Payroll employment declines by 140,000 in December; unemployment rate unchanged at 6.7%
(…) In December, nonfarm employment was below its February level by 9.8 million, or 6.5 percent. (…)
The change in total nonfarm payroll employment for October was revised up by 44,000, from +610,000 to +654,000, and the change for November was revised up by 91,000, from +245,000 to +336,000. With these revisions, employment in October and November combined was 135,000 more than previously reported.
(…) In December, 15.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic—that is, they did not work at all or worked fewer hours at some point in the last 4 weeks due to the pandemic. This measure is 1.0 million higher than in November. Among those who reported in December that they were unable to work because of pandemic-related closures or lost business, 12.8 percent received at least some pay from their employer for the hours not worked, little changed from November.
Among those not in the labor force in December, 4.6 million persons were prevented from looking for work due to the pandemic. This measure is up from 3.9 million in November. (To be counted as unemployed, by definition, individuals must be either actively looking for work or on temporary layoff.)
Consensus was +70k, GS -50k.
U.S. Jobless Claims Decline
Seasonally adjusted state initial jobless claims for unemployment insurance edged down to 787,000 in the week ending January 2, from a slightly upwardly-revised 790,000 in the previous week (was 787,000). This is the third consecutive decline after reaching a three-month high in December. The Action Economics Forecast Survey anticipated 772,000 new state claims.
Claims for the federal Pandemic Unemployment Assistance (PUA) program, which covers individuals such as the self-employed who are not qualified for regular/state unemployment insurance, fell to 161,460 from 310,462. This is the lowest level since April, shortly after the program’s initiation. However, comparison to that period is tricky because of backlogs and other difficulties during startup.
Seasonally adjusted state continuing claims for unemployment insurance declined to 5.072 million in the week ending December 26, from 5.198 million. Continuing PUA claims, which are lagged an additional week and not seasonally adjusted, decreased to 8.383 million from 8.453 million. Pandemic Emergency Unemployment Compensation (PEUC) claims moved down to 4.516 million in the week ending December 19. This program covers people who were unemployed before COVID but exhausted their state benefits and are now eligible to receive an additional 13 weeks of unemployment insurance, up to a total of 39 weeks. While funding for the federal programs were renewed in late December, uncertainty about the funding status may have hampered filing.
The seasonally adjusted state insured rate of unemployment held steady at 3.5% in the week ending December 26. This data does not include the federal pandemic assistance programs. If you include the latest data available, which is lagged one additional week, the total number of state, PUA and PEUC continuing claims declined to 18.3 million or 11.4% of the labor force.
This is from Bespoke:
(Bespoke)
U.S. Light Vehicle Sales Strengthen During December
Light vehicle buyers returned to the market last month following two months of decline. The Autodata Corporation reported that sales of light vehicles improved 3.1% during December (-4.3% y/y) to 16.38 million units (SAAR) and reversed virtually all of the decline during November to 15.89 million units. During all of 2020, light vehicle sales declined 14.8% to 14.54 million units, the lowest level since 2012.
Sales of light trucks increased 4.8% (1.5% y/y) during December to 12.53 million units. Purchases of domestically-made light trucks increased 7.3% (1.3% y/y) to 9.89 million units following two months of decline. Offsetting this rise was a 4.0% decline (+1.5% y/y) in imported light truck sales to 2.63 million units after rising 2.2% during November.
Imports’ share of the U.S. vehicle market eased last month to 23.1%, reversing the improvement since August. Imports’ share of the passenger car market increased to 29.9%, the highest level since June. Imports’ share of the light truck market fell to 21.0% but has been trending up from 14.7% in 2014.
This Building Boom Is For Rent Investors are building tens of thousands of houses expressly to rent in a bet that Americans will keep flocking to spacious suburban living even if they can’t afford to buy homes.
There haven’t been so many single-family homes under construction in the U.S. since 2007, yet many of these new houses won’t be for sale.
Investors are building tens of thousands of houses expressly to rent in a bet that Americans will keep flocking to spacious suburban living even if they can’t afford to buy homes.
The Covid-19 pandemic sparked a race for space among Americans, and home prices have surged to records. The gains have outpaced wage growth, straining affordability despite historically low borrowing costs.
Homeownership is unaffordable for average wage earners in 55% of U.S. counties, up from 43% a year earlier, according to Attom Data Solutions, a real-estate analytics firm. Meanwhile, single-family landlords have reported record occupancy and fast-rising rents since the pandemic began.
Individuals, family offices, pension funds and Wall Street’s boldfaced names are shoveling billions of dollars into build-to-rent projects. Home builders are embracing the business of selling houses wholesale to landlords, and even teaming up with them to build neighborhoods that blur the line between houses and apartment complexes. (…)
From clustered cottages to cul-de-sac McMansions, more than 50,000 houses were built specifically to serve as rentals during the 12 months ended Sept. 30, according to John Burns Real Estate Consulting. That tally—well above the 31,000 average over the past four decades—is likely low since it misses one-offs in which end use isn’t specified by building permits as well as houses in typical subdivisions that are sold to investors, said Rick Palacios Jr., the consulting firm’s head of research.
