Posted on by The Daily Shot Editor: Lev Borodovsky

4.5 million Americans quit their jobs in November

The Daily Shot: 05-Jan-22
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Asia – Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. Let’s begin with the labor market.
 
• Job openings ticked down, but demand for workers remains extraordinarily high.
 

 
– The ratio of unemployed workers to job openings continues to hit new lows.
 

 
Here is the Beveridge curve.
 
Source: @GregDaco  
 
• Voluntary separations reached a new record, with 4.5 million Americans quitting their jobs in November.
 

 
A million workers resigned in Leisure and Hospitality alone.
 

 
Here is the breakdown of quit rates by sector.
 
Source: @axios   Read full article  
 
– Based on the level of resignations, the unemployment rate should be much lower.
 
Source: Wells Fargo Securities  
 
– This chart shows quits and layoffs rates over the past two decades.
 

 
– While hiring has also been strong, resignations are outpacing recruitment.
 

 
• Here is why many Americans are staying out of the labor force.
 
Source: @WSJ   Read full article  
 
• It will take a while before US employment returns to pre-COVID levels.
 
Source: @WSJ   Read full article  
 
• Falling labor force growth in the US has been a long-term drag on GDP growth. With early retirements and low immigration, this trend is unlikely to reverse soon.
 
Source: Alpine Macro  
 
• US wage growth dispersion (see definition below) hit a new high.
 
Source: Cornerstone Macro  
 
• Placement companies’ revenues have fully recovered.
 
Source: Evercore ISI Research  
 
• The spike in unemployment at the start of the pandemic did not generate the consumer credit draw we saw in 2008 (partially due to generous government support).
 
Source: The FRED Blog   Read full article  
 
• US jobs data revisions tend to be higher during periods of job growth volatility.
 
Source: @financialtimes   Read full article  
 
Source: @financialtimes   Read full article  

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2. The ISM Manufacturing PMI declined in December.
 

 
But this drop turned out to be good news. Much of the decline was due to faster supplier deliveries rather than weaker production.
 
Source: Mizuho Securities USA  
 

 
Price gains are slowing as well, …
 

 
… which points to some moderation in inflation ahead.
 
Source: @macro_daily  
 
All supply-chain indicators have peaked.
 
Source: The Daily Feather  
 
• Factory hiring improved in December.
 

 
• The spread between indices of new orders and inventory points to moderation in manufacturing growth this year.
 
Source: @macro_daily  

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3. US automobile sales remained depressed in December …
 

 
Source: Reuters   Read full article  
 
… as the semiconductor backlog continues to worsen.
 
Source: Bloomberg   Read full article  
 
Source: Bloomberg   Read full article  

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4. Mortgage rates climbed to the highest level since early 2020.
 

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The United Kingdom

1. Manufacturing growth was stable in December.
 
Source: IHS Markit  
 
The backlog is starting to ease.
 

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2. Consumer credit supplied is back at pre-COVID levels.
 

 
Mortgage approvals are stabilizing inside the pre-pandemic range.
 

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3. The surge in new cases has not translated into much higher hospitalizations and deaths (2 charts).
 
Source: Scotiabank Economics  
 
Source: @financialtimes   Read full article  

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4. A record 5.9 million people in the UK are waiting for some sort of medical treatment.
 
Source: EFG International  

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The Eurozone

1. French inflation appears to have peaked for now.
 

 
2. Next, we have some updates on Germany.
 
• Retail sales increased in November, running close to the pre-COVID trend.
 

 
• Unemployment is nearing pre-pandemic levels.
 

 
• Germany lags behind the US in terms of venture growth and value creation (2 charts).
 
Source: Lakestar   Read full article  
 
Source: Lakestar   Read full article  
 
• Here is a projection for Germany’s “prime-age” population.
 
Source: @WSJ   Read full article  

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3. The euro-area economy is highly correlated to global growth.
 
Source: BCA Research  

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Europe

1. Poland’s central bank hiked rates again as inflation surges.
 

 
2. Deutsche Bank expects the fiscal impulse in the EU to remain positive this year.
 
Source: Deutsche Bank Research  
 
3. This chart shows the share of companies with online sales of at least 1% of the total.
 
Source: Eurostat   Read full article  

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Asia – Pacific

1. Japan’s consumer confidence held steady last month.
 

 
Vehicle sales remain soft.
 

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2. Australia’s job ads came off the recent highs.
 

 
Dining spending dropped more than usual for this time of the year.
 
Source: ANZ Research  

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3. New Zealand’s home price appreciation has peaked.
 

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China

1. USD-denominated high-yield bond prices are dropping again.
 

 
2. Tech shares continue to tumble in Hong Kong.
 

 
• Equity capitalization growth in 2021 has been in the mainland market.
 
Source: @WSJ   Read full article  
 
• Chinese stocks had a tough year, hitting the bottom end of the range relative to emerging markets.
 
Source: Alpine Macro  

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3. Interest rates on loans to small and medium-sized enterprises (SMEs) are rising relative to large firms.
 
Source: China Beige Book  
 
Corporate borrowing declined over the past quarter, except in the transport sector.
 
Source: China Beige Book  

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4. China’s imports from the US are well under the Phase-I agreement levels.
 
Source: @WSJ   Read full article  
 
5. Here is a projection for China’s working-age population.
 
Source: Yardeni Research  

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Emerging Markets

1. Let’s begin with Mexico.
 
• Economic activity has been weakening (through October).
 

 
• The manufacturing sector just can’t break into growth mode.
 
Source: IHS Markit  
 
• Loan growth is rebounding.
 

 
• Remittances remain at record levels for this time of the year.
 

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2. Next, we have some updates on Brazil.
 
