U.S. JOLTS: Job Openings & Hiring Rates Improve Sharply in February
The Bureau of Labor Statistics reported that on the last business day of February, the total job openings rate strengthened to a record 4.9% from 4.7% in January, revised from 4.6%. 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 improved to 4.0% following two months at a depressed 3.8%. The overall layoff & discharge rate held steady at 1.2%. The quits rate rose also was unchanged at 2.3% and has been moving sideways since July.
The private-sector job openings rate jumped to a record 5.2% from 5.0%. The professional & business services rate eased to 6.3% but the leisure & hospitality rate rose sharply, also to 6.3%. The education & health services rate also jumped to a record 6.3%. The government sector job openings rate fell to 2.9%, the lowest reading in nine months. The private sector job openings level rose 5.5% (7.9% y/y) to 6.732 million.
In February, the private sector hiring rate rose to 4.5%, but remained well below the record 7.2% in May of last year. The leisure & hospitality rate jumped to 8.6%. The professional & business service sector edged higher to 5.3% while the factory sector hiring rate rose to 3.2%.The government sector hiring rate fell to 1.4%, down from a 2.6% high in August. The level of private sector hiring rose 6.7% (-2.6% y/y) to 5.446 million. (Haver Analytics)
Preparing for full re-opening, employers are seeking as many employees as in 2019 but hires are lagging…
…because of a lack of available people. Openings as a percent of the labor force is at a record high while the participation rate (the percentage of the population that is either working or actively looking for work) is at a record low.
The participation rate declined in every age groups during the pandemic but the group 65 years and over has seen the largest relative drop and has shown no signs of recovering so far. This group was a major supplier of labor post the GFC and likely helped contain overall wages as it added 5% to the labor force.
Small business owners are shifting worries from COVID to inflation
This is from Axios:
A new poll of more than 10,000 small business owners finds that even as nearly half (48%) are earning less than 50% of their monthly, pre-pandemic revenues, their worries are moving from COVID-19 to the increasing cost of goods and supplies.
The latest survey from Alignable finds “a newfound optimism that expedited vaccine distribution in the U.S. has kick-started the beginning of a recovery for some industries and groups, while others still suffer.”
While 75% of small and medium-sized businesses still report negative effects from the pandemic, the percentage claiming they’ve seen a “significant negative impact” has dropped 20% from last month to 38%.
- “This marks the first time in a year that this number has dipped below 40%,” the survey’s authors note.
62% of small businesses are now fully open, reversing a five-month decline and showing a 17% increase over last month.
- Hiring for small businesses has been flat for months, but owners now predict that 98% of pre-pandemic employees will be back on payrolls by August.
- Small business owners said their top concern was that fresh government shutdowns would begin again given the surge in new COVID-19 case counts.
An increasing percentage of small business owners “list skyrocketing prices of supplies as a major concern, sounding the alarm about inflation,” Alignable notes.
- Over the past two months, concern about the cost of supplies has jumped to the highest level in the short history of the survey.
- A total of 17% of business owners listed rising prices as their top concern. That number has almost doubled from where it was in February (9%) and more than tripled from November (6%).
An Update on How Households Are Using Stimulus Checks
(…) We find remarkable stability in how stimulus checks are used over the three rounds, with a slight decline in the share dedicated to consumption and a proportional increase in the share saved. The average share of stimulus payments that households set aside for consumption—what economists call the marginal propensity to consume (MPC)—declined from 29 percent in the first round to 26 percent in the second and to 25 percent in the third.
The CRRSA Act authorized lump-sum economic impact payments of $600 to each eligible adult and child. To examine how households used these payments we draw again on the New York Fed Survey of Consumer Expectations (SCE), a nationally representative, internet-based survey of about 1,300 U.S. households. Since June 2013, the monthly survey has been collecting information on household heads’ economic expectations and behavior. In the January 2021 SCE survey, we included several questions regarding the second round of stimulus checks, whether households received such a payment and how they are using or expecting to use it.
