Available Jobs Outnumber Unemployed Americans Seeking Work Unfilled job openings rose by 590,000 to a seasonally adjusted 10.1 million in June, the highest level since record-keeping began in 2000, the Labor Department said.
Unfilled job openings rose by 590,000 to a seasonally adjusted 10.1 million in June, the highest level since record-keeping began in 2000, the Labor Department said Monday. The increase was driven by industries such as professional and business services, retail and the accommodation and food services, as pandemic restrictions continued to ease that month and consumers were more willing to dine out and travel. (…)
Some economists say the recent disparity might be due to a skills or geographic mismatch between workers and available jobs. Data released Monday showed openings were revised higher in May to exceed unemployment that month as well, and the gap between openings and jobless people widened in June. (…)
Monday’s Labor Department report showed the highest rate of job openings in June was in the South. Broadly, the labor market in the South, where business restrictions were less severe, has recovered from the pandemic more fully than the rest of the country. The West and Northeast, which includes New York and California where some restrictions were in place into June, had the lowest rate of job openings.
The good news is that hires have finally jumped well above (+12.4%) their pre-pandemic levels.
The jobs are there but nobody cares!
Data: Bureau of Labor Statistics, FRED; Chart: Axios Visuals
The math from the above chart is simple: real GDP = labor market growth x output per worker (productivity). For employment to grind its way to pre-pandemic levels during the next 12 months, it needs 500k new jobs per month = +4% labor force growth. Add 2-3% productivity growth = +6-7% GDP growth. If no productivity growth, watch inflation rise and profit margins decline…
- The scramble for warehouse workers is getting more intense, and more expensive. Walmart is offering special bonuses to many of its warehouse employees to work every hour they are scheduled and giving temporary pay raises to some employees, the WSJ’s Sarah Nassauer reports, as the retail giant ramps up for the holiday shopping season amid a tight labor market and stretched supply chains. Some workers have been offered $1,000 over four weeks for not skipping any scheduled shifts during the second half of the summer. The spending signals that companies are growing more concerned that this year’s big shipping disruptions and delays along with a worker shortfall will leave them unprepared to benefit this fall from strong consumer demand. U.S. warehousing operators have added nearly 130,000 jobs in the past year, by the Bureau of Labor Statistics measure, including 10,700 in July during a robust month for employment growth. (WSJ
- During private discussions [at a recent meeting with Treasury Secretary Janet Yellen in Atlanta], some executives bemoaned the fact they still can’t fill open positions even after wages were increased, according to a person familiar with the conversation. The consensus among employers was that higher pay is here to stay. (Bloomberg)
- Speaking of scramble for workers, hotels must be desperate:
NY FED’S SURVEY OF CONSUMER EXPECTATIONS
- Median one-year-ahead inflation expectations were unchanged at 4.8% in July while median inflation expectations at the three-year horizon increased slightly to 3.7% from 3.6%, its highest reading since August 2013.
- Median one-year-ahead expected earnings growth rose 0.3 percentage point in July to 2.9%, its fourth consecutive increase and a new series high. The increase was driven mostly by respondents with no more than a high school degree and with annual household incomes under $50,000.
- Median household spending growth expectations retreated slightly from a series high of 5.2% reached in June to 5.1% in July.
Small Business Optimism Dips in July as Labor Shortage Remains Biggest Challenge
The NFIB Small Business Optimism Index decreased in July to 99.7, a decrease of 2.8 points, reversing June’s 2.9-point gain. Six of the 10 components declined, three improved, and one was unchanged.
- Sales expectations over the next three months decreased 11 points to a net negative 4% of owners.
- Owners expecting better business conditions over the next six months decreased eight points to a net negative 20%.
- Earnings trends over the past three months decreased eight points to a net negative 13%.
U.S. Consumer Credit Posts Record Increase in June
Consumer credit outstanding surged $37.7 billion during June (4.2% y/y) following a $36.7 billion May increase, revised from $35.3 billon. A $22.0 billion June rise had been expected in the Action Economics Forecast Survey. The $18.9 billion April rise was revised from $20.0 billion. The ratio of consumer credit outstanding-to-disposable personal income of 24.1% in June compared to 24.0% during all of last year and 25.9% during 2019.
Nonrevolving credit usage grew $19.8 billion (5.5% y/y) in June following a $27.6 billion May rise, revised from $26.1 billion. (…)
Revolving consumer credit balances jumped $17.9 (-0.2% y/y) after a $9.1 billion May rise, revised from $9.2 billion. (…)
Fed’s Bostic Urges Faster Bond Taper as Economy Strengthens
Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank should move to taper its asset purchases after another strong month or two of employment gains, and proceed with that scaling-back process faster than in past episodes. (…)
My sense is if we are able to continue this for the next month or two I think we would have made the ‘substantial progress’ toward the goal and should be thinking about what our new policy position should be.”
