Job Cuts Surge 46% In September 2022, Up 68% From Same Month Last Year September Hiring Intentions Fall To Lowest Level Since 2011
(…) “Some cracks are beginning to appear in the labor market. Hiring is slowing and downsizing events are beginning to occur,” said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc. (…)
“Typically, Retail and Transportation/Warehousing are ramping up hiring for the holiday season and announcing their plans in September. This low figure suggests companies that typically staff seasonal hires are waiting to see whether consumers will show up for the holiday season,” said Challenger.
- Amazon to Hire 150,000 Workers Before Holiday Season The e-commerce company recently raised hourly pay to entice job candidates.
The hiring target Amazon announced Thursday is the same as it had last year and comes as the e-commerce company has been struggling with slower sales. (…) The company shed almost 100,000 employees during its second quarter to end the period with roughly 1.5 million staff members. Much of that reduction took place at its warehouses.
Walmart Inc. WMT -0.93%▼ has scaled back its holiday hiring as consumer demand has fallen amid higher prices and strained household budgets. The company said last month that it planned to hire about 40,000 mostly seasonal employees for the holidays, far lower than the 150,000 permanent workers it sought last year. (…)
- J.T. O’Donnell, a career coach, says she hears rising worries from applicants about the once-booming job market (via N.Y. Times): “I watch the train wreck in slow motion. All these people thought: ‘Oh, when I’m ready to go back to work it’ll be no problem.’ And now it’s a problem.” (Axios)
INFLATION WATCH
Costco Not Ready to Cut Prices as Shipping, Commodities Costs Fall Rising labor costs and prices that were locked in with suppliers months ago are keeping inflationary pressures on the retailer
(…) It can take anywhere from six months to a year before lower shipping costs translate into falling prices for consumers, said Chuck Grom, a managing director at Gordon Haskett Research Advisors. Higher costs in other business areas can delay price drops even longer.
Hourly employees, which account for about 90% of Costco’s workers, earn more than $25 an hour on average in the U.S., according to Mr. Galanti, following a string of pay increases over the past 18 months. The company looks to attract and retain workers in competitive job markets, such as Seattle, said Mr. Galanti. These cost pressures will persist, as wages don’t tend to come down once they have gone up, Mr. Galanti said. Costco had around 285,000 employees at the end of June. (…)
Costco reported absorbing price inflation of around 8% in the quarter ended Aug. 28, up from 7%-plus in the previous quarter and a range of 3.5% to 4.5% a year earlier. (…)
Average car prices are shooting higher and higher thanks to continued auto parts shortages. Interest rates are rocketing higher thanks to the federal government’s efforts to control inflation. And car companies and dealers have less incentive to take steps to bring down costs because demand is still vastly greater than supply.
The end result: Don’t expect the car market to return to normal anytime soon.
The average new car loan interest rate reached 5.7% in the third quarter of 2022, the highest it’s been since 2019, according to Edmunds.com. At the same time, the average amount financed to purchase a new car reached an all-time record of $41,347. The average monthly payment in the third quarter was over $700. It was $630 in the same quarter last year, and the average down payment was almost $1,000 less then, too, according to Edmunds.com. (…)
In past years, when the Fed pushed up interest rates, car makers would come out with artificially low interest rate car loans – sometimes even 0% – as a purchase incentive. But with few cars to sell, there’s little incentive to do that sort of thing now, Caldwell said. (…)
These high costs will be hard on consumers but it still won’t reduce demand enough to ease pressure on car prices, at least in the near term, analysts interviewed by CNN Business said. That’s because demand for new cars is already so far outstripping the supply – hence the high prices – that the reduction in demand caused by these even higher payments still won’t bring things back in line. Car dealers can still sell every new car that comes onto their lots, often even before the car carrier trucks delivers them. Customers will just have to pay more. (…)
The inventory shortage is starting to ease just a bit, said Smoke. In the last few months, there have been a couple of hundred thousand more vehicles on dealer lots, he said.
“It’s not across the board on all models, but it’s principally domestic North American production,” he said. (…)
- “A $10-per-barrel increase in the price of oil would shave only 0.1% from U.S. real GDP growth over the subsequent year.” (Moody’s)
- “Per Okun’s law, a 1-percentage point deceleration in GDP growth over the course of a year would trim employment growth by around 800,000 jobs per annum. This would also increase the unemployment rate by about 0.5 percentage point and shave a few basis points off year-over-year growth in both the consumer price index and PCE deflator.” (Moody’s)
Bank of Canada’s Macklem Says ‘More to Be Done’ on Taming Inflation Canada central banker plays down slowing economy, suggests little evidence that underlying, or core, inflation is decelerating
(…) the labor market remains “very tight,” job vacancies are at elevated levels, and wage growth has climbed and continues to broaden. (…) “All signs point to an economy that is clearly in excess demand,” he said. “The clear implication is that further rate increases are warranted.” (…)
The Canadian dollar’s depreciation, “if it’s sustained, will be a countervailing force” in the central bank’s efforts to cool inflation, Mr. Macklem said. (…)
TRANSITORY REDEFINED! “From [today], all price increases are forbidden. Forbidden! From today. Not from tomorrow, from today. So that prices aren’t driven up in the next 24 hours. “ Belarusian President Alexander Lukashenko (ADG)
SENTIMENT WATCH
Retail traders used to be happy dip buyers, but they were sellers for the second week in a row. Is this a contrarian factor? This past week they net sold -$1.1B. Notably they sold the rally on both Monday (SPX +2.59%) and Tuesday (+3.06%). Retail traders net sold -$2.4B of single stocks. Large cap tech names including AAPL (-$470MM), META (-$134MM), and GOOG (-$128MM), in particular, suffered from heavy selling. The last two weeks represented the worst selling in single stocks since March 2020. This bearish sentiment was also evident in the options market. Retail traders sold -$1.0B of delta. (The Market Ear)
JPM retail radar
There was the Fed Put, no more. There was the retail “buy-the-dip” cushion, no more.
