Commentary |
Stock indexes are mostly flat with investors seeming to prefer the sidelines ahead of the April jobs report on Friday. Wall Street this week has been more focused on economic data amid some rising fears that US consumers are in trouble and the economy could head south.
While data has been softer, it’s tough to say that any of it has been outright “bad.” Bears believe we are just seeing the start of an economic plunge that some think could result in recession, or worse “stagflation” if inflation stays hot.
Bulls still think the slowdown is a resumption of a slow and steady pullback that will land us in a “goldilocks” economy that’s not too hot and not too cool. Bulls are pointing to the Job Openings and Labor Turnover Survey (JOLTS) released yesterday that showed a bigger pullback in job openings that Wall Street was anticipating. In fact, April job openings of 8.06 million were the lowest in three years.
If you recall, the Federal Reserve at one point had theorized that a significant decline in US job openings could be an effective way to slow wage inflation - and overall inflation - while simultaneously keeping the unemployment rate relatively steady. This was reflected in the April jobs report, which marked a big slowdown in hiring to +175,000 versus over +300,000 in March.
Bulls further note that weekly jobless claims have continued to hold at around 200,000 - 220,000, a level they’ve been at all year. Meaning the data points to a steadily cooling job market that so far shows no signs of brewing trouble for businesses or the broader economy.
The May jobs report, due out on Friday, is expected to show job gains of around +195,000.
Today, investors will be digesting ADP’s private payroll report which is forecast to show a gain of +173,000 for May.
Today also brings the ISM Services Index, which has continued to clock hefty gains in the “prices paid” component all year long.
The services sector has been a key contributor to inflation, though it may be starting to lose steam based on a slowdown in job listing across the restaurant sector. On the earnings front, key releases include Campbell Soup, Dollar Tree, Five Below, lululemon, and Victoria’s Secret.
Most Worrisome Trend for Global Economy Is ‘Willy-Nilly’ Tariffs Policy: The world economy is headed for a soft landing, inflation is going down, and rate cuts are coming, according to Kristalina Georgieva, International Monetary Fund managing director, but she says the rise of sanctions and trade restrictions, including tariffs, from the world’s largest economies is the most worrisome risk to global growth. Trade is slowing down even more than it would be slowing down otherwise, Georgieva said during an interview with CNBC on Tuesday. The IMF has tracked a tripling of trade restrictions over the last year, from 1,000 to 3,000, and the IMF managing director said two-thirds of those tariffs lack justification. By everywhere, Georgieva meant mostly the three largest economic powers in the world, the U.S., China and the European Union. Half of the industrial policy measures come from these places and when we analyze the tariffs, we can find justification for one-third, she said. Source CNBC
Job Openings Fall to Lowest Level Since February 2021: Job openings fell in April as the labor market shows further signs of cooling off from the hiring boom that followed the US economy reopening after the pandemic. New data from the Bureau of Labor Statistics released Tuesday showed there were 8.06 million jobs open at the end of April, a decrease from the 8.35 million job openings in March. March's figure was revised lower from the 8.48 million open jobs initially reported. Economists surveyed by Bloomberg had expected the report to show 8.35 million openings in April. The Job Openings and Labor Turnover Survey survey also showed 5.6 million hires were made during the month, little changed from March. The hiring rate held at 3.6%, unchanged from March. Also in Tuesday's report, the quits rate, a sign of confidence among workers, held steady at 2.2%. Source YahooFianance
Interesting Data... Strategic Reserve and How Much Oil We Use Daily: The nation’s Strategic Petroleum Reserve (SPR) was launched in 1975 with the Energy Policy and Conservation Act. It currently holds around 360 million barrels of oil. That is down from over +600 million barrels of oil in 2021, and down significantly from the record 727 million barrels held back in December 2009. Does this pose an energy risk to the nation? The U.S. consumes around 20 million barrels of oil per day, which translates to around 7.3 billion barrels per year or around 22 barrels per person per year. If no additional oil were drilled, the current strategic reserve would be depleted in just 18 days. However, even if the reserve were filled to its historical peak capacity, it would require just 36 days to drain it dry. Moral of the story, the SPR will not permanently solve any long-term oil supply or production disruption problems. But the SPR should be filled back close to capacity sooner than later, as it does have the ability to buy some time in order to make the necessary adjustments so that effects at the gas pump and in people’s wallets can be dampened. Source The Hill
