The labor market imbalance persists

The Daily Shot: 31-Aug-22
The United States
The United Kingdom
The Eurozone
Europe
Asia – Pacific
China
Emerging Markets
Commodities
Energy
Equities
Credit
Global Developments
Food for Thought



 

The United States

1. Job openings unexpectedly jumped in July, signaling a persistently tight labor market.
 

 
There are still two job openings per every unemployed worker in the US. The Fed would like to see this ratio come down meaningfully. Until then, the central bank will continue to pressure the demand side of the economy.
 

 
The imbalance is also visible in the Beveridge curve.
 
Source: BLS  
 
Logistics sectors were a big contributor to the increase in job vacancies.
 

 
The government sector was another contributor, driven by a persistent shortage of public school teachers.
 

 
Real estate services sector also shows rising demand for workers.
 

 
Openings at hotels and restaurants have been trending lower.
 

 
Here is the attribution (monthly changes).
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
One indicator that continues to move in the Fed’s “preferred” direction is voluntary resignations (quit rate).
 

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2. The market now expects the Fed to increase rates by another 140 bps before the end of the year.
 

 
The terminal fed funds rate (peak level) is pushing toward 4%.
 

 
The 2-year Treasury yield is approaching 3.5%.
 

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3. Let’s continue with the labor market.
 
Job postings on Indeed have been drifting lower but remain over 50% above pre-COVID levels.
 
Source: @AE_Konkel   Read full article  
 
The Conference Board Consumer Confidence labor differential (“jobs plentiful” vs. “jobs hard to get”) remains elevated.
 

 
Labor demand is far outstripping supply in most sectors, which is the opposite of what occurred during the Great Recession.
 
Source: Deutsche Bank Research  
 
The number of searches for $15/hour work has been dwindling.
 
Source: @axios   Read full article  
 
Quiet quitting? It’s all fun and games until the labor market softens.
 
Source: @chartrdaily  
 
Why do some Americans regret quitting their job?
 
Source: Statista  
 
The population of working-age foreign-born Americans is approximately 1.7 million below the pre-covid trend, which is a large source of missing labor supply.
 
Source: Deutsche Bank Research  
 
These charts show wage growth by skill, education, and wage category.
 
Source: Alpine Macro  

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4. The Conference Board’s consumer sentiment index surprised to the upside.
 

 
America’s mood has improved a bit due to lower gasoline prices and the ability to take a vacation.
 

 
The Conference Board’s index remains well above the University of Michigan’s measure.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Typically, a recession ensues shortly after the spread between the Conference Board’s expectations and current conditions indicators bottoms.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
CEO sentiment is also in recessionary territory.
 
Source: @LizAnnSonders, @Conferenceboard  


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The United Kingdom

1. Household credit growth has been holding up.
 
Consumer credit:
 

 
Mortgage applications (still inside the pre-COVID range):
 

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2. Retail inflation continues to surge.
 
Source: Reuters   Read full article  
 
3. Business sentiment is rolling over.
 


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The Eurozone

1. Sentiment indicators are trending lower. The last panel is a combined indicator that includes consumer confidence.
 

 
2. Germany’s inflation hit a multi-decade high in August.
 

 
Spain’s CPI came off the high. Both CPI indicators were in line with expectations.
 

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3. Inflation expectations are well above the ECB’s projections.
 
Source: Nordea Markets  
 
Source: Deutsche Bank Research  

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4. There is plenty of room for the ECB to get to a neutral policy stance.
 
Source: TS Lombard  
 
5. The CPI-based euro effective exchange rate is close to record lows, but the PPI-based index is close to record highs.
 
Source: Deutsche Bank Research  
 
6. Foreign ownership of euro-area sovereign debt has been declining.
 
Source: IIF  


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Europe

1. Sweden’s manufacturing confidence is rolling over. Consumer confidence remains at extreme lows.
 

 
Wage growth is accelerating, according to Nordea.
 
Source: Nordea Markets  

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2. The Swiss leading indicator is now well below pre-COVID levels.
 

 
3. The Czech economy has finally recovered from the COVID slump.
 

 
4. This graph shows the dependence on Russian gas across Europe.
 
Source: Global X ETFs   Read full article  


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Asia – Pacific

1. Japan’s consumer confidence unexpectedly improved this month.
 

 
2. South Korea’s manufacturing output declined in July but remains well above the pre-COVID trend.
 

 
3. Australia’s July retail sales surprised to the upside
 


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China

1. China’s official manufacturing PMI edged higher this month but remained in contraction territory.
 

 
Non-manufacturing activity continues to expand.
 