“Right now I’m thinking in the October-to-December range, but if the number comes back big” as with the last report “or maybe even a little bigger, I’d be open to moving it forward,” Bostic said. “If the number really explodes, I think we would have to consider that.”
Bostic is a rotating member on the Fed’s policy-setting committee through year-end. He’s staked out a more hawkish position than some of his colleagues. For interest rates, he said that he anticipates the first increase “very late” in 2022.
At a separate event Monday, Richmond Fed President Thomas Barkin also said he sees progress in the economy toward the central bank’s goals.
“I think it is fair to say on the price side we made substantial progress, maybe more than substantial progress,” Barkin said at an event in Roanoke, Virginia. “I believe there is still more room to run in the labor market.” (…)
Chip Shortage Keeps CIOs and Other Tech Leaders Scrambling Across the economy, corporate tech leaders are dealing with dwindling supplies of the physical building blocks of IT
(…) “We’re seeing 10- to 12-week delivery times for laptops and computing devices,” said Sue Workman, chief information officer at Case Western Reserve University in Cleveland. “Those used to take a day or two.” (…)
From schools to financial firms and grocery stores, the world-wide chip shortage—which comes amid soaring prices for silicon wafers, and the resins and metals used in their manufacture—is rippling through supply chains. It is causing tech-hardware manufacturers to idle factories, vendors to put orders on hold and has left enterprise IT customers in limbo, industry analysts say.
Across the economy, chief information officers and other tech leaders are dealing with dwindling supplies of the physical building blocks of IT, items like liquid crystal displays, images sensors, integrated circuits and processors, said Mario Morales, group vice president for enabling technologies and semiconductors at industry research firm International Data Corp.
“Suppliers are operating at full capacity and are not expected to catch up until the end of this year,” Mr. Morales said. (…)
TECHNICALS WATCH
The last several days merely maintained the uncertainty: large caps logged in new highs on reduced volume but smaller caps kept their divergent trend intact. Even the NASDAQ cannot show more 52-week highs than lows in July despite rising 35% in the last year and nearly 4% in July.
Ned Davis Research published a technical warning two weeks ago:
For the past several months, our thesis for the U.S. stock market for the rest of 2021 has not changed. Macro and fundamental factors are in the process of transitioning from their most bullish readings in years to being in zones in which the stock market has struggled. Sentiment has been reflecting excessive optimism for months. Technicals, on the other hand, had remained bullish, thanks to broad participation from most sectors.
Recently, two developments have caught our attention. First, the market seems to have suddenly realized our concern that recent explosive economic and earnings growth numbers are not repeatable. (…)
Second, since early May, a few chinks in the technical armor have begun to show. Small-cap and cyclical Value leadership has given way to FANMAG stocks carrying the cap-weighted popular averages. More recently, relative strength tables have been dominated by risk-off sectors. Bond yields have tumbled below 1.2%.
As a result, the percentage of stocks in the NDR Multi-Cap universe above their 50-day moving averages has fallen from 78% on April 26 to 29%. The percentage above their 200-day has fallen by less, from 92% to 67%. (…)
When cyclical breadth has been better than defensive breadth, the S&P 500 has risen at a 11.0% annualized pace (chart, left). When defensive breadth has been better, gains have been smaller, at 4.8% per year. The rotation into defensive sectors is a warning sign of more challenging market conditions. (…)
Since July 2015, when FANMAG has been outperforming the rest of the market by at least 10% points over the previous six months, the S&P 500 has been essentially flat (-0.2% per year) versus 25.6% per annum when the spread has been less than 10%.
FANMAG stocks have proven to be a defensive place to hide when pandemic fears increase. The combination of FANMAG relative strength and better defensive breadth versus cyclical breadth is a reflects defensive positioning amid weakening breadth. (…)
Any future rallies will require broader participation for technical indicators to avoid joining macro and fundamental ones in warning of a major peak.
There has been 187 US equity trading days from November 1st to today. This was the start of positive vaccine developments. Since November 2020, there have been +$837 Billion worth of global equity inflows in 40 weeks. This is +$21B worth of inflows every week or +$4.2B worth of buying per day.
EARNINGS WATCH
From Refinitiv/IBES:
Through Aug. 6, 443 companies in the S&P 500 Index have reported earnings for Q2 2021. Of these companies, 87.4% reported earnings above analyst expectations and 9.7% reported earnings below analyst expectations. In a typical quarter (since 1994), 66% of companies beat estimates and 20% miss estimates. Over the past four quarters, 83% of companies beat the estimates and 14% missed estimates.
In aggregate, companies are reporting earnings that are 16.4% above estimates, which compares to a long-term (since 1994) average surprise factor of 3.9% and the average surprise factor over the prior four quarters of 20.1%.