(…) landlords found that renters were willing to pay premiums to move into brand-new houses. (…)
Car leasing techniques applied to homes.
Watch this:
As Treasuries tank, bets against them rise
(…) clients at JP Morgan are expecting even more weakness. When clients were more than 15% net short during the past decade, 10-year Treasury futures tended to rise, with the most net short positions leading to gains in note prices each time. Their current positioning isn’t quite on par with those other extremes, though. (…)
Put volume has been heavy for weeks, so the 20-day average of the ratio has soared to nearly a record high, just below the peak from late 2013. (…)
Along with options traders, trend-following hedge funds seem to be pressing their bets against Treasuries, with Hedge Fund Exposure dropping below -40% this week. Over the past decade, when funds were heavily short, below -40% exposure, then the 10-year was higher 68% of the time 3 months later. When funds had the opposite position, then the 10-year was higher only 45% of the time. (…)
A lot more charts from Jason here.
Derby’s Take: Fed Officials Weigh In on Outlook for Bond Buying Stimulus Effort Federal Reserve officials weighed in on the longer-run outlook for their continuing bond buying program in public appearances Thursday, with one saying the U.S. economy may perk up enough to consider starting to wind down the effort around the turn of next year.
Goldman Sachs again revises upward:
- Expects around $750bn in additional fiscal stimulus, including $300bn in stimulus checks, in the US after the Georgia special elections tilted the Senate majority to the Democrats
- Raised its full-year 2021 US GDP forecast from +5.9% to +6.4% (with 50% of the population expected to be vaccinated by April). Q4/Q4 basis: +6.6% vs. +5.6%
- Brought forward our expectation for Fed liftoff to 2H24
- Lowered expectation for path of US unemployment and raised expectation for path of inflation. GS now expects core PCE inflation to reach 1.8% at end-2021, 1.75% at end-2022, 1.95% at end-2023, and 2.1% at end-2024.
BTW, Bloomberg says that, so far, 6.25 million doses have been given in the U.S..
The initial round of shots through early January has been doled out primarily through hospitals and other institutional health-care settings. The next phase will draw more on pharmacies and health clinics—places where vaccines are more traditionally administered—and will broaden the pool of people eligible to get the shots.
U.S. Deaths Set New Record as Cases Surge Deaths in the U.S. associated with Covid-19 exceeded 4,000 in a day for the first time and newly reported infections hit their second-highest day on record.
Sinovac Vaccine Is 78% Effective in Brazil Trials China’s shot also gives 100% protection against severe cases of the disease, raising hopes it can be widely used in the developing world
Pfizer, BioNTech Shot May Defeat New Variants, Study Shows The research comes as Covid-19 is spreading globally at record daily levels.
Moderna’s COVID-19 vaccine should protect ‘potentially for a couple of years,’ CEO says
(…) “The antibody decay generated by the vaccine in humans goes down very slowly (…) We believe there will be protection potentially for a couple of years.”
Bancel added his company was about to prove that its vaccine would also be effective against variants of the coronavirus seen in Britain and South Africa.
U.S. Trade Deficit Widens As Imports Surge
The U.S. trade deficit in goods and services widened to $68.1 billion during November from an unrevised $63.1 billion in October. September also was unrevised at $62.1 billion. The Action Economics Forecast Survey anticipated $65.2 billion. Imports increased 2.9% (0.3% y/y) while exports rose 1.2% (-12.5% y/y).
The deficit in goods trade increased to $86.4 billion in November from $81.4 billion. Exports of goods rose 1.0% (-6.7% y/y) as non-auto consumer goods improved 1.1% (-2.4% y/y). Imports of goods gained 3.1% (6.0% y/y), driven by a 7.0% increase in nonauto consumer goods imports (17.9% y/y). Petroleum imports grew 1.7% (-34.1% y/y). Oil import volumes declined 4.9% (-6.4% y/y). Non-petroleum imports rose 3.2% (9.2% y/y).
The surplus on trade in services held steady m/m at $18.2 billion. The value of services exports grew 1.5% (-23.4% y/y) led by an 11.4% gain in travel (-72.3%). Charges for the use of intellectual property eased 0.5% (+0.3% y/y). Imports of services gained 2.4% (-22.5% y/y) also led by a 19.9% (-77.7% y/y) rise in travel. Charges for imports of intellectual property eased 0.7% (+14.0% y/y).
The goods trade deficit with China widened to $30.0 billion in November from $26.5 billion in October. Exports to China fell 3.8% (+40.5% y/y) while imports rose 7.5% (24.5% y/y). The trade deficit with the European Union grew to $16.7 billion. Exports to the EU rose 4.9% (-8.4% y/y) while imports gained 5.6% (0.7% y/y). The deficit with Japan deepened to -$6.6 billion. Exports to Japan declined 1.3% (-12.4% y/y) and imports rose 8.1% (2.6% y/y).
The CARES Act is partly responsible for the import surge since many of the goods purchased during the pandemic are foreign sourced.