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2. China’s credit impulse has troughed, while some property indicators are stabilizing.
 
Source: PGM Global  
 
However, import volumes remain very low.
 
Source: PGM Global  

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3. Is the renminbi oversold?
 
Source: Alpine Macro  


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Emerging Markets

1. Chile’s current account deficit hit extreme levels.
 
Source: ING  
 
Polls suggest that Chileans will reject the proposed constitutional rewrite.
 
Source: Wells Fargo Securities  

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2. Brazil’s trade balance has improved significantly.
 
Source: @RobinBrooksIIF  
 
Brazil’s presidential election polls are tightening.
 
Source: Reuters   Read full article  
 
Source: Americas Society/Council of the Americas  
 
Here is the betting market.
 
Source: @PredictIt  

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3. Hungary’s central bank added another 100 bps to its hiking cycle.
 

 
4. Russia has massively increased its use of the yuan as it shifts international transactions away from the US dollar.
 
h/t Kira Zavyalova  


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Commodities

1. Industrial commodities and mining firms took a hit on Tuesday.
 

 
2. The rise in China’s infrastructure investment could boost demand for steel and iron ore.
 
Source: PGM Global  


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Energy

1. WTI futures failed to break resistance at the 50-day moving average.
 

 
Source: CNBC   Read full article  

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2. US gasoline futures are at levels last seen before the Russian war.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. European natural gas futures declined sharply on improved inventories, a regulatory push to lower prices, and profit taking.
 

 
Source: Reuters   Read full article  


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Equities

1. The S&P 500 is down 5% over the past three days.
 

 
Higher real yields continue to pressure stocks.
 

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2. The put/call ratio is elevated but does not show extreme fear.
 

 
3. Analysts got busy downgrading corporate earnings forecasts in August.
 
Source: Yardeni Research  
 
But they are done for now.
 
Source: Yardeni Research  

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4. Hedge funds and mutual funds agree on sector positioning except when it comes to financials.
 
Source: Goldman Sachs; @MikeZaccardi  
 
5. This chart shows short interest by sector at the end of July and in mid-August.
 
Source: S&P Global Market Intelligence  
 
6. Assets of funds that use options strategies hit a record high.
 
Source: @WSJ   Read full article  


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Credit

1. The share of developed market corporate bonds in distress (rated CCC or below) is at historical lows.
 
Source: Capital Economics  
 
Corporate balance sheets in developed markets remain healthy.
 
Source: Capital Economics  

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2. This chart shows securitized product spreads vs. weighted average life.
 
Source: Deutsche Bank Research  


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Global Developments

1. Advanced economies’ consumer confidence and spending have diverged during the pandemic era.
 
Source: JP Morgan Research; @carlquintanilla  
 
2. USD remains the dominant currency in global reserves, but its share has been trending lower in recent years.
 
Source: Barclays Research  
 
3. Next, we have a breakdown of global investment banking fees. Here are the explanations for each bucket: M&A, DCM, ECM, Syndicated Lending.
 
Source: SIFMA  
 
4. The depth of recessions has not been a reliable guide to the scale of job losses.
 
Source: Capital Economics  
 
5. This chart shows the global M&A activity by type of buyer and by sector.
 
Source: The Economist   Read full article  


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Food for Thought

1. Online electronics and media sales in 2021:
 
Source: EcommerceDB   Read full article  
 
2. Top fertiliser exporters:
 
Source: @financialtimes   Read full article  
 
3. Changes in debit/credit card spending at discount stores vs. department stores:
 
Source: @WSJ   Read full article  
 
4. Dining out:
 
Source: @chartrdaily  
 
5. Largest college endowments (2 charts):
 
Source: Bloomberg   Read full article  
 
Source: @WSJ   Read full article  

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6. Universities’ vaccine mandates reduced regional COVID cases and deaths.
 
Source: The Economist   Read full article  
 
7. Vehicle deaths in the first half of each year:
 
Source: @DLeonhardt  
 
8. Box office sequels, spinoffs, or remakes:
 
Source: @ercjhnkrbs  
 

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