Posted on by The Daily Shot Editor: Lev Borodovsky

Despite elevated unemployment, indicators point to US labor shortages

The Daily Shot: 10-Mar-21
• The United States
• Canada
• The Eurozone
• Europe
• China
• Emerging Markets
• Commodities
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. The NFIB small business index ticked higher but was below forecasts.
 

 
• Recent political developments remain a drag on sentiment.
 
– Outlook:
 

 
– Good time to expand:
 

 
– Sales expectations:
 

 
It’s important to note that 60% of the NFIB members are tiny businesses. As a result, this report sometimes resembles a GOP-leaning household survey.
 
Source: NFIB  
 
• Businesses are increasingly facing labor shortages. Unemployment benefits have been much higher than normal. Combined with the one-off government payments, it’s been less attractive for many workers to get back into the labor force. Childcare challenges exacerbate the situation. The index of “job openings hard to fill” hit a record high.
 

 
The NFIB job openings index spiked, suggesting that we will see more vacancies at the national level.
 
Source: Mizuho Securities USA  
 
Job postings on Indeed keep climbing.
 
Source: @JedKolko, @indeed  
 
• More firms are boosting prices (2 charts).
 

 

 
It’s a clear indication of rising consumer inflation ahead.
 
Source: @GregDaco, @OxfordEconomics  

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2. High-frequency indicators point to stronger gains in some of the CPI components in the coming months.
 
• Rent and owners’ equivalent rent:
 
Source: Pantheon Macroeconomics  
 
• Airline fares:
 
Source: Pantheon Macroeconomics  
 
• Used cars:
 
Source: Pantheon Macroeconomics  
 
By the way, rising vehicle prices are hurting affordability.
 
Source: The Daily Feather  
 
• The Texas electricity price spike will boost the headline CPI.
 
Source: Mizuho Securities USA  

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3. Next, we have some updates on the housing market.
 
• Search activity for home financing has dipped below interest in rentals.
 
Source: Arbor Research & Trading  
 
• For now, there is little evidence that higher mortgage rates are becoming a drag on the housing market.
 
– Mortgage applications for house purchase:
 

 
– Homebuilder survey from Evercore ISI:
 
Source: Evercore ISI  

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4. Here is a forecast for the US labor market recovery from Morgan Stanley.
 
Source: Morgan Stanley Research  
 
5. Herd immunity by summer?
 
Source: Moody’s Analytics  

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Canada

1. Consumer confidence hit a multi-year high.
 

 
2. Will demand from the US fiscal stimulus leak into Canada through the trade accounts? Export gains in January are already tracking well for the quarter.
 
Source: Scotiabank Economics  
 
3. Liftoff by late next year?
 
Source: Scotiabank Economics  
 
4. Currently, the overnight repo rate average is below the Bank of Canada’s target.
 
Source: Scotiabank Economics  
 
5. Canadian cannabis stocks trade at a substantial premium to US counterparts.
 
Source: @WSJ   Read full article  

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The Eurozone

1. Investor confidence continues to improve.
 

 
2. Italy’s industrial production held up better than expected at the start of the year.
 

 
3. Germany’s trade surplus is trending lower.
 

 
4. According to Pantheon Macroeconomics, business investment is rebounding.
 
Source: Pantheon Macroeconomics  

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Europe

1. Let’s begin with Sweden.
 
• Industrial activity remains robust.
 

 
• Service-sector recovery will take time.
 

 
• And so will consumer spending.
 

 
• Here is the overall private-sector output.
 

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2. Norway’s industrial production is rebounding.
 

 
3. EU emergency loans were used to mainly finance inventories and working capital.
 
Source: Barclays Research  

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China

1. The CPI ticked higher last month, …
 

 
… driven by core inflation. However, there is a great deal of seasonal noise in the data (2nd chart).
 

 
Pork prices are down 15% from a year ago as the pig herd is rebuilt.
 

 
By the way, food is 20% of the CPI.
 
Source: @financialtimes   Read full article  

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2. Producer prices are rebounding, which is now a global trend.
 

 
3. Beijing is focused on automation.
 
Source: BCA Research  
 
4. China accounts for 30% of the world’s carbon emissions.
 
Source: @davidfickling, @bopinion   Read full article  

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Emerging Markets

1. Mexico’s core inflation remains relatively benign.
 

 
2. Except for Chile, the pace of vaccinations in LatAm nations has been slow.
 
Source: @PantheonMacro, @andres__abadia   Read full article  
 
3. South Africa’s Q4 GDP gain was firmer than expected.
 

 
4. Saudi stocks hit the highest level since 2015 on the back of rising oil prices.
 
h/t @filipepacheco   Read full article  
 
5. Asian currencies have been softer in recent days. Here is the Malaysian ringgit vs. USD.
 

 
6. Local-currency government bond yields have been climbing this year.
 
h/t @lisaabramowicz1   Further reading  

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Commodities

1. While the rise in China’s iron ore inventories is normal for this time of the year, the commodity stockpiles from Brazil hit a record high.
 
