory high inflation could lead to a sustained increase in inflation. Such feedback on labor agreements led me to look at other recent union contracts, and the return of cost of living adjustments (COLAs) appears noteworthy.

Recall the recent settlement at Deere after its first strike in 35 years: some 10,000 workers got an immediate 10% raise plus a $8,500 bonus. DE pay rates will rise another 5% in 2023 and 2025 along with lump-sum payments equal to 3 percent of wages in the remaining years of the contract. Workers can earn 20% beyond their base pay when they hit productivity targets, rather than 15%. Deere will also establish a post-retirement health care fund. The new, much improved, contract was only ratified 61-39%.

Last week:

Columbia graduate workers end 10-week strike as tentative deal is reached The union for teaching and research assistants has won higher wages and independent arbitration.

(…) Teaching assistants, research assistants and graduate students who lead their own courses stopped working on Nov. 3. (…)

(…) The four-year deal, covering more than 5,000 workers, guarantees minimum annual raises of 3 percent. (…) The contract secures pay increases of up to 30 percent, comprehensive dental coverage and higher child-care stipends. (…)

She and other graduate students in the School of Social Work were earning $23,000 for a nine-month appointment until this year when a pay bump took them up to $29,000. The tentative agreement will take them closer to $39,000. (…)

All told, the university estimates the deal is one of the highest compensation offers in the country, representing an increase of nearly $100 million over the next four years. (…)

“The agreement has broad implications in higher education, particularly for private sector institutions, and might create a lodestar concerning the level of compensation and health benefits for graduate assistants,” Herbert said. (…)

Pay rates are thus being raised at both the low end of the salary rung, pushing lower wage rates up, and at the higher end of the skilled segment, pulling higher wages and benefits up. Over time, the whole pay scale will move up.

The Goldilocks scenario looks very optimistic, wishful thinking, at this stage. I have yet to see that scenario supported with actual facts and trends so far.

BTW: “Over the course of calendar year 2021, the national median rent increased by a staggering 17.8 percent. To put that in context, annual rent growth averaged just 2.3 percent in the pre-pandemic years from 2017-2019.” (Apartment List National Rent Report)

The Zillow measure is up 12.6% YoY in November.

BTW #2: And it’s not spring yet:

Larry Summers Says Fed and Markets Are Too Sanguine on Anti-Inflation Steps

(…) “My own view is that the Fed and the markets are still not recognizing what’s likely to be necessary,” Summers said on Bloomberg Television’s “Wall Street Week” with David Westin. “The market judgment and Fed’s judgment is that you can somehow contain this inflation without rates ever rising above 2.5% in terms of the fed funds rate.” (…)

“What we’re going to find out is what the vulnerability of the economy is to rate increases,” Summers said. “It may be, as some argue, that because of greater levels of debt, because asset prices are substantially inflated, the economy is more vulnerable than usual to rate increases or to quantitative tightening.” (…)

“We’re heading into a very challenging period for the Fed in terms of executing a soft landing.”

Bill Dudley: The Federal Reserve Needs to Get a Lot More Hawkish It can’t remain in the fantasyland of its dovish forecasts indefinitely.

(…) I see only a couple ways for this Alice-in-Wonderland fantasy to come true. First, today’s inflation could prove transitory, allowing the Fed to keep interest rates low — but this is inconsistent with the Fed’s own near-term analysis and hardly plausible when the ratio of unfilled jobs to unemployed persons is at an all-time high and wage growth is picking up markedly. Second, the neutral federal funds rate could be much lower than officials’ 2.5% median estimate, making the 2.1% rate projected for the end of 2024 much tighter – but there’s no evidence to support such a hypothesis, and indeed no Fed officials changed their estimate of the long-term neutral rate in December.

More likely, the Fed will have to leave the enchanted forest. This means becoming a lot more hawkish, both in the near term and over the next few years. As the economic recovery pushes unemployment unsustainably low — something that may already have happened — wage growth will spill into consumer price inflation.  The Fed will have to respond by taking interest rates above neutral well before the end of 2024. (…)

So if inflation subsides to 2.5% to 3% as supply chain issues dissipate, then a federal funds rate peak in the 3%-to-4% range seems reasonable.

This is a much steeper path and higher peak than financial markets currently anticipate — roughly double what Eurodollar futures imply. Markets are starting to catch on, but only very slowly. At some point, the reckoning is likely to become disruptive, triggering a sharp rise in interest rates and a large drop in bond prices. The “taper tantrum” may have been merely delayed, not avoided.

