Morning Report: Trade tensions and construction employment 4/2/18

Vital Statistics:

Last Change
S&P futures 2633 -10
Eurostoxx index 370.87 1.61
Oil (WTI) 64.92 0
10 Year Government Bond Yield 2.77%
30 Year fixed rate mortgage 4.45%

Stocks are lower this morning after investors come back from the long Easter weekend. Bonds and MBS are up.

The big event will be the jobs report on Friday. The Street is looking for 167,000 jobs, which seems small, however weather-related effects in the Northeast and Midwest are undoubtedly driving some of that. The consensus for wage growth is 0.2% MOM and 2.7% YOY. This number is the one that matters the most as far as the bond market. Until the report bonds will probably take their cue from the equities market, zigging when stocks zag.

Inflationary pressures can come from strange places. In the US, spot trucking freight rates are up 28% as driver shortages and new technology limit hours. So far, retailers and producers have not passed this cost on to consumers, but at some point they will. Even long-term rates, which are more stable than spot rates, are up 12%. Note that this is with moderate diesel prices – it isn’t fuel driven.

Trade tensions with China are increasing, as the Chinese imposed some restrictions on US agricultural exports which kick in today. China is urging more trade talks to prevent further damage. A trade war will have a push-pull effect on the US economy: on one hand, higher tariffs on imported goods will increase inflation, however trade wars also act as a damper on economic activity which should keep the Fed at bay. Since inflation remains well below the Fed’s target I suspect they will focus more on the depressing effects on a trade war than they will on the potential inflationary pressures of one.

The Fed studied how student loan debt impacts homeownership and found that as student loan debt increases, the person’s likelihood of owning a home decreases. This shouldn’t be much of a surprise, but it does show that the increase in salary from having a college education isn’t offsetting the increase in debt, at least when you look at debt to income ratios.

For new graduates looking for a job, head to the Midwest. There are more job openings there than there are unemployed workers.

Construction spending increased 0.1% MOM and 3% YOY in February, according to Census. This was a touch below consensus. Residential construction increased 0.1% MOM and 5% YOY.  The National Association of Homebuilders conducted a study on where the construction workers are in the US, and unsurprisingly most of them are out West, where the fastest growth appears to be.

Manufacturing eased slightly in March, according to the ISM report, however it is still quite strong. The potential tariffs are beginning to concern businesses. One quote from the report: “Much concern in the industry regarding the steel and aluminum tariffs recently [imposed]. This is causing panic buying, driving the near-term prices higher and [leading to] inventory shortages for non-contract customers.” (Machinery). Others mentioned it will take a few weeks to gauge the impact of tariffs. That said, the reading of 59.3 is usually associated with real GDP growth pushing 5%, so it is still a strong report despite the decrease.

15 Responses

  1. This matches my own views:

    “The Passing of the Libertarian Moment

    The end of the Cold War and the rise of Donald Trump have left classical liberals without a political home.

    Kevin D. Williamson”

    Liked by 1 person

  2. Worth noting:

    “Mulvaney nears victory in struggle with Mnuchin on tax rules

    03/27/2018 04:25 PM EDT”


    • A follow-up story to my Dec. 16 1973 injury. I was due in court to pick a jury that Monday but could not do it. My opposing counsel Malcolm Robinson graciously agreed to the untimely Motion for Continuance, announcing to the jury panel that I had been the first male victim of natural childbirth. My W1 had back labor for 14 hours and I actually got crippled by bending over her rubbing her back all night.

      A few years later Malcolm flat did not show up to pick a jury against me and I told Judge Clark that I owed Malcolm one so we called his office and they said Malcolm had been in an auto wreck. He was OK but had been taken to the hospital for “observation”. We reached him in the hospital by phone from chambers. I asked him if he wanted to continue the case or see if Judge Clark could delay for one day. He said we should settle it right then, if possible. So we held a half hour telephone settlement conference in Judge Clark’s office and did indeed settle.

      Later Judge Clark asked why I had not been willing to simply pick a jury in Malcolm’s absence and I explained that he had shown me the courtesy in 1973 of not taking advantage of my situation. These courtesies between lawyers became fewer and fewer as I grew older.

      Liked by 1 person

  3. This is the saddest part of the story.

    The event was met with a far larger audience than expected, according to organizer Robert Rock MED ’18. Over 1,300 people indicated they were interested in attending the event on Facebook, well over what the building can hold at capacity. Although many potential attendees were turned away at the door because of space constraints, they were able to view a livestream of the event on Facebook.

    A conversation is two-way. Does anybody think that this “difficult racial conversation” is two way. Why not just say that whitey doesn’t like to be hectored and lectured?

    Take your medicine, bitches!

    Matos added that discomfort should not stop white allies from showing up to support people of color.

    I’m guessing there is a large lefty cohort that happily marches the their struggle sessions.

    By all means, find other tits.

    adding that he believes that it is time for those organizations to change whom they “look to for donations, look to for volunteers and look to for advice.”

    I’m guessing the audience was whiter than MSNBC’s lineup.


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