U.S. JOLTS: Job Openings Rate & Level Surge to Records During April
The Bureau of Labor Statistics reported that on the last business day of April, the level of job openings rose to a record 9.286 million and have doubled y/y. The total job openings rate also reached a record 6.0%, which was increased from an unrevised 5.4% in March. The openings rate is calculated as job openings as a percent of total employment plus jobs that have not yet been filled.
The hiring rate held steady m/m at 4.2% which was up from 3.8% in December & January. The overall layoff & discharge rate eased to a record low of 1.0% from an upwardly-revised 1.1% in March. The quits rate surged to a record high of 2.7% as the number of quits have risen 17.9% during the last six months.
The private-sector job openings rate jumped to a record 6.4% from 5.7% in March. The leisure & hospitality rate surged to a record 10.1% from 8.0% while the professional & business services rate strengthened to 6.8%. The factory sector job openings rate surged to a record 6.5% but the education & health services rate held at 5.8%. The government sector job openings rate also jumped to a record 4.1% from 3.8% in March. The private sector job openings level surged 12.5% and has more-than doubled y/y to 8.374 million.
Employers are having trouble finding workers as hiring is lagging job openings. In April, the private sector hiring rate rose to 4.7% and equaled the level six months earlier. It was well below the record 7.2% in May of last year. The leisure & hospitality hiring rate jumped 10.1%, equaling the openings rate. The professional & business service sector hiring rate fell to 5.1% the lowest level since May of last year. The construction sector’s hiring rate weakened to 4.5% from 5.9% in March, and the factory sector hiring rate fell to 3.2% from 3.5%. The government sector hiring rate edged lower to 1.6%. It remained below the 2.6% high last August. The level of private sector hiring rose 1.5% (54.1% y/y) to 5.728 million. (…)
The layoff & discharge rate in the private sector slipped to a record low of 1.1%. (…)
The record quits rate of. 3.1% in the private sector remained up from 1.8% in April and May last year. It compared to 0.9% in government. (…) The level of job quits in the private sector nearly doubled y/y. In government, the level of quits rose 13.9% y/y.
The U.S. economy is hiring at the highest rate this cycle, higher than pre-pandemic, but the job openings rate has literally exploded with actual openings, at 9.3M, 23% above their best level of November 2018.
Meanwhile, the number of available workers remains substantially higher than pre-pandemic.
Either matches are found and employment surges, or desperate employers, eager not to miss the reopening of the economy, accept to pay up to fill their needs, thinking that strong demand will allow them to raise their prices and maintain margins. PMI surveys suggest a bit of both is happening.
(…) Employment is still way down from pre-pandemic levels, suggesting an ample pool of workers from which to draw, and most jobs being created right now are in low-wage industries like restaurants and tourism.
But last week’s jobs report showed a larger-than-forecast pickup in average hourly wages for a second straight month. It turns out that whatever the unemployment numbers say, there’s a shortage of people ready to work at the going rate of compensation — prompting many employers to boost pay or offer bonuses in order to staff up. (…)
Surging Manufacturing Prices Put Pressure on Beijing China’s factory-gate prices surged by the most in nearly 13 years in May, escalating global concerns about rising commodity costs and squeezed profit margins for businesses.
China’s producer-price index jumped 9.0% from a year ago in May, accelerating from April’s 6.8% increase, the National Bureau of Statistics said Wednesday. The result topped the 8.6% increase expected by economists polled by The Wall Street Journal, and marked the fastest year-over-year rise since September 2008, when producer prices rose 9.1%.
The statistics bureau said that soaring crude-oil, iron-ore and metals prices boosted factory-gate prices last month, and drove China’s imports to the fastest increase in over a decade. (…)
“Today’s data showed that the pressure of soaring raw-material prices is pretty heavy for industrial firms and such pressure is now passed through to downstream firms in an accelerated way,” said Li Wei, an economist at Standard Chartered. (…)
The faster-than-expected price gains have eaten into the profitability of many small businesses downstream in China’s industrial chain that haven’t yet fully recovered from the pandemic-induced weak consumer demand. However, it benefits upstream factories, whose profits more than doubled from a year earlier according to Goldman Sachs, with their products in high demand. (…)
With prices skyrocketing, the northern city of Tangshan, the nation’s largest steel-production hub, decided to pare back the limits imposed on the city’s steelmakers earlier this year. Under the previous limits, seven major steelmakers were ordered to cut production by 50% by midyear for Chinese leaders’ decarbonization plan. (…)
China’s consumer inflation has so far remained tame, according to official data released Wednesday. The consumer-price index rose 1.3% from a year ago in May, higher than the 0.9% growth in April but lower than the 1.5% increase expected by the surveyed economists. (…)
Bloomberg shows that “So far, manufacturers are absorbing higher costs, rather than passing them on to customers.”
As the gap between CPI and PPI growth rate widens, profits of producers are going to fall as they cannot pass rising costs on to consumers.
This is especially true at the moment when there are small lockdowns in Guangdong province. Some residents are not allowed to leave their home, which means demand for goods in the domestic market is affected. Producers can look to the global market for a price increase. But overseas markets have only recently started to recover, and it is uncertain if producers can pass the extra costs on to export markets.