We find that 68 percent of households reported having received an average of $1,314 ($1,200 median) in stimulus funds in this second round at the time they were surveyed. Those who had not yet received anything reported an average 35 percent chance of receiving a second-round stimulus check in the future. We also asked what share of this payment the household has already or expects to 1) spend or donate, 2) save or invest, and 3) use to pay down debts. In a follow-up question, respondents were asked to divide the share reported for the first group into categories: spending on essential items (such as necessary daily living expenses), spending on non-essential items (such as hobbies, leisure, and vacations), and donations.
Combining all respondents, we find that in January, households reported using or planning to use an average 16 percent of the second-round stimulus funds for essential spending, an average 6 percent for non-essential spending, and to donate 3 percent, resulting in a total MPC of 26 percent.
They also reported saving or planning to save an average 37 percent of their stimulus checks and use 37 percent to pay down debt. These shares are very similar to those we found for the first round of stimulus checks, where households reported spending 29 percent, saving 36 percent, and using 35 percent to pay down debt. (See the table below.) The reported allocations are also in line with those that households reported back in August for a potential future second round of stimulus checks. At that point in time, they expected to use a slightly lower share for consumption (24 percent) and debt paydown (31 percent), with more expected to be saved (45 percent).
Our data allow us to assess how use of the second round of stimulus checks varies with household characteristics. For example, households making less than $40,000 report using or expecting to use 44 percent of their stimulus checks to pay down debt, while those making more than $75,000 would use or expect to use only 32 percent. Further, lower-income households are spending or expect to spend 27 percent of their stimulus payments, while higher-income households making more than $75,000 would spend 24 percent. The difference in spending on essentials is larger for the lower- and higher-income groups, 20 percent versus 12 percent. (…)
I could not find the exact questions asked in the survey. I suspect a suggested timeline that would influence the answers. But the last few lines of the report reveal that people were asked how they intend to use the stimmies in coming months, while the pandemic was still very active (my emphasis):
Our findings indicate that in an environment that continues to be characterized by constraints on many activities and by high unemployment, as well as high uncertainty about the duration and continued economic impact of the pandemic (including elevated uncertainty about future inflation), fiscal support continues to impact predominantly savings instead of consumption, with households planning to use the third relief payments mostly to pay off debt and save. As the economy reopens and fear and uncertainty recede, the high levels of saving should facilitate more spending in the future. However, a great deal of uncertainty and discussion exists about the pace of this spending increase and the extent of pent-up demand.
The debate is still on…
Meanwhile, in China:
- With Recent Covid-19 Wave Under Control, Chinese Consumers Spend on Travel Over the three-day traditional tomb-sweeping holiday, travel was back up to pre-coronavirus levels by some metrics.
Eurozone private sector returns to growth on back of strong manufacturing performance
Underpinned by a series record increase in manufacturing output, the eurozone private sector economy returned to growth during March. After accounting for seasonal effects, the IHS Markit Eurozone PMI® Composite Output Index posted 53.2, up from 48.8 and the highest level since last July. The index was also above the earlier flash reading for March.
The second-fastest increase in private sector output in two-and-a-half years was driven in the main by a surge in manufacturing production, the strongest in nearly 24 years of data collection. In contrast, services output fell again, although only marginally and at the slowest rate in the current seven-month sequence of contraction.
The improved activity picture was broadly seen across the eurozone, with all nations experiencing a rise in their headline indices during March. Growth was led by Germany, where a resurgent manufacturing economy helped drive the country’s best overall activity performance in just over three years.
Ireland also saw a solid expansion, followed by modest growth in Italy and a slight activity rise in Spain. France was the only country not to record an expansion in activity, although output was stable following six successive monthly declines.
Supporting the rise in overall eurozone private sector activity was an increase in new orders – again led in the main by the manufacturing economy. Overall, new sales rose at the sharpest degree in two-and-a-half years. Moreover, demand increased across both domestic and external markets, with new export business rising at the strongest rate in over six-and-half years of data collection.
Rising new business added to overall workloads, with firms reporting an increase in backlogs of unfinished business for the first time since November 2018. This spilled over into the labour market, with firms choosing to take on additional workers for the second successive month and to the greatest degree since June 2019. Jobs growth was seen across both manufacturing and services economies.