Goldman Sachs: Earlier Runoff, Four Hikes

Nominal r* is probably higher than in the last cycle, in part because of larger long-run fiscal deficits and in part because of the Fed’s higher effective inflation target. And the supply-demand balance is likely to shift in favor of higher interest rates, as global central banks go from growing their balance sheets to shrinking them while government deficits remain above pre-pandemic norms.

Consumer Debt in U.S. Surges by a Record $40 Billion

Total credit jumped $40 billion from the prior month after a revised $16 billion gain in October, Federal Reserve figures showed Friday. On an annualized basis, borrowing increased 11%. The November gain exceeded all estimates in a Bloomberg survey which had a median projection of $20 billion.

Revolving credit outstanding, which includes credit cards, climbed $19.8 billion — the largest increase on record. Non-revolving credit, which includes auto and school loans, rose $20.2 billion, the largest gain in six months.

The figures suggests Americans’ are starting to rely more on credit as savings built up on the back of government pandemic-relief funding dries up. Bloomberg Economics estimates that households earning less than $90,000 a year will have exhausted their financial cushions by February.

FYI, in 2020, the median household income was $67,521 and the mean income was $97,026. In effect, much more than half of Americans will have exhausted their financial cushions by February per Bloomberg’s estimates.

Also, the refundable child tax credit of up to $3,600 per child ($180B in annualized personal income, or 1.0% of disposable income, much more for the middle and low classes) will likely lapse in 2022.

• Banks Are Making It Easier to Get Credit Cards Even subprime borrowers, a group shunned during the pandemic, are finding it easier to get credit.

Same debt trend in the U.K. where rates are rising to fight inflation:

And how about that from Bloomberg?

Proof that the tight labor market is U.S. specific:

Canada Caps Record Jobs Year as Monthly Gain Doubles Estimates

Employment rose 54,700 last month, Statistics Canada reported Friday in Ottawa. That’s more than double the 25,000 gain economists were predicting in a Bloomberg survey. Full-time jobs actually surged by 123,000, as many part-time workers shifted to more permanent employment — another sign of strength. (…)

The nation created 886,000 new jobs for all of 2021, a record year. After losing 3 million jobs at the start of the pandemic, employment is now 240,500 above where it was in February 2020.

The jobless rate fell to 5.9% in December, from 6% in November — also near historic lows.

Canada recorded 153,700 net new jobs in November — and a monthly average of 115,940 since June. (…)

While bank officials have pledged not to raise borrowing costs until the labor market has fully recovered, there’s little in the data that suggests there’s much slack left.

The percentage of the population employed — at 61.5% — is just under pre-pandemic levels. So are participation rates, with little sign of long-lasting damage to the economy from the widespread lockdowns and closures last year, at least in aggregate. Average hourly wage rates are up 2.7% from a year ago, unchanged from November but stronger than the 2% clip recorded in October. (…)

Public sector employment was a big factor behind the gain, rising by 31,600 in December. The number of employees in the public sector was 307,000 above pre-pandemic levels. (…)

About the “stag” in stagflation:

Through Jan. 02, 2022:

Chase calculates that control retail sales were down 11.8% MoM in December. The direction and sheer size of the decline are worrisome. Advanced purchases and omicron will take the blame but the basic fundamentals are bad.

Steve Blumenthal posted this chart with this comment: “Dr. Copper does not signal often. I share the chart with you today, as it is nearing an economic sell signal (bottom right-hand corner, next chart – signals occur when the lines cross).”

With all this uncertainty, no wonder investors are reviewing their book, cutting and pruning their risk.

RISK DOWN (2)

Continuing the January 7 tally:

• Higher risk stocks have underperformed significantly over the past 6 months, which is quite unusual considering that the drawdown in SPX has been very limited.

(JPM)

• As long rates perk up, long-long duration bets get dumped:

(Financial Times)

My favorite technical analysis firm, also noting that “the market” has become risk averse and highly selective, waves the caution flag higher, raising the possibility that this could well be a topping process.

We seem to have entered the dangerous period when people are principally looking for reasons to sell with precious few people willing to hold the bag.

The largest of large caps are hanging in, providing a positive sentiment to the less aware investors, which are quite numerous nowadays.

