Displaying items by tag: economy

Tuesday, 14 July 2020 12:49

Why This Labor Market is Better Than Expected

(New York)

There has been a quite a bit of consternation over the current labor market, and with good reason. Over a million people have applied for unemployment assistance ever week for over 4 months. All told, over 30 million people have lost their jobs. However, there is an encouraging trend: unlike in past recessions, there is still plenty of hiring going on. New job postings have not plunged the way they did in the past. In previous recessions, including after the Crisis, a lot of unemployment had to do with a combination of attrition and a lack of hiring-much more so than outright layoffs. However, that does not appear to be happening now as job postings are still holding strong at their 2015 levels.


FINSUM: This is an encouraging sign for the economy and for individual job seekers. There is still a chance that demand hollows out—especially if we have another full scale lockdown—but for now things look positive.

Published in Eq: Total Market
Monday, 13 July 2020 16:16

A Strong but Hidden Economic Indicator

(New York)

Investors are doing a lot of economic data analysis these days. As the economy picks up (for the most part) after the COVID lockdown, everyone is trying to guess the trend of the expansion. Well, in our search for new economic data, we found something that really stuck out to us as a positive: lumber demand. The whole lumber sector got hurt very badly in the first quarter as COVID shut down real estate construction. The collapse in demand led to a halt in production in the lumber industry. However, lumber demand for construction projects has come back faster than anyone anticipated and the supply chain cannot even keep up. Lumber prices rose 60% in the second quarter alone.


FINSUM: We think it is an excellent sign that builders and consumers have enough confidence in the economy and their financial positions to be able to create this kind of demand. V-shaped recovery?

Published in Eq: Real Estate

(New York)

Morgan Stanley made a bold call this week. Their research team has officially adopted what seems like a fairly risky position on the economic recovery: they are saying it will be of the much sought after v-shape. The bank has been calling for a short and sharp recession for some time, but this is the most optimistic outlook they have published. According to Morgan Stanley’s chief economist, “Recent upside surprises in the incoming growth data and policy action have increased our confidence that this will be a deep V-shaped recession”.


FINSUM: We still don’t think this is going to be a v-shaped recovery. More like a U-shape or more likely a Nike swoosh shape. The depth of firings combined with the probable corresponding slow pace of consumer spending will hold back the pace of the recovery.

Published in Eq: Total Market

(New York)

The New York Times has published an interesting piece this week which argues that markets and investors are ignoring an ugly and disastrous reality: that the economy is suffering a huge and largely unprecedented collapse in demand. New data out of Europe and Japan, as well as US manufacturing demand, this week showed that demand fell sharply in May, a sharp contrast to the employment jump. The NYT argues that this systemic fall in demand will take time to play out, but that the huge decline in employment and change in behaviors will cause a rupture in demand that will play out over years.


FINSUM: The NYT piece is very bearish. We held off on covering it until new data was released overnight showing a big fall in demand.

Published in Eq: Total Market
Monday, 08 June 2020 10:58

Don’t Be Fooled by the Jobs Numbers

(Washington)

Friday saw the release of what appeared to be absolutely stellar jobs numbers. Instead of the jobless rate potentially hitting almost 20%—which was the forecast—the opposite happened: the unemployment rate fell to 13.3% in May from over 14% in April. Markets soared. However, the reality is that those numbers are both highly inflated, and unrealistic. Firstly, the Bureau of Labor Statistics counted those who are currently furloughed and unpaid as “employed”. It admitted that if it hadn’t done so the unemployment rate would have jumped to over 16%. Secondly, the big jump in hiring was at least partly, and probably hugely, because of an artificial government rule in the PPP program. Small businesses had to hire employees back by the end of June to have their loans turn into grants, so there were artificial incentives to put people back on payroll even I the absence of true business demand.


FINSUM: If you take these two facts together, it becomes clear that the May data is not really a reflection of an economic pickup, so don’t make any predictions based on this.

Published in Eq: Total Market
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