Cost pressures meanwhile intensified, with March’s data showing the sharpest rise in operating expenses for nearly a decade. Supply-side delays were reported to be a key factor driving input prices higher, especially in manufacturing.
Firms were, however, able to pass on a portion of these higher costs to clients in the form of higher output charges. Latest data showed that output price inflation accelerated during March to its strongest since the start of 2019.
Finally, amid growing hopes that vaccination programmes will provide the basis for a strong rise in activity in the second half of 2021, business confidence improved to a 37-month peak.
The IHS Markit Eurozone PMI® Services Business Activity Index remained stuck below the 50.0 no-change mark for a seventh successive month in March. However, a rise in the index to 49.6, from 45.7 in the previous month, pointed to only a marginal rate of contraction that was the slowest in the current sequence.
Germany and Ireland both recorded higher levels of service sector activity during March. All other nations recorded declines although rates of contraction were modest, and noticeably slower in France and Spain.
An eighth successive monthly fall in incoming new business was registered during March. In line with activity, the rate of contraction was only marginal, however. New export business continued to drag on overall performance, with foreign sales declining for a thirty-first successive month.
Amid rising levels of confidence about the future – business expectations reached the highest for over three years – service providers took on extra staff for a second successive month in March. Modest growth was underpinned by payroll gains in France, Germany and Ireland.
Finally, operating expenses increased for a tenth successive month in March, with inflation rising to its highest since February 2020. Output charges subsequently increased for the first time in over a year, though only slightly.
IMF Lifts Global Growth Forecast, Warns of Diverging Rebound
The global economy will expand 6% this year, up from the 5.5% pace estimated in January, the IMF said in its World Economic Outlook published on Tuesday. That would be the most in four decades of data, coming after a 3.3% contraction last year that was the worst peacetime decline since the Great Depression.
The IMF sees advanced economies less affected by the virus this year and beyond, with low-income countries and emerging markets suffering more — a contrast to 2009, when rich nations were hit harder. (…)
For 2022, the fund saw global growth at 4.4%, higher than the 4.2% previously projected. (…) The world economy in 2024 will be about 3% smaller than anticipated before the Covid-19 outbreak, the IMF said last week. (…)
The fund estimated per-capita income losses over the 2020-22 period in emerging and developing markets excluding China at the equivalent of 20% of the per-capita GDP figures for 2019. That’s much worse than the 11% the IMF sees in advanced economies. (…)
Among the forecasts released Tuesday:
- Advanced economies will expand 5.1% this year, compared with the 4.3% previously seen
- Emerging market and developing economies will grow 6.7%, up from 6.3%
- U.S. is seen at 6.4%, up from 5.1% in January. The fund previously calculated the stimulus enacted in March will boost U.S. output by a cumulative 5% to 6% over three years
- The euro area will expand 4.4%, up from the 4.2% previously seen
- Japan will grow 3.3%, compared with 3.1%
- China is seen expanding 8.4%, up from 8.1%
- India will grow 12.5%, up from 11.5%
(…) Meantime, inflation data globally could turn volatile in the coming months, given record-low commodity prices a year ago, but the trend should prove short-lived, the IMF said. The muted outlook reflects a weak labor market, high unemployment and little worker bargaining power. (…)
Dimon predicts post-pandemic boom for US economy JPMorgan chief says government spending programmes could fuel ‘Goldilocks moment’
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Bloomberg: “Fintech and Big Tech are here… big time! That’s the warning from JPMorgan’s Jamie Dimon, who said his industry’s disruption is finally at hand. Shadow lenders are gaining ground and traditional banks are being consigned to a shrinking role in the financial system.”
Global corporate tax deal edges closer after US backs minimum rate Any agreement should include taxing tech giants’ global profits, say European countries
SPAC Tries New Structure to Ease Concerns
SPAC creators have come under fire for attracting investors then quickly selling shares. A new blank-check firm aims to change that.
EG Acquisition, a SPAC backed by two longtime investors, said Monday that it aims to raise $250 million and will feature a three-year lock-up on sponsor equity. That is the longest lock-up yet in the recent SPAC craze, according to Kristi Marvin of data provider SPACInsider.
