U.S. Unemployment Claims Again Edge Down
Initial claims for unemployment insurance edged down 1,000 in the week ended November 13 to 268,000 from 269,000 the prior week; that earlier tally was revised slightly from 267,000 initially reported. The Action Economics Forecast Survey had expected 261,000 initial claims for the latest week. The 4-week moving average fell to 272,750 in the November 13 week from 278,500 the week before. Both the most recent week’s claims and the four-week average again set a new post-pandemic low since March 14, 2020 when initial claims were 256,000 and the four-week average was 225,500. (…)
In the week ended October 30 the total number of all state, federal, PUA and PEUC continued claims was 3.185 million, up 619,000 from the pandemic-period low of 2.566 million in the October 23 week, which was indeed the smallest amount since March 14, 2020, when continued claims totaled 2.103 million.. These figures are not seasonally adjusted.
Initial claims are now only 12K above the pre-pandemic reading of 256K from March 13, 2020. Bespoke adds
On a non-seasonally adjusted basis, that pre-pandemic low was finally taken out this week. Unadjusted claims totaled 238.9K from 257K last week. That is the lowest level since the first week of March 2020 when claims were a hair below 200K. With the program’s expiration now even further in the rearview, PUA claims continue to have a minimal impact of only 1,390.
From a seasonal perspective, 2021—particularly this fall—has been an interesting year. For starters, claims have more or less returned to historically normal levels even when factoring in auxiliary programs. Furthermore, from Labor Day through the end of the year has historically marked a period of the year that claims have had a tendency to rise, but this year the opposite has been the case. In the context of that bucked seasonal trend, the current week of the year (46th) actually has a seasonal tailwind with claims rising week over week only 16.67% of the time since 1967. In other words, this week’s drop could be expected but the new low it resulted in is thanks to seasonally unusual declines in weeks leading up to now.
Lagged one week to initial claims, continuing claims were the better part of the claims release. Continuing claims fell to 2.08 million versus expectations of a decline to 2.12 million from last week’s reading of 2.16 million. As with initial claims, that resulted in the strongest level for claims since March of last year when the reading sat below 2 million.
Speaking of seasonal adjustments, Macromaven’s Stephanie Pomboy suggests that the BLS’ number crunchers artificially inflated October’s retail sales data: “Whereas in the last 3 years they assumed Retail Sales would post a 4.7% increase in the month of October, this year they assumed only a 2.6% gain. Had they used the same seasonal [factor], yesterday’s [Tuesday’s] headline # would have been -0.4% (rather than +1.7%).”
Adding the rising inflation factor which contributed 1.0% to the 1.7% nominal gain, “adjusted adjusted” real retail sales declined 1.4% in October against a -0.4% decline in real labor income (aggregate weekly payrolls).
That said, the Chase Card Spending Tracker remains strong through November 13. Given consumers’ FOMO amid mediatized shortages and merchants’ “if you see it, buy it”, the risk of nasty surprises is really in December and after.
The Real Biden Bill: At Least $4.6 Trillion Program by program, here’s how Democrats disguise the real cost of their entitlement blowout.
By the WSJ Editorial Board
The Congressional Budget Office on Thursday released its “official” cost estimates for the House tax and entitlement bill, but don’t believe it. The CBO gnomes aren’t lying about a 10-year deficit estimate of $367 billion. They’re obliged to score the bill under rules that Democrats have rigged with multiple tricks that disguise the real cost by trillions of dollars.
Democrats phase out the biggest programs in the bill while paying for them with 10 years of tax increases. They phase-in other programs and off-load costs to the states. The Penn Wharton Budget Model estimates the House bill would cost nearly $4.6 trillion over 10 years if temporary provisions are made permanent, as most will be.
The Committee for a Responsible Federal Budget (CRFB) pegs the cost at $4.9 trillion if temporary tax credits and programs are made permanent through 2031. This would add $1.5 trillion to deficits over the next five years without additional tax offsets. (…)
Keep in mind that CBO this summer projected that annual deficits will already exceed $1 trillion on average through 2030, causing U.S. debt to swell by $12.8 trillion—and that’s before the infrastructure bill or this House bill. When the spending all kicks in, and the rich are all taxed out, the middle class will be hit with a huge tax increase. This is the most dishonest spending bill in American history.
Japan Plans $490 Billion Stimulus to Jolt Struggling Economy The government approved the package to support recovery from the Covid-19 pandemic, including cash payments to most families and some smaller companies.