Source: Westpac Strategy, @Robert__Rennie  
 
2. The surge in rhodium prices has been spectacular. Rhodium is a byproduct of platinum and nickel mining, and platinum inventories are quite high currently. Since miners are not incentivized to produce platinum, there has been a shortage of rhodium. At the same time, stricter emission standards in Europe increased rhodium demand for catalytic converters.
 
Source: The Washington Post   Read full article  
 
Source: Johnson Matthey, h/t Florian  

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3. Cotton prices dropped in response to a weaker Brazilian real.
 

 
4. US corn exports have been elevated.
 
Source: @ReutersCommods, @kannbwx   Read full article  

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Equities

1. Tech stocks popped on Tuesday as bonds caught a bid.
 

 

 
The correlation between tech and Treasuries keeps climbing, making the market increasingly vulnerable to higher Treasury yields.
 

——————–

 
2. Retail investors are chasing microcaps again, boosted by the Reddit pump & dump machine.
 

 
Retail trading is now nearly as large as mutual funds and hedge funds combined volumes.
 
Source: @jessefelder, @FT   Read full article  

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3. Less than 10% of US stocks are overbought based on the RSI indicator.
 
Source: Longview Economics  
 
4. While margin debt spiked in recent months, …
 
Source: Gavekal Research  
 
… the increase is not extreme relative to the total market cap.
 
Source: Yardeni Research  

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5. Momentum stocks are still very expensive vs. the broader market.
 
Source: MarketDesk Research  
 
By the way, Tesla is the highest weighted stock in the iShares Momentum Factor ETF (MTUM), which has been a drag on performance over the past month.
 
Source: Koyfin  

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6. The S&P 500’s cyclically adjusted price-to-earnings ratio is declining from its highest level since the dot-com bubble.
 
Source: TS Lombard  
 
7. Companies with weak balance sheets have outperformed sharply since the vaccine announcement.
 

 
8. Global equity inflows have been stronger than flows into US funds.
 
Source: @ISABELNET_SA, @GoldmanSachs  
 
9. Dealers are extremely short gamma.
 
Source: Variant Perception  

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Credit

1. The gap between VIX and investment-grade credit default swap spreads remains wide.
 
Source: III Capital Management  
 
2. This chart shows the return impact of a 50-basis point move in the 10-year Treasury yield.
 
Source: SPDR Americas Research, @mattbartolini   Read full article  
 
3. Foreign banks continue to dominate USD commercial paper issuance.
 

 
4. BofA controls 19% of the new-issue muni sales.
 
Source: Bloomberg   Read full article  

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Rates

1. The market is pricing in a full 25 bps Fed rate increase by the middle of Q4 of next year. And the market-based probability of liftoff within the next 18 months is now 58%.
 

 
Source: Variant Perception  

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2. Swap spreads have eased as the demand for mortgage portfolio hedging wanes.
 

 
3. Here are the largest foreign holders of Treasury debt.
 
Source: @bespokeinvest   Read full article  

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Global Developments

1. Goldman’s risk appetite index is near record highs.
 

 
2. The dollar has moved higher versus other major currencies over the past two weeks.
 
Source: Nordea Markets  
 
Higher US relative growth expectations could support further upside in the dollar. 
 
Source: Nordea Markets  
 
Moreover, speculative accounts are extremely short the US currency.
 
Source: @ISABELNET_SA, @jpmorgan  

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3. Global producer price inflation is about to accelerate.
 
Source: @PantheonMacro, @IanShepherdson  

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Back to Index

 

Food for Thought

1. The global cloud market:
 
Source: @chartrdaily  
 
2. Trust in tech companies:
 
Source: The Center for Growth and Opportunity  
 
3. Smart speaker popularity:
 
Source: Statista  
 
4. Young workers’ labor market share:
 
Source: Reuters   Read full article  
 
5. The pandemic has been particularly hard on working mothers.
 
Source: The Economist   Read full article  
 
6. Voting restrictions legislation:
 
Source: CNN   Read full article  
 
7. US vaccination progress, by age:
 
Source: @axios   Read full article  
 
8. Retail investor concerns:
 
Source: Investopedia  
 
9. A day in the life of a US teen:
 
Source: Pew Research Center   Read full article  

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