Car manufacturing hit by global semiconductor shortage Volkswagen, Daimler, GM and Renault vie with consumer electronics groups for scarce chips
FOOD COSTS
Supply chains are being disrupted and the pandemic is wreaking havoc on workforces across the globe. Additionally, like gold and most commodities, food supplies largely are priced in dollars, and as the dollar has fallen to its weakest level in more than 2½ years, food prices have risen. (Axios)
Data: UN FAO food price index; Chart: Axios Visuals
(FYI:
U.S. Suspends Plan to Impose Tariffs on French Luxury Goods The U.S. on Thursday suspended plans to impose tariffs on French luxury goods in response to France’s tax on big tech companies, saying it wants to coordinate its response with its efforts in similar disputes with other countries.
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Joe Biden’s Big Decision on Tech Taxes Apple, Alphabet and others will pay the price if the incoming president doesn’t back global reform efforts
U.S. tech giants are already handing over so-called digital-service taxes to the French government. Unless the incoming administration restarts global efforts to reform corporate-tax rules, the likes of Alphabet, Apple and Facebook will soon face myriad such levies around the globe. On Thursday, the U.S. trade representative said it would delay retaliatory action against France promised by President Trump, essentially leaving the problem for Mr. Biden.
U.S. backing is crucial for a deal. The Organization for Economic Cooperation and Development started working in 2013 to update industrial-era corporate tax rules for online companies and crack down on what many countries see as aggressive tax avoidance. But the project was soon shelved because of a lack of support from then-President Obama. (…)
With a technical solution in sight, a deal could be done this year if the U.S. wants it. (…)
On Wednesday, a stay of execution for Washington’s retaliatory tariffs expired. But rather than following through on its threat, the U.S. trade representative said it wanted a “coordinated response.” It is working on similar anti-DST measures against Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the U.K.
There is bipartisan frustration in Washington with taxes targeting U.S. tech giants. Mr. Biden is more likely to use diplomacy or multilateral institutions like the World Trade Organization, but will probably keep the Trumpian option of tariffs in his back pocket.
The president-elect has a very long to-do list, and it is unclear where global corporate tax reform will rank. However, the DSTs in France and other countries will likely force the issue. The OECD is due to update G-20 finance ministers this summer. If there isn’t significant progress by then, the global tax reform project will probably be back on the shelf and investors should brace for more trans-Atlantic fireworks.
Surging Stock Markets in Asia Look Increasingly Dangerous Unreliable flows and inconsistent narratives have sent different stock markets in Asia sharply higher, with many now outperforming U.S. equities.
(…) The Taiwanese and South Korean bourses are the most obvious examples. The Taiex and Kospi are up 45% and 36%, respectively, since the beginning of 2020, while the S&P 500 is up more like 18%. China’s equity market recorded a strong 2020, but the most interesting performances may be outside the world’s second-largest economy.
Perhaps most perplexing is India’s equity stock market. The Sensex index now matches the S&P 500’s gain in dollar terms for the same period. India, of course, has nothing like the capacity of the U.S. to support the economy with either monetary or fiscal policy. Its price to earnings ratio for the 12 months ahead has risen even more than its U.S. equivalent since the nadir in March. (…)
The weakness of the dollar has made life easier for parts of the world with large revenue denominated in other currencies, or dollar-denominated debts. But the recent upswing can’t be accounted for by currency effects alone. (…)
There is no sense in betting against such rallies, especially where frenetic retail activity is in play. But investors should be cautious about surges without foundations. If the market narrative changes, several Asian markets look like they would be left most exposed.
Beijing orders Chinese media to censor coverage of Alibaba probe Directive to restrict reporting comes as speculation mounts over whereabouts of Jack Ma
OCC Says Banks Can Use Stablecoins in Payments The banking regulator’s guidance comes as the use of stablecoins has boomed in recent years, observers say
Banks are allowed to participate in public decentralized networks and use stablecoins in payment settlements, according to new guidance from a federal banking regulator.
The Office of the Comptroller of the Currency in a guidance letter this week said national banks and federal savings associations may use new technologies, including independent node verification networks—also known as blockchain networks—and related stablecoins, to perform bank-permissible functions.
The letter, published Monday, is the latest from the Treasury Department unit to spell out how traditional financial institutions can do business involving digital currencies. Before the guidance, some banks were unsure about whether they could use the underlying blockchain as payment networks. (…)
The OCC in its guidance said there is increasing demand in the market for faster and more efficient payments through the use of decentralized technologies, such as independent node verification networks. And using stablecoins in payment settlements may offer both the efficiency and speed of digital currencies and the stability of existing currencies, the OCC said. (…)
Cryptocurrency companies, on the other hand, are also interested in having sophisticated banks as partners to take advantage of the banks’ well-developed compliance programs.
It can be challenging for cryptocurrency companies to build compliance programs from scratch, he said. “This is an exciting opportunity for banks to move into an area that is becoming increasingly profitable and do cutting-edge work,” said Mr. Alberts, who co-chairs his firm’s financial institutions group.
“It would also free up cryptocurrency companies” to focus on what they’re good at, he said.