The size of the package was nearly double what analysts were expecting earlier this month and amounts to about one-tenth of Japan’s gross domestic product. (…)
The plan by Japan’s Prime Minister Fumio Kishida, who took office in October, doesn’t include major tax increases and seeks to jump-start a sluggish recovery from the pandemic in the world’s third-largest economy. GDP shrank at a 3% annual rate in the July-September quarter, the second contraction in three quarters. (…)
Most families with children will get cash payments and vouchers worth nearly $900 for each child aged 18 or younger. The government will provide financial aid of up to the equivalent of $22,000 each for smaller companies that can demonstrate they were affected by the pandemic. Wage increases for nurses and care workers are also planned. (…)
Japan’s economy remains smaller than its pre-pandemic peak, while the U.S. and China have already made up for their pandemic setbacks and then some. (…)
Lawmakers in both Mr. Kishida’s ruling Liberal Democratic Party and in opposition parties have advocated greater spending while generally not making a major issue of the debt. Some in the LDP say it isn’t a problem now because Japan issues debt in its own currency, the yen, and its inflation and interest rates are both around zero. The government is currently paying less than 0.1% interest on its 10-year bonds. (…)
U.K. Budget Deficit Exceeds Forecasts as Debt Costs Triple
(…) Interest costs were 5.6 billion pounds ($7.6 billion) compared with 1.8 billion pounds in the same month in 2020, the Office for National Statistics said Friday. In the first seven months of the fiscal year, the costs were up 63%. (…)
Faster inflation may also prompt more Bank of England interest-rate increases, which markets expect to begin next month, further increasing debt-servicing costs. (…)
- Oh god, not again! The Brexit deal in chance of collapse… Boris Johnson considers invoking Article 16 in the Northern Irish protocol, which will throw the parties back at the negotiations table. This is a digital risk event for the GBP and BoE.
(…) Under the terms of the post-Brexit trade agreement, Northern Ireland was kept part of EUs single market for goods to avoid a need for checks along the Irish land border as goods enter EU. This means that products moving from Britain to Northern Ireland are subject to checks and controls, which according to the British government is damaging trade and supply lines. The European Commission has offered to simplify these a great deal, but Britain insists on a total rewrite of the protocol to remove most checks and controls.
The “nuclear option” Article 16 allows either part – Britain and EU – to suspend any part of the agreement that is causing economic, societal and environmental damage or trade diversion. The British government says this condition is clearly met, entitling it to invoke Article 16.
Data prints from August 2021 from the Irish Central Statistics Office reveal that exports from the Republic of Ireland to Northern Ireland had gone up 43% since Britain left the EU, whilst goods flowing in the opposite direction had gone up 77%. In contrast, 50% of Northern Irish businesses have said that the Protocol has had a negative impact on business with the rest of the United Kingdom. This trade diversion forms the context for why Britain are (probably) ready to invoke Article 16.
If Boris Johnson invokes Article 16, both parties should enter negotiations to find a solution and no measures can be implemented during the initial one-month negotiating period. Should negotiations fail, then Britain can adopt “unilateral measures” that will be reviewed every three month.
In practice, this could mean Britain stopping checks on goods that are being sent across the Irish Sea or on a more severe note, suspending further parts of the agreement like product standards, customs checks or VAT rules. Depending on the scenario, EU can take different “rebalancing measures”. This will most likely result in lengthy court proceedings. However, if Britain overrides the provisions on customs and the single market, the EU would respond more forcefully. (…)
- Lagarde urges patience at ECB despite ‘painful’ inflation surge Euro knocked by president’s dovish comments on need to avoid ‘premature tightening’ of monetary policy
- The Fed’s John Williams said longer-term price expectations have moved up “quite a bit,” and cautioned against letting that trend continue. He cited rising rents and supply constraints as major factors. The IMF warned that U.S. price risks are to the upside, which may require an accelerated policy response. (Bloomberg)
Chinese Developer Yango Agrees to a Bond Swap With Investors Chinese property developer Yango Group, on the brink of default. has received approval for a debt swap that will allow it to delay payments.
(…) The broader market for dollar-denominated Chinese junk bonds, which is dominated by developers, also remains far from healthy. The yield to maturity of an ICE BofA index of Chinese high-yield corporate bonds peaked at nearly 28% earlier this month, and stood at about 22.4% as of Thursday.
China Property Risks to Economy Can Be Contained, IMF Says …but needs to step-up fiscal support for its slowing economy.