• Inflation has been moderating.
 

 
• The debt-to-GDP ratio has peaked for now but remains well above pre-COVID levels.
 

 
• Manufacturing growth has stalled.
 
Source: IHS Markit  

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3. LatAm economic surprises have been negative recently.
 
Source: Acorn Macro Consulting Ltd.  
 
4. India’s industrial output remains robust.
 

 
PMI measures continue to show growth.
 
• Manufacturing:
 
Source: IHS Markit  
 
• Services:
 

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5. ASEAN manufacturing growth remains robust.
 
Source: IHS Markit  

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Cryptocurrency

1. Historically, bitcoin tends to fall in January, although the cryptocurrency registered a positive return 50% of the time over the past nine years. The probability of a positive outcome is mixed.
 
Source: CoinDesk   Read full article  
 
2. With bitcoin’s little movement over the past week, short-term holders are bearing the most pain, which could lead to increased selling pressure.
 
Source: Glassnode   Read full article  
 
3. Bitcoin implied volatility is following realized vol lower.
 

 
4. Digital asset funds saw a roughly 36% increase in flows over the past year. Still, over the past week, some funds saw outflows as crypto prices declined (2 charts).
 
Source: CoinShares   Read full article  
 
Source: CoinShares   Read full article  

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5. Development activity in Polkadot has picked up significantly over the past year.
 
Source: @MessariCrypto  
 
6. Recently, a majority of NFT transaction volume consists of collectors with deep pockets (2 charts).
 
Source: @chainalysis  
 
Source: @acemaxx, @FT   Read full article  

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Commodities

1. Cotton prices have been surging due to limited supplies.
 
Source: Bloomberg   Read full article  
 
2. US meat and sugar prices rose to a higher degree relative to the world as a whole (2 charts).
 
Source: Quill Intelligence  
 
Source: Quill Intelligence  

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Energy

1. Comforted by estimates of tight oil supplies this year, OPEC is raising output.
 

 
2. Energy has mostly outperformed other commodities last year.
 
Source: EIA   Read full article  
 
3. Crude oil hedging activities are declining for US oil producers, which suggests companies expect to capitalize on higher prices. Will we see a further increase in production?
 
Source: Argus Media   Read full article  
 
4. Over the past week, an increase in anticipated supply was offset by an increase in demand expectations, which resulted in higher oil prices.
 
Source: NY Fed   Read full article  
 
5. The largest US wind project is ready to proceed.
 
Source: Bloomberg   Read full article  

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Equities

1. Following the past 10 years with the shallowest intra-year pullbacks, stocks tended to see deeper drawdowns and more modest annual gains in the next year.
 
Source: Truist Advisory Services  
 
2. This chart shows the 2021 winners and losers by market cap change.
 
Source: @financialtimes, h/t Walter   Read full article  
 
3. Next, we have the trajectories of full-year earnings estimates since 2016.
 
Source: Leuthold Group  
 
4. US outperformance vs. the rest of the world is not limited to growth stocks.
 
Source: PGM Global  
 
5. S&P 500 valuations tend to decline during periods of rising inflation.
 
Source: Norges Bank  
 
6. Inflation-sensitive stocks jumped on Tuesday.
 

 
7. High-dividend sharers rallied.
 

 
Speculative growth stocks took a hit …
 

 
… as real rates (TIPS yields) claimed.
 

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8. Here are some sector trends over the past few days.
 
• Banks:
 

 
• Consumer discretionary (lead by Tesla).
 

 
• Healthcare:
 

 
• Industrials:
 

 
• Transportation/logisitcs:
 

 
• Tech:
 

 
• Energy:
 

 
• Metals & Mining:
 

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Credit

1. US business lending is rebounding.
 

 
2. US corporate health appears strong relative to history, which suggests the credit cycle is in an expansion phase.
 
Source: Loomis Sayles   Read full article  
 
3. Loan issuance hit a record in 2021.
 
Source: @LPCLoans, @refinitiv   Read full article  
 
4. Loan prices are near multi-year highs.
 

 
5. ESG-linked credit exploded in 2021.
 
Source: @LPCLoans  

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Rates

1. Treasury market implied volatility remains elevated relative to equity vol.
 
h/t @ossingerj  
 
2. Demand for the 7-year and 20-year Treasury auctions have weakened last year.
 
Source: Deutsche Bank Research  
 
3. Treasury duration-weighted supply net of Fed purchases is projected to fall by about 10% this year.
 
Source: Deutsche Bank Research  
 
4. Here is Goldman’s forecast for the 10yr Treasury yield.
 
Source: @ISABELNET_SA, @GoldmanSachs  

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Global Developments

1. Let’s start with performance across asset classes in 2021.
 
Source: @TimmerFidelity, @Fidelity  
 
Here is how equity markets performed.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  

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2. ESG fund flows have slowed over the past year.
 
Source: @financialtimes   Read full article  
 
Interest in ESG appears to have peaked.
 
Source: Google Trends  

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3. Manufacturing growth held steady in December.
 
Source: IHS Markit  
 
• Italy saw the fastest growth in factory activity.
 
Source: IHS Markit  
 
• US and Eurozone manufacturing PMIs have recovered more than emerging markets.
 
Source: Loomis Sayles   Read full article  

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Food for Thought

1. US mortgage rates by year (average):
 
Source: @lenkiefer  
 
2. Third-quarter GDP growth by state:
 
Source: Oxford Economics  
 
3. The average age of US government structures:
 
Source: Gavekal Research  
 
4. US local governments’ sources of revenue:
 
Source: Moody’s Investors Service  
 
5. Champagne as a share of wine deliveries:
 
Source: @axios   Read full article  

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