The labor market is cooling

The Daily Shot: 30-Aug-23
The United States
The Eurozone
Asia-Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Equities
Credit
Rates
Food for Thought



 

The United States

1. The July job openings print came in below forecasts, suggesting that the job market continues to loosen.
 

 
The Beveridge Curve signals improvement in addressing imbalances in the labor market.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Voluntary resignations (quits) are back at pre-COVID levels.
 

 
The scatterplot comparing the quits rate to the unemployment rate also suggests normalization.
 

 
The quits rate signals a sharp slowdown in wage growth ahead.
 
Source: Capital Economics  
 
Below are some job openings trends by sector.
 
Manufacturing:
 

 
Logistics:
 

 
Professional and business services:
 

 
Hotels and restaurants:
 

 
Real estate services (surprisingly resilient):
 

 
Healthcare:
 

 
Public school teachers (a big drop):
 

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2. The Conference Board’s consumer sentiment index dropped this month amid higher gasoline prices and stock market volatility. The print was well below forecasts.
 

 
All components of the Conference Board’s index declined.
 
Source: Mizuho Securities USA  
 
The spread between expectations and current conditions continues to signal a recession ahead.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Households are becoming nervous about the job market, which was reflected in last month’s quits rate drop (above).
 

 
Here is the labor differential, the difference between “jobs plentiful” and “jobs hard to get” indicators, which is now below pre-COVID levels.
 

 
The labor differential’s sharp decline signals higher unemployment ahead.
 
Source: Oxford Economics  
 

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3. Treasury yields dropped sharply in response to signs of a cooling labor market.
 

 
Stocks surged on hopes that the Fed is done raising rates.
 

 
The dollar declined.
 

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4. The Citi Economic Surprise Index is rolling over, …
 

 
… suggesting that the Atlanta Fed’s GDPNow estimate of the current quarter’s growth will be adjusted lower.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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5. Home prices climbed again in June.
 

 
The FHFA’s house price index has not had a down quarter in years.
 

 
The gap between house prices and wages continues to widen.
 


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The Eurozone

1. Germany’s consumer confidence appears to be rolling over.
 

 
French sentiment held steady this month.
 

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2. Germany’s real wage growth is back above zero.
 
Source: @financialtimes   Read full article  
 
3. Spain’s real retail sales continue to surge.
 

 
Here is a comparison to the post-GFC recovery.
 
Source: Arcano Economics  

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4. This chart shows the contributions to the euro-area board money supply growth, which is now negative on a year-over-year basis.
 
Source: Arcano Economics  


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Asia-Pacific

1. The yen remains under pressure.
 

 
2. South Korea’s household debt is very high.
 
Source: Peterson Institute for International Economics   Read full article  
 
3. New Zealand’s building permits continue to sink.
 

 
4. Next, we have some updates on Australia.
 
The monthly inflation estimate surprised to the downside.
 

 
Building permits are near multi-year lows.
 

 
Consumer sentiment appears to have stabilized.
 
Source: @ANZ_Research  


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China

1. This chart displays the cumulative construction starts for 2023 in comparison to the trends observed from 2010 onwards.
 
Source: Chart and data provided by Macrobond  
 
2. Here is a look at the changes in consumer spending last month.
 
Source: @financialtimes   Read full article  
 
3. Government spending is down on a year-over-year basis.
 
Source: @hancocktom   Read full article  
 
4. Investor positioning is increasingly cautious.
 
Source: JP Morgan Research; @AyeshaTariq  
 
5. It has been a rough month for the Hong Kong dollar (2 charts). The USD/HKD volatility has risen amid weaker liquidity conditions.
 

 
Source: @markets   Read full article  

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6. Macau’s hotel occupancy has almost fully recovered.
 


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Emerging Markets

1. Let’s begin with Mexico.
 
Economic activity (strong):
 

 
Exports (still above last year’s levels):
 

 
The peso (too expensive?):
 
Source: Alpine Macro  

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2. Turkey’s economic confidence is deteriorating.
 

 
3. Vietnam’s trade surplus hit a record high.
 

 
4. EM equities have decoupled from China (2 charts).
 
Source: Alpine Macro  
 
Source: Alpine Macro  


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Cryptocurrency

1. Grayscale prevailed in its battle with the SEC to turn GBTC into an ETF.
 
Source: CNBC   Read full article  
 
The GBTC discount to NAV narrowed sharply.
 

 
Crypto assets rallied in response to the Grayscale news.
 

 
Bitcoin climbed above its 200-day moving average.
 

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2. Litecoin has been underperforming.
 

 
3. Crypto assets saw some outflows in recent days.
 
Source: CoinShares   Read full article  


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Commodities

1. Wheat prices remain under pressure.
 

 
Source: MarketWatch   Read full article  

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2. Cocoa prices continue to surge.
 

 
London cocoa futures hit a multi-decade high.
 

 
Source: Reuters   Read full article  

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3. The Global X lithium ETF bounced from recent lows.
 


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Equities

1. The S&P 500 cleared its 50-day moving average.
 

 
Given the gamma exposure, is 4500 the new resistance level?
 
Source: @Mayhem4Markets  

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2. Small caps and microcaps underperformed significantly this month.
 

 
Below is the S&P 500 equal-weight index.
 

 
This chart shows the IWM/QQQ ratio (Russell 2000/Nasdaq 100).
 

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3. Here is a look at tech mega-caps’ forward profit margins.
 
Source: Yardeni Research  
 
4. Globally, share buybacks haven’t been this popular in two decades.
 
Source: BofA Global Research  
 
5. Short-seller attacks have slowed in recent years.
 
Source: @markets   Read full article  
 
6. According to CornerCap Institutional, active ETFs are twice as likely to pay capital gains than passive ETFs.
 
Source: CornerCap Institutional  


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Credit

1. Investment-grade CDS spreads appear too tight relative to stock prices.
 
Source: @themarketear  
 
2. HY companies boosted their cash positions in Q2.
 
Source: S&P Global Market Intelligence  
 
3. European HY issuers face some refinancing headwinds over the next few years.
 
Source: @markets   Read full article  


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Rates

The 10-year Treasury yield is testing short-term uptrend support.
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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Food for Thought

1. Vacations are back.
 
Source: @axios   Read full article  
 
2. The biggest strikes in the US:
 
Source: Statista  
 
3. Roughly 40% of employees are either hybrid or fully remote, according to a survey by WFH Research.
 
Source: Morgan Stanley Research  
 
4. Is remote work boosting productivity?
 
Source: @I_Am_NickBloom  
 
5. Legal status of sports betting:
 
Source: @financialtimes   Read full article  
 
Online casinos vs. sports betting (revenues):
 
Source: @financialtimes   Read full article  

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6. Changing US attitudes over the past two decades:
 
Source: Gallup   Read full article  
 
7. Drugs seized at ports of entry along the US-Mexico border:
 
Source: Reuters   Read full article  
 
Opioids seized:
 
Source: Reuters   Read full article  

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8. Number of dentists per thousand residents:
 
Source: Codera Analytics  
 

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