BofA: Financial conditions have tightened and are near peaks observed over the past three decades
@MikeZaccardi
THE WEALTH EFFECT
The fragile stock market is also important to watch as the Fed pushes rates higher. Stock prices are sliding again, down almost 25% from the all-time high at the start of the year. This translates into a loss in stock wealth of $12.5 trillion, of which an estimated $7.5 trillion is owned by U.S. households. The impact this loss of wealth has on consumer spending, known as the wealth effect, is estimated to be approximately one penny. That is, consumers will reduce their spending by one cent due to a one dollar decline in their stock wealth in the year after the decline in wealth.
Thus the $7.5 trillion in lost stock wealth will reduce consumer spending by $75 billion in the coming year, equal to 0.3% of GDP. This is a meaningful but modest impact, and likely close to what the Fed would like to see in its effort to slow growth and inflation.
However, the stock wealth effect is highly variable and difficult to gauge. Indeed, on average through the business cycle it is estimated at closer to 2.5 cents. The estimate is much smaller currently because high net worth households that own the bulk of the stocks have substantial excess savings built up during the pandemic. Those in the top quintile of the income distribution have close to $50,000 in excess savings. With cushions so large, the decline in stock wealth won’t compel these households to save more. Moreover, the decline in stock prices simply puts them back where they were at the start of 2021, before that year’s surge in stock prices.
Shareholders likely never really thought they were as wealthy as the value of their stockholdings suggested at the start of 2022, so they aren’t as affected by the decline. If the stock wealth effect is still 2.5 cents, then the slide in stock prices to date would reduce consumer spending by 0.75% of GDP. For an economy otherwise just skirting recession, this would be enough to push it over the edge. Of course, the wealth effect will be larger and the recession deeper if the stock market continues to slide. In a typical recession, stock prices fall by closer to 30% peak to trough. (Moody’s)
EARNINGS WATCH
Samsung Expects Earnings to Slump as Consumer Spending Slips Memory-chip and smartphone businesses feel effects of high inflation and other economic pressures
On Friday, the tech company projected third-quarter operating profit of 10.8 trillion South Korean won, or roughly the equivalent of $7.7 billion, a 32% drop from the prior year’s 15.8 trillion won.
Revenue for the quarter ended Sept. 30 is expected to increase year over year by 2.7% to 76 trillion won, the company said.
Analysts polled by FactSet were on average expecting roughly 11.9 trillion won in operating profit and 78.2 trillion won in revenue.
In June, Samsung’s operating profit for the July-September period was expected to be around 15.9 trillion won, according to FactSet. (…)
Other semiconductor companies are facing tough conditions. Advanced Micro Devices Inc. on Thursday lowered its revenue forecast for the third quarter, after issuing a subdued outlook earlier. AMD said the PC market has weakened significantly in recent months. (…)
The warning follows muted outlooks from a range of chip makers
The chip maker, which sells central processing units for laptops and desktops alongside a large videogame graphics chip business, on Thursday said it expected about $5.6 billion of sales in the just-ended quarter, about $1.1 billion less than it previously said it was expecting when it issued a subdued outlook in August.
Sales in the third quarter are expected to be down 15% from the prior quarter, though up 29% from the year-ago period, when the company formally posts results Nov. 1, AMD said.
“The PC market weakened significantly in the quarter,” AMD Chief Executive Lisa Su said. (…)
AMD said it expects to book a charge of about $160 million mostly to reflect items such as inventory and pricing issues.
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Taiwan Exports ‘Will Only Get Worse’ After First Drop Since 2020 Overseas shipments dropped 5.3% in September compared to a year earlier, according to a statement from the Finance Ministry in Taipei on Friday.
(…) The drop in exports was more severe than the warning officials gave last month of a decline by as much as 3%. (…) Imports fell 2.4% in September, compared to a 3.5% increase in August. Economists had projected a 9.8% increase. That was also the first drop since 2020. (…)
Officials said Friday that they expect October exports to fall by as much as 6% year-on-year as trade continues to be challenged. In a statement, the finance ministry said export performance in the end of the year would be “highly pressured by slowing manufacturing activities around the world” due to rising interest rates and uncertainties caused by Russia’s invasion of Ukraine and the “US-China tech war.”
“The tech sector’s impressive strong growth trend since the pandemic seems to have peaked, with Taiwan’s tech export orders falling about 13% from the recent peak” in the first quarter of this year, wrote Grace Ng, an economist at JPMorgan Chase & Co., in a research note earlier this week. (…)
South Korea, the hub of the world’s top memory chipmaker Samsung Electronics, saw its semiconductor output drop in August from a year earlier for the first time in more than four years. The country’s chip inventories also soared 67% as buyers hold off on more purchases, clouding the outlook of an industry that was still booming in the first half of 2022.
Binance Estimates $100 Million Was Stolen in Blockchain Hack Crypto exchange Binance said late Thursday that $100 million was likely stolen as a result of a hack on its Binance Smart Chain blockchain network.
A blockchain hack!!! 