Downside risks to the IMF’s forecast of 8% growth in China this year and 5.6% in 2022 “are accumulating” due to factors such as “pandemic uncertainty” and weak consumption, the IMF said in a press release following an annual survey of the world’s second-largest economy. (…)
China’s Economy Is in for Much Slower Growth, Beige Book’s Miller Says
China’s economy is slowing more than people think and the outlook is for weaker growth going forward as the government is unlikely to step in with significant stimulus, according to Leland Miller, chief executive officer of China Beige Book.
“The third quarter was particularly brutal” for China’s economy, Miller said Friday on Bloomberg Television in Singapore. In addition, “we’re going to be looking at much lower growth going forward and it’s going to be because the Party is OK with that.” (…)
“There was no big stimulus or broad policy easing,” he said, because China’s leaders have decided “to slow things down, to work toward slower, healthier growth of the Chinese economy, rather than deal with the consequences of keeping pushing this model to its limits.”
The government will be able to contain the problems from China Evergrande Group within the property sector, Miller argued, because they have control over the banks and other counterparties, and so there won’t be unconstrained contagion. However, the problem for the economy is that there’s no replacement for the property sector as a driver of growth.
“Structurally, nothing is being done to empower consumers,” either through a much stronger currency or via transferring state assets to households, Miller said. “Investment is falling but consumption is not being empowered.” (…)
China Faces Many Challenges in Keeping Economy Stable, Li Says
Authorities should strive to keep the economy operating within a reasonable range and ensure the overall employment situation is stable, Li said at a seminar with scholars and businessmen Friday, according to a report in state media Xinhua. He said “cross-cyclical” adjustments were needed to support growth. (…)
Li said Friday the economy was recovering steadily and this year’s main goals can be achieved.
More effort was needed to support businesses and keep jobs, he said, vowing to study new ways of supporting manufacturing enterprises and small firms, such as tax and fee cuts. (…)
Various policies supporting coal power companies must be fully implemented to ensure stable power supply, he said. (…)
Alibaba now expects revenue for the year ending in March to rise between 20% and 23%, the slowest pace since its 2014 stock market debut and down from a May forecast of 29.5% growth. The company also undershot expectations for earnings per share in the second quarter. (…)
“These economic headwinds, coupled by intensifying market competition also affected our core commerce business in China,” Alibaba CEO Daniel Zhang said on an earnings call, adding that demand for apparel and general merchandise had been particularly affected. (…)
Alibaba said it had recorded single-digit growth for physical goods gross merchandise value, a key online retailing metric for the total value of merchandise sold through a marketplace, though it did not provide more details or a comparison with previous quarters. (…)
Axios today:
Amazon’s competitors are multiplying. Traditional retailers are trying to replicate the e-commerce giant’s playbook. Macy’s is set to launch a third-party sellers marketplace next year, the company said today, becoming the latest legacy retailer to enter an arena dominated by Amazon.
Hudson’s Bay opened a third-party marketplace earlier this year, while Walmart expanded its version to international sellers around the same time.
The pandemic helped brick-and-mortar stores get even better at selling online — handing consumers more buying options and putting pressure on Amazon to stay competitive.
Amazon’s year-over-year sales growth during the third quarter, at 15%, was its slowest in almost seven years. Meanwhile, Macy’s digital sales were up 19% in Q3.
A third-party marketplace could be beneficial to Macy’s existing e-commerce business because the platform could generate commissions like Amazon does, without needing Macy’s to hold any additional inventory, David Swartz, a consumer equity research analyst at Morningstar, tells Axios.
1 for the road: Yard delivery via drone
Self-driven drones are now delivering Walmart packages to customers’ yards in Pea Ridge, Ark. — just outside Bentonville, Worth Sparkman writes for Axios Northwest Arkansas. Officials told Axios that packages consistently land in an area the size of two parking spots.
A pilot (!) project officially started this week behind a Neighborhood Market about 20 minutes from the retailer’s HQ. Walmart and drone-maker Zipline will then decide whether to launch the service in other markets.
The Zipline method, which can drop a 4-pound package within 30 minutes of being ordered, helps fill the “last mile” of the supply chain.Customers in the service area schedule an online order. A Walmart employee packs the product and hands it off to a Zipline staffer. Zipline preps and launches the aircraft, which drops the package with a biodegradable parachute.
The drone circles a target to determine wind direction, then approaches the drop zone.Under a waiver from normal FAA rules, Zipline drones have no cameras or remote human pilot. Walmart is working with the FAA to expand delivery to more areas of Northwest Arkansas.