Of these companies, 87.1% reported revenue above analyst expectations and 12.9% reported revenue below analyst expectations. In a typical quarter (since 2002), 61% of companies beat estimates and 39% miss estimates. Over the past four quarters, 74% of companies beat the estimates and 26% missed estimates.
In aggregate, companies are reporting revenues that are 4.6% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.1% and the average surprise factor over the prior four quarters of 3.5%.
The estimated earnings growth rate for the S&P 500 for 21Q2 is 93.1%. If the energy sector is excluded, the growth rate declines to 77.7%. The estimated revenue growth rate for the S&P 500 for 21Q2 is 23.5%. If the energy sector is excluded, the growth rate declines to 19.2%.
The estimated earnings growth rate for the S&P 500 for 21Q3 is 29.8%. If the energy sector is excluded, the growth rate declines to 23.3%.
Costs pressures suggested by some macro trends have yet to meaningfully impact S&P 500 companies. In truth, revenue growth rates between 10-20% surely help offset many rising costs.
- Finance Chiefs Work to Navigate Higher Costs, Transportation Woes E.l.f. Beauty is offering a smaller holiday assortment to save shipping-container space, while McCormick reduces packaging
Companies across a range of industries are facing inflationary pressures caused by factors including higher commodity prices, supply chain hiccups and high demand for shipping capacity. Many of them are responding by raising prices, but often that isn’t enough to offset the impact of cost pressures and transportation challenges. (…)
[Mattel Inc.], which operates its own plants but also relies on external manufacturers, is benefiting from a recent cost savings and efficiency program which helped reduce the number of different items it sells, or stock-keeping units, by about 35%, according to Mr. DiSilvestro. “If you have a third less SKUs to think about, it does reduce the complexity and enables us to be more efficient,” he said, adding that Mattel is watching its input costs and margins. (…)
Changing the packaging of a product can help the company [Hershey] raise prices, Mr. Voskuil said. Hershey is also taking a close look at its contracts with vendors and its manufacturing plants in search of potential improvements, he said. (…)
E.l.f. [Beauty Inc.], which has raised prices, has noted improvements around the availability of shipping containers in recent weeks, Ms. Fields said. “Capacity is opening up, but the cost is still pretty high,” she said. The company expects that elevated costs for transport will continue to affect its profit margin, according to Ms. Fields.
E.l.f.’s gross margin declined by about 3.4 percentage points to 63.8% in the past quarter compared with the prior-year period, in part driven by higher transportation costs.
Delta Wave Goes Coast-to-Coast in U.S., Showing Variant’s Force
The U.S. Covid-19 wave that started in low-vaccination states in the Ozarks and Deep South has now engulfed the country, with cases and hospitalizations at their highest since February.
Thirty-eight states have transmission levels considered high by the Centers for Disease Control and Prevention, meaning they’re posting at least 100 cases per 100,000 residents or have positivity rates of at least 10%. The other 12 states and the nation’s capital have transmission rates that are considered substantial, the second-worst category.
The latest U.S. wave began in low-vaccination states. Intensive-care units are now swamped with virus patients in Florida, Louisiana and Mississippi.
But the faster-spreading variant is finding its way even into states that outperformed in the vaccination campaign and have enforced strong mitigation measures. Twenty-three states and the nation’s capital have seen their seven-day average cases increase at least 50% in the past week, including such highly vaccinated states as Vermont, Washington state and Hawaii, according to CDC data.
(
From J.P. Morgan Asset Management:
The most important divergence to watch right now is between reported COVID cases and COVID deaths. Clearly, the Delta variant is threatening to the unvaccinated population. Many states in the U.S. are dealing with devastating surges, and China and Israel are enforcing new restrictions despite having mature vaccination programs.
However, the example of the United Kingdom provides compelling evidence that the vaccines are powerful tools that will allow the global economy to normalize barring a new vaccine resistant variant. At this point, it seems like the UK is through the worst of the Delta case surge without a large surge in either hospitalizations or deaths. The primary reason: over 95% of its age 50+ population is already vaccinated.
Even though vaccination rates are relatively low in certain areas of the United States, 90% of people aged 65+ have received at least one dose of a vaccine. Delta will likely delay full economic normalization (due to supply shortages emanating from Asia) and lead to responses such as vaccine mandates and a delayed return to the office for some companies, but we have powerful tools to combat the most destructive COVID outcomes. Booster shots will likely play a very important role in economic normalization in the developed countries in 2022.
Canada Reopens U.S. Border to Fully Vaccinated Americans
(…) The U.S. didn’t reciprocate. Although Canadians can continue to fly to the U.S. for nonessential purposes, as they have been permitted to do throughout the pandemic, they are not allowed to cross at the land border
.
Canada plans to extend its reopening to include fully vaccinated tourists from other countries, and not just the U.S., beginning in early September. (…)
It’s the economy, stupid!