But beware:

U.S. Equity Giants’ Valuation Echoes Dot-Com Exuberance

The price-to-earnings ratio of the S&P 500 Index’s 10 largest stocks is trading near a level that marked the implosion of the dot-com bubble two decades ago. Elevated valuations combined with a potential rise in bond yields and risk of slowing growth make equities more vulnerable to corrections. And with the S&P 500 Index’s top 10 biggest companies comprising nearly a third of the gauge’s total weighting, any retreat in these market behemoths could fuel a dip in the entire market.

• “The superb QDS team at MS showing that their Crowded Longs (CRWD) and Expensive Tech (EVSA) baskets are 85% of the way through their typical downside move during a “rate shock” vs. indices which are only 40-50% of the way through. Software now approaching 2019 trough valuations (Gavin Baker).” (The Market Ear)

MS QDS

Please note that the “rate shock” events tallied above only cover the 2014-2021 period (red rectangle below):

• Bitcoin ETF Goes From Boom to Bust After a Record U.S. Debut

With a 30% drop, the ProShares Bitcoin Strategy exchange-traded fund, ticker BITO, is now one of the 10 worst performers when looking at returns two months after a public listing, Bloomberg Intelligence data analyzed by Athanasios Psarofagis show.

Thank the wider retreat in digital currencies as the Federal Reserve readies to withdraw pandemic stimulus. Bitcoin, the largest digital asset by market value, lost more than 34% in the two months after BITO’s debut on Oct. 19, and is down significantly from a November peak of above $68,000 per coin. Since the start of the year, Bitcoin is roughly 10% lower. (…)

But BITO is down near 9% this week alone. And flows data show initial euphoria also hasn’t kept up. It hasn’t seen a single day of inflows since 2022 started. (…)

EARNINGS WATCH

Stocks Face Next Test as Earnings Season Approaches

(…) Analysts estimate that profits from companies in the S&P 500 rose 22% in the fourth quarter from a year earlier, according to FactSet. (…) Earnings from S&P 500 companies are expected to rise 9.4% in the year 2022, a slower pace than the 45% profit growth estimated for the year 2021. In 2019, the last full year before Covid-19 began affecting the U.S. economy, profits edged down about 0.1% for the year. (…)

The net profit margin for the S&P 500 hit 13.1% in the second quarter of 2021, the highest level in data going back to 2008, according to FactSet. It slipped to 12.9% in the third quarter and is expected to fall to 11.9% in the fourth. (…)

Investors will want to know how the spread of the Omicron variant could continue to affect business. And they will be eager to hear how companies plan to manage wage increases and higher transportation costs, among other expenses. (…)

Actually, the earnings season has already started. Twenty companies have reported their November quarter: beat rate: 70% (76% for same companies in Q3). Surprise factor: +7.0% (+4.2%). Three quarters of them are consumer centric and have thus not experienced the apparent December slowdown.

Meanwhile, in the Middle Kingdom:

Shimao’s debt woes deepen concerns over cash crunch in Chinese property Shanghai bonds of once highly rated developer suspended after failure to make loan payment

Electric cars aren’t just vehicles. They’re big batteries. To get more Americans in electric vehicles, we all need to realize they can do much more than just get us around.

(…) Electric vehicle manufacturers are starting to use this idea as a selling point. Volkswagen’s electric vehicles will support bidirectional charging starting this year, and Ford’s upcoming F-150 Lightning, an electric version of the country’s most popular pickup truck, is designed to be able to power an entire home for up to three days. An early ad for the F-150 Lightning, released about three months after a series of winter storms in Texas knocked out power for millions and killed hundreds across the state in 2021, showed off the truck’s credentials: It can “help build your house,” the ad’s narrator said, “and if need be, power that house.”

The marketing seems to be working; as of December, nearly 200,000 people had preordered the F-150 Lightning. “Ten years ago I never would have thought that Ford would have put out an electric F-150, and I would have also never predicted how many people would have preordered it, especially in rural and conservative areas,” said Baker. “Climate change is hitting everywhere in the US, and so whether you believe in the science behind it or not, you want to protect your family. Having a large battery that can be a backup generator is just one way to do that.”

(…) another reason to see EVs as more than vehicles — is that old EV batteries can be removed from cars and used to store solar and wind power. This idea is already seeing some traction: A startup called B2U Storage Solutions has set up an energy storage facility in California that stores enough energy in an array of 160 used Nissan Leaf batteries to power more than 90 homes a day. And Hyundai is partnering with a solar energy developer and a utility company serving San Antonio, Texas, to set up a similar facility. (…)