Payroll employment rises by 850,000 in June; unemployment rate changes little at 5.9%
- Total nonfarm payroll employment rose by 850,000 in June, following increases of 583,000 in May and 269,000 in April. In June, nonfarm payroll employment is up by 15.6 million since April 2020 but is down by 6.8 million, or 4.4 percent, from its pre-pandemic level in February 2020.
- The change in total nonfarm payroll employment for April was revised down by 9,000, from +278,000 to +269,000, and the change for May was revised up by 24,000, from +559,000 to +583,000. With these revisions, employment in April and May combined is 15,000 higher than previously reported.
- Average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents to $30.40 [+3.6% YoY] in June, following increases in May and April (+13 cents and +20 cents, respectively). Average hourly earnings of private-sector production and nonsupervisory employees rose by 10 cents to $25.68 [3.7% YoY] in June.
U.S. Initial Unemployment Insurance Claims Decrease to Pandemic Low
Initial claims for unemployment insurance fell 51,000 in the week ended June 26 to 364,000 from 415,000 in the previous week, which was initially 411,000. The June 26 number was the lowest since March 14, 2020, just as the pandemic was settling in. The Action Economics Forecast Survey panel expected new claims to decline to 389,000. The 4-week moving average fell 6,000 last week to 392,750 from 398,750.
Initial claims for the federal Pandemic Unemployment Assistance (PUA) program rose for a third consecutive week, increasing to 115,267 in the June 26 week from an upward-revised 111,778 in the prior week (initially 104,682). Despite the three increases, the number of claims is maintaining a flat pattern near pandemic lows; this has been in place since early April. The PUA program provides benefits to individuals who are not eligible for regular state unemployment insurance benefits, such as the self-employed. Given the brief history of this program, these and other COVID-related series are not seasonally adjusted.
Continuing claims for regular state unemployment insurance rose 56,000 in the week ended June 19 to 3.469 million; the prior week was revised upward 23,000 to 3.413 million. The insured rate of unemployment was also revised upward, going back to the 2.5% of the prior two weeks, and it remained there in the June 19 week. This rate reached a high of 15.9% in the week of May 9, 2020.
Continued claims for PUA fell to 5.936 million in the week ended June 12, again the lowest since the week ended April 25, 2020, from 5.951 in the previous week. Continued PEUC claims maintained their recent tight range, decreasing 12,117 to 5.262 million in the June 12 week from 5.274 million in the previous week. The Pandemic Emergency Unemployment Compensation (PEUC) program covers people who have exhausted their state unemployment insurance benefits.
The total number of all state, federal, and PUA and PEUC continued weeks claimed was 14.660 million in the week ended June 12, a decrease of 180,890 from the previous week. This was the lowest continued weeks claimed since April 4, 2020. These figures are not seasonally adjusted.
(Bespoke)
U.S. Light Vehicle Sales in June Fall Again
The Autodata Corporation reported that light vehicle sales during June declined 10.2% (+16.0% y/y) to 15.35 million units (SAAR). They have fallen 17.9% during the two months since the April peak of 18.69 million units.
Sales of light trucks declined 10.3% (+14.3% y/y) in June to 11.69 million units after falling 9.7% in May from the record 14.43 million in April. Purchases of domestically-made light trucks fell 9.7% (+17.4% y/y) to 8.90 million units after a 10.7% May decline. Sales of imported light trucks were off 12.0% (+5.3% y/y) to 2.79 million, down from April’s record 3.39 million units.
Trucks’ share of the light vehicle market was unchanged at 76.2% last month.
Passenger car sales fell 10.1% (+22.0% y/y) in June to 3.66 million units after falling 4.7% in May. Purchases of domestically-produced cars weakened 7.8% (+17.2% y/y) to 2.38 million units after falling 7.5% in May. Sales of imported autos were off 14.7% (+32.0% y/y) to 1.28 million following a 2.0% May improvement.
Imports’ share of the U.S. vehicle market eased last month to 26.5%, but remained up from 23.2% in December. Imports’ share of the passenger car market weakened to 35.0% in June. Imports’ share of the light truck market slipped to 23.9%.
- An EY survey found 32% of non-car owners intend to get one in the next six months. About half of those were millennials. (Bloomberg)
U.S. Construction Spending Falters in May
Construction levels by sector
Source: Macrobond, ING
Fed Likely Needs to Raise Rates as Soon as Late 2022, IMF Says
The Federal Reserve probably will need to begin raising interest rates in late 2022 or early 2023 as increased government spending keeps inflation above its long-run average target, according to the International Monetary Fund.
The U.S. central bank likely will begin to scale back asset purchases in the first half of 2022, staff from the Washington-based fund said in a statement Thursday following the conclusion of so-called article IV consultations, the IMF’s assessment of countries’ economic and financial developments following meetings with lawmakers and public officials.
“Managing this transition — from providing reassurance that monetary policy will continue to deliver powerful support to the economy to preparing for an eventual scaling back of asset purchases and a withdrawal of monetary accommodation — will require deft communications under a potentially tight timeline,” IMF staff said in the concluding statement. (…)
The IMF forecasts the increase [in PCE inflation] to be transitory, with the index peaking at 4.3% and dropping to around 2.5% by the end of 2022. That’s still above the Fed’s long-run average target of 2%. (…)
The IMF raised its estimate for U.S. economic expansion this year to 7% — the fastest pace since 1984 — from a 6.4% forecast in April. (…)
Global minimum tax vs. S&P 500 profits
- The arrangement, announced on Thursday, could be finalized by October, with implementation following in 2023. (Fortune)
- In an analysis published on June 7, Goldman Sachs analysts estimated that a global minimum tax rate of 15% that took effect in 2022 would “represent a downside of just 1%-2%” to S&P 500 earnings. “At the sector level, Info Tech and Health Care would face the greatest earnings risk, but even those sectors appear to face aggregate downside of less than 5% relative to current consensus estimates,” they wrote. (Axios)
A Wave of Earnings Restatements Slams a Hot Market Accounting guidance from the Securities and Exchange Commission has led to a big slowdown in SPACs
More than 540 companies have restated their financial accounts in the past three months, higher than every full year since 2013, to comply with a directive from Washington, new data show.
The guidance from the Securities and Exchange Commission hasn’t had a big impact on investors but has helped cause a big slowdown in one of the market’s hottest areas.
The SEC’s statement targeted special-purpose acquisition companies, saying in April that some were improperly accounting for warrants. The guidance took the market by surprise, according to analysts. Issuance of SPACs has tumbled since. What’s more, some SPACs used the restatements to disclose other more serious problems. (…)
For years, SPACs and companies that had merged with SPACs treated these warrants as equity in their financial statements. The SEC in April said certain features of many of the warrants, such as better terms being offered to sponsors than outside investors, meant they should instead be treated as liabilities. One reason is that there is the potential for a cash payout in some circumstances. (…)
The monthly amount raised by new blank-check companies plummeted from $35 billion in March to $3 billion in April and has yet to recover, according to data provider Dealogic. SPACs raised $3.9 billion in May and $3.2 billion in 2021 through June 24, the data show. (…)
There is continuing fallout from the SEC action: Treating the warrants as liabilities means they will have to be revalued every three months, when the company reports its latest financial results, as opposed to the one-off value if the warrants are included as equity.
Question: since this is “not a new accounting question” (guidance on how to classify warrants was part of accounting rules for more than a decade), why did the SEC wait until April 2021 to intervene?