Posted on by The Daily Shot Editor: Lev Borodovsky

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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