It is three times the typical 12-month lock-up, which usually includes the possibility of early release if the shares trade particularly well. The new SPAC has no such provision, meaning its sponsors won’t be able to sell any shares until a full 36 months after it closes a deal.
SPAC creators like venture capitalist Chamath Palihapitiya have been criticized for making lofty projections to investors when they take companies public, then selling shares before those targets are met.
Such rosy projections aren’t allowed in traditional IPOs. Critics say that SPAC creators, called sponsors, make huge returns while sticking individual investors with losses even if blank-check mergers turn out poorly.
EG Acquisition’s lock-up aims to better align the SPAC’s interests with those of the company and long-term investors, an idea that some analysts have proposed to strengthen the blank-check company structure.
A few other SPACs have already made similar changes.
Hedge-fund titan William Ackman and other Pershing Square Tontine Holdings executives are paying more for a smaller portion of its shares rather than taking the typical 20% cut. That should make them more focused on profiting from the company’s performance, rather than the transaction, analysts say.
EG Acquisition is backed by an affiliate of the $19 billion investment firm EnTrust Global and former Glencore executive Gary Fegel’s investment firm. EnTrust’s founder Gregg Hymowitz is known for helping fund some of activist investors’ biggest bets, including those of Daniel Loeb and Nelson Peltz.
The new SPAC is also notable because four of its seven officers and directors are women, a rarity among blank-check firms that are nearly all run by men.
Still, it is launching at a time when investor enthusiasm for SPACs appears to be fading. Just three SPACs have raised money and begun trading since March 26. A few weeks ago, an average of five new blank-check firms per business day were being created.
EG’s sponsors are betting that a few tweaks were just what investors wanted. (WSJ)
Guggenheim’s Minerd Sees Another Archegos-Style Blowup as ‘Highly Likely’
(…) “It is highly likely that we are going to have another situation like that,” Minerd said Monday in a Bloomberg Television interview. Major losses, such as those incurred by Archegos, “tend to continue to cascade until the market corrects and flushes the risk out of the system,” he said. (…)
COVID-19
How swede was it?
John Authers compares the Swede’s Herd immunity experiment with its neighbors.
(…) Sweden’s neighbors Denmark and Norway, culturally and economically very similar countries, both adopted straightforward lockdowns. Their joint population is 11.1 million, compared to 10.2 million Swedes, so direct comparisons aren’t difficult.
Now we have the results of the controlled experiment, and unfortunately for Swede, the numbers are shocking. I smoothed the following chart by looking at the rolling five-day death total, and then taking the seven-day moving average for the Swedish data, which tend to be very volatile from day to day. The total figures show 13,533 deaths in Sweden and 3,110 deaths in Denmark and Norway. The second wave took a heavier toll on Sweden than the first.
Moreover, Sweden gained no obvious economic benefit.(…) Sweden’s economy suffered a slightly deeper contraction last year than those of its neighbors.
U.S. Cases Fall as Vaccine Rollout Ramps Up
(…) The seven-day average, which smooths out irregularities in data reporting, was 64,662 on Monday, while the 14-day average was 65,224, according to a Wall Street Journal analysis of data compiled by Johns Hopkins University. When the seven-day average is lower than the 14-day average, it indicates cases are declining. Monday was the first time that had happened since March 23. (…)
On Tuesday, President Biden said that all U.S. adults should be eligible for vaccines by April 19, speeding up a timeline he set out last month (…).
California plans to fully reopen its economy on June 15 assuming there is enough supply of vaccine for everyone ages 16 and older and Covid-19 hospitalizations remain low. (…) California is now seeing an average of five new cases a week per 100,000 residents, down from a peak of more than 100 in January.
Tokyo Eyes Tighter Virus Restrictions as Cases Rebound in Japan
White House Rejects U.S. Vaccine Passports, Skirting Uproar
Beijing is putting up color-coded signs on buildings in its financial district to indicate what percentage of workers inside are immunized, with green signaling more than 80%. (Bloomberg)
The bad news is that once the top is in for the ISM, equities almost always pull back. This isn’t necessarily the beginning of a bear market or a crash, but they can be expected to have a bumpier ride before long. (…)