We believe the net effect of all this will be slower profit growth for producers until consumer power recovers further. (ING)
- No Quick Fix for Commodities Crunch Caused by Stingy Capital Spending Limited inventory of resources is converging with a buying spree to supercharge prices, spurring inflation concerns
(…) Since 2011, investments to develop the energy and mining sectors have fallen 40%, according to asset manager Schroders, leaving many producers unprepared for a recent boom in manufacturing and spending in the world’s two largest economies. Prices of resources from corn to lumber to battery metals have risen sharply over the past year, in many cases to twice or more from pre-pandemic levels, aided by low interest rates, a weaker dollar and infrastructure building in the U.S. and China. (…)
From 2011 to mid-2016, there were an average of 3½ months of global copper surpluses and 8½ months of shortages annually, International Copper Study Group data show. From September 2016 onward, the deficits became more frequent, increasing to an annual average of 10 months with two months of surpluses. (…)
But the lag in capital investments in key new sectors slows their responsiveness to fast-changing demand that requires doubling—or, for some battery metals, tripling—production in coming years, analysts say. (…)
American lumber mills, which can take two years to build, added about 10% to their capacity in the last five years. They haven’t kept up with home-building demand that has roughly doubled lumber prices year-over-year. Global supplies of commodities from platinum to coal fell or flatlined last year from 2019. (…)
Individual commodities are a small part of the final price tag of consumer goods, and aren’t likely on their own to move the price significantly. After soaring 40% year-over-year, cobalt prices still are just 1% of an electric vehicle’s cost. But the broad rallies stoke producer price inflation, a harbinger—though inconsistently so—of consumer inflation. PPI is rising in both the U.S. and China. (…)
U.S. data show prices of imports from China rose 2.1% year-over-year in April, the most since March 2012—due in part to yuan strength against the dollar. (…)
“Although China is not obviously exporting inflation, from a U.S. perspective, rising prices of imports from China may start to feature in the debates about inflation there,” Oxford Economics economist Louis Kuijs said. “If global commodity prices were to continue to rise significantly in the coming six months, inflation will become a significantly larger problem—globally and in China.”
Commodity prices are much more volatile than end-product prices.
Throughout the current cycle, consumer inflation has matched producer inflation:
China Moves to Contain Its Hot Property Market Shenzhen experiments with maximum prices for secondhand homes, but skeptics worry moves will lead to market distortions
(…) Under the new rules, maximum prices were laid out by authorities in an 84-page document released in February that listed more than 3,500 property developments citywide. Several banks pledged to limit financing on properties whose sales prices exceeded the prescribed values.
Buyers could pay more if they wanted to, but doing so would mean spending more up front for down payments, potentially curbing demand. Several large online property-listing platforms also removed advertised prices on existing homes and replaced them with the government’s guidance prices. (…)
Shenzhen officials are planning to supply more land this year for new housing, which they hope will ease price pressures.
Other cities, including Nanjing and Hefei, both in eastern China, are implementing localized policies to manage the market, including restrictions on purchases in popular districts.
In Dongguan, near Shenzhen, authorities unveiled their own guidance prices for secondhand homes in March. In late May, the southwestern city of Chengdu said it would impose guidance prices for secondhand homes in more than 200 complexes and refresh the prices every six months. (…)
Some of the moves seem to be working. Shenzhen’s secondhand home market cooled off quickly in April, with nearly 4,900 existing apartments sold, down 28% from March and nearly 36% from a year earlier, according to data from Wind. The number declined further to around 3,000 units in May, down 65% from a year ago.
Secondhand housing prices in the city stopped climbing in April from a month earlier, after rising 1.7%, 0.9% and 0.4% in the first three months this year, respectively. In Hefei, transactions of secondhand homes dropped 27% in April, a month after the new rules kicked in. (…)
But nationwide, the property boom is showing little sign of abating. In April, new-home prices in 70 major cities grew at the fastest pace in eight months, according to China’s National Bureau of Statistics.
Prices of secondhand homes in Shenzhen were still 12% higher than a year earlier. The average price for an existing home in Shenzhen in May was about $11,000 a square meter, according to property website Fang.com, or about $1.9 million for a 1,900-square-foot apartment, the typical home size in the U.S. (…)
Some buyers say they plan to start moving their money to cities that don’t have strict controls or steer it into other speculative behavior. (…)
The price-to-income ratio in Shenzhen—an affordability gauge that measures the average price of a roughly 1,100-square-foot apartment compared with per capita disposable income—was 36.1 as of 2019, the most recent year for which data was available. That was the highest among Chinese megacities and compared with around 25 in Shanghai and Beijing, according to CBRE Research. (…)
Banks to Companies: No More Deposits, Please Some banks, awash in deposits, are encouraging corporate clients to spend the cash on their businesses or move it elsewhere.
(…) Bankers say they thought the improving economy would reduce companies’ desire for holding cash, but deposit inflows have continued in recent weeks. Chief financial officers and treasurers, many still wary of the pandemic’s impact, say they aren’t ready for big changes, even if they earn little or nothing on their deposits. (…)
High deposits usually aren’t a bad thing for banks, as long as they can use the money to make loans. But bank lending has been slow as many companies prefer to borrow money from investors. For banks, total loans equaled 61% of all deposits as of May 26, down from 75% in February 2020, according to the Fed data.
The industry net-interest margin, a key measure of lending profitability, fell to a record low in the first quarter, according to the Federal Deposit Insurance Corp. (…)
(…) There isn’t a lot in the table above that’s concerning. Shorter-term returns were weak, but a couple of them within an already tiny sample bucked that weakness and saw consistent strength. Over the next year, all but two record double-digit gains. It will be a more pressing concern if Bear Market Probability climbs above 70%.