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US Official Warns Chinese Spies are Targeting Disgruntled American Workers: The U.S. needs to prepare for more cyberattacks from an increasing number of threat actors across the globe, with China being the biggest one, said Michael C. Casey, director of the National Counterintelligence and Security Center. China is “by far the most prolific actor out there and the one coming after us across the board and in the hardest way possible,” he said at the CNBC CEO Council Summit in Washington, D.C., on Tuesday. Casey said there has been a 100% increase in cyber incidents and ransomware demands across the board. Over the years, he said, China realized that America’s advantage in the world was technology and that made it a huge target. And it won’t stop, “because it works, because they keep succeeding,” Casey said. Among the threats that CEOs need to have on their radar when it comes to any IP threat is a rise in the use of what he called “human assets.” These are people within organizations that can be recruited to steal IP, data, or whatever the bad actor is targeting. Source CNBC
Majority of Middle-Class Americans Say They Struggle Financially: Almost two-thirds of Americans considered middle class said they are facing economic hardship and don’t anticipate a change for the rest of their lives, according to a poll commissioned by the National True Cost of Living Coalition. By many traditional measures, the US economy is strong, with robust labor, housing, and stock markets, as well as solid gross domestic product growth. But the data don’t capture the financial insecurity of millions of households. In the large poll of 2,500 adults, 65% of people who earn more than 200% of the federal poverty level — that’s at least $60,000 for a family of four, often considered middle class — said they are struggling financially. A sizable share of higher-income Americans also feel financially insecure. The survey shows that a quarter of people making over five times the federal poverty level — an annual income of more than $150,000 for a family of four — worry about paying their bills. Overall, regardless of the income level, almost 6 in 10 respondents feel that they are currently financially struggling. The February poll found that more than half said it’s at least somewhat difficult to manage current levels of debt. Source Bloomberg
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The Billionaire Battle For AI's Future: “Winning the race for AI means economic power, which then lets you influence social policy or ideology,” according to Vinod Khosla, the former Sun Microsystems CEO. Where the former Sun Microsystems CEO and Khosla Ventures founder and his fellow investors and entrepreneurs generally agree: Artificial intelligence has heralded a technological revolution on par with that of the mainframe or PC. But it could come with a terrible cost, with unforeseen consequences potentially far worse than those that accompanied prior watershed moments in technology—such as a dystopian AI arms race with China. If social media brought us culture wars and the weaponization of “truth,” what collateral damage might accompany AI? To Khosla, Hoffman and a powerful set of tech leaders, there’s a clear way to mitigate regrettable, unintended consequences: Control AI’s development and regulate how it’s used. But an increasingly vocal faction is doing all they can to thwart Khosla, Hoffman and everything they stand for, led by Marc Andreessen, 52, the cofounder of Netscape and venture capital firm a16z, along with Meta chief AI scientist Yann LeCun and Tesla CEO and X owner Elon Musk (sometimes). Source Forbes
Injectable Weight Loss Drugs - Who Uses Them and Do They Work? Six percent of U.S. adults, representing an estimated 15.5 million people, report having used injectable diabetes medicine to reduce weight, including 3% who are currently using such medicine specifically for this purpose. Current or past usage runs slightly higher among women, those with health insurance and those aged 40 to 64. Close to two-thirds of Americans who have taken weight loss injections (64%) say the drugs have been either “extremely effective” or “effective” at helping them lose weight. Only 11% report weight loss injections to be “not at all effective. ”Perceived effectiveness is relatively consistent among younger and middle-aged adults, with 70% of those aged 18 to 49 and 67% of those aged 50 to 64 reporting weight loss injections as effective or extremely effective. Among adults aged 65 and older, however, reported effectiveness is much lower, at 48%. Source Gallup
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