THE DAILY EDGE: 11 SEPTEMBER 2019

Did you miss THE PROFIT PROBLEMS?

U.S. Job Openings Cool in Slowing Labor Market A pullback in openings aligns with other labor-market signals pointing to a slowdown

Job postings fell 3% from a year earlier in July to 7.217 million after declining 2% in June, the Labor Department reported Tuesday. Before June, job openings hadn’t decreased year over year since early 2017. (…)

Openings peaked at 7.6 million in November and have decreased by about 400,000 since then.

Still, the number of available jobs remains high. Job openings exceeded the number of unemployed Americans by 1.2 million in July, the 17th straight month openings have outnumbered job seekers. (…)

Quits keep rising, more pressure on labor costs:

• The Conference Board Employment Trends Indexâ„¢ (ETI) Declined Slightly in August

Median U.S. Household Income Showed No Growth in 2018

Median household income was $63,179 in 2018, an uptick of 0.9% that census officials said isn’t statistically significant from the prior year based on figures adjusted for inflation. The poverty rate in 2018 was 11.8%, a decrease of a half percentage point from 2017, marking the fourth consecutive annual decline in the national poverty rate. It was the first time the official poverty rate fell significantly below its level at the start of the recession in 2007.

Census officials said that median household income was essentially the same as it was during previous peaks in 1999 and 2007.

The share of Americans who lack health insurance rose for the first time since 2009, according to the figures. In 2018, 8.5% of people, or 27.5 million, didn’t have health insurance at any point during the year, compared with 7.9% of people, or 25.6 million, the previous year. That reversal comes years after the 2010 Affordable Care Act expanded insurance coverage to millions of Americans. (…)

U.S. Businesses Say China’s Slowdown Is a Greater Threat Than Trade War U.S. companies are downshifting in China as its economy slows and trade tensions with the U.S. persist, according to a new survey.

(…) More than three quarters of the 333 respondents to this year’s survey said they remained profitable in China last year, but only half forecast revenue growth in 2019, down sharply from 81% in 2018 and similar rates in recent years. Likewise, a solid majority—61%—said they held a positive view about business prospects in China over the coming five years. In past years, however, that figure was routinely 80% or higher. Now, 21% express outright pessimism about the five-year outlook, a figure that in the recent past hadn’t touched 10%. (…)

A slowing Chinese economy is considered the biggest challenge in the next three to five years by nearly 58% of respondents, a risk recognized by only about a third of respondents a year earlier. Amcham said 18% of responding members intend to cut China investment this year, three times as many as those who said last year they planned to do so. Fifty-three percent of respondents said tariffs are leading to slower or less investment spending, while 20% said they plan to cut head count.

The manufacturing-heavy chamber said market access remains a crucial demand of members, and 75% of them disapprove of President Trump’s application of tariffs, as members would prefer deeper engagement with China. More than two-thirds gave a thumbs down to the China International Import Expo trade fair, President Xi Jinping’s signature initiative to expand business opportunities for foreign companies. (…)

Global Currency Decline Bruises Investors Currencies around the world are tumbling to multiyear lows against the dollar, bruising investors’ portfolios and fanning the flames of a global trade war.

The Chinese yuan recently hit its lowest level in more than a decade against the dollar, the euro dropped to a fresh two-year low last week and the British pound is at depths it hasn’t consistently plumbed since the 1980s.

Some emerging-market currencies such as the Colombian peso have fallen to their lowest prices on record against the dollar, while Argentina has recently introduced capital controls after its peso plunged in August. Out of 41 currencies tracked by The Wall Street Journal, only nine are up against the dollar in 2019. (…)

As falling rates and slowing growth drove bond yields lower, investors headed to the U.S., where the economy is relatively strong and the payout on Treasurys stands far above that offered by many other government bonds. That shift has weighed on large parts of the foreign-exchange market while pushing the dollar up to historic highs against the currencies of many U.S. trading partners. (…)

For developing countries, however, a depreciating currency can be a headache. Accelerating inflation can be a problem in emerging markets, where central banks must often fight to keep prices from rising too quickly.

A falling currency makes it harder for developing countries to service their dollar-denominated debt. Too sharp a drop can unnerve investors, causing a stampede as money managers ditch emerging-market assets. (…)

JPMorgan CEO Dimon Raises Specter of Zero Rates

James Dimon, chief executive of JPMorgan Chase & Co., said at an industry conference Tuesday the bank has begun discussing what fees and charges it could introduce if interest rates go to zero or lower.

While Mr. Dimon stressed he wasn’t expecting zero rates at this point, the fact that he would entertain such a conversation is a sign of how sharply the environment has changed. A year ago, the Federal Reserve was still raising rates, and many bankers including Mr. Dimon expected the rate increases to continue into this year. (…)

Wells Fargo & Co., Citigroup Inc. and JPMorganJPM 1.27% all told investors at this week’sBarclays financial services conference in New York that lending profitability in the second half of the year would likely be less than the banks had previously expected.

The bankers blamed falling interest rates along with a growing list of global concerns including Brexit and protests in Hong Kong, which they say are hampering business clients from making decisions. The trade war between China and the U.S. remains the biggest impediment, the bankers said.

“People are a little less willing to make bets,”Bank of America Corp. ’s Chief Operating Officer Thomas Montag said. Some clients are changing supply chains, while others are holding off on drawing down on their revolving lines of credit, he said. “There’s enough uncertainty going on in the world that they’re going to wait.”

There were some brighter spots: Bank of America and JPMorgan were more upbeat on trading revenue. Lower interest rates have spurred increased mortgage origination. And generally the banks said U.S. consumers remained strong.

Latest data to Aug. 28 shows steady loan growth in the 6-7% range:

ft.com

China to Announce Policies to Cushion Trade War, Global Times Editor Says

SMALL TALK ON SMALL CAPS

The Daily Shot reproduces this relative valuation chart suggesting that small caps are cheap relative to large caps:

Source: @LizAnnSonders, @LeutholdGroup

They are indeed cheaper but beware of the 20% or so apparent discount. One, we don’t know how the small cap P/E is calculated, if it includes losses or not (some 30% of the Russell 2000 index components are losing money). Two, the outlook is not improving:

• This chart compares the NFIB index with the Russell 2000 small-cap stock index (on a year-over-year basis). (The Daily Shot)

Source: Capital Economics

Amazon Probed by U.S. Antitrust Officials Over Marketplace The FTC is interviewing merchants to determine whether the e-commerce giant is using its market power to hurt competition.

Young Americans are less trusting of other people – and key institutions – than their elders

Around three-quarters (73%) of U.S. adults under 30 believe people “just look out for themselves” most of the time. A similar share (71%) say most people “would try to take advantage of you if they got a chance,” and six-in-ten say most people “can’t be trusted.” Across all three of these questions, adults under 30 are significantly more likely than their older counterparts to take a pessimistic view of their fellow Americans.

All told, nearly half of young adults (46%) are what the Center’s report de

All told, nearly half of young adults (46%) are what the Center’s report defines as “low trusters” – people who, compared with other Americans, are more likely to see others as selfish, exploitative and untrustworthy, rather than helpful, fair and trustworthy. Older Americans are less likely to be low trusters. For example, just 19% of adults ages 65 and older fall into this category, according to the survey, which was conducted in late 2018 among 10,618 U.S. adults. (You can read more here about how the study grouped Americans into low, medium and high trust categories.)

Young adults also express less confidence in their fellow citizens to act in certain civically minded ways. (…)