All Things in Moderation

Vital Statistics:

Stocks are higher as we start the second half of 2021. Bonds and MBS are down small.

Announced job cuts fell to a 21 year low last month, according to outplacement firm Challenger, Gray and Christmas. Job cuts fell 88% YOY to 20,476. Note that this statistic measures announced cuts (as in via a press release). “We’re seeing the rubber band snap back,” said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc. “Companies are holding on tight to their workers during a time of record job openings and very high job seeker confidence. We haven’t seen job cuts this low since the Dot-Com boom.” Energy and defense lead the sectors in job cuts.

Initial Jobless Claims fell to 364k, which is still elevated compared to pre-COVID where 225k was the norm. If you compare the last year to the Great Recession, the 2009 bust looks like a molehill compared to a mountain:

The Challenger and initial jobless numbers illustrate the conundrum of analyzing the labor market. Job openings are at record highs, yet initial claims are stubbornly high. Unemployment is elevated, but it seems like every fast food place and retail establishment has a “help wanted” sign. The Fed minutes don’t really shed any light on the situation; they just lay out the same contradictions I just did. I don’t think anyone really has a handle on it, and think tanks are interpreting it via their own ideological lenses. And with global bond markets under the firm control of central banks’ activist policies interest rates are a pretty useless indicator as well.

Lumber prices are finally falling back to earth. Lumber has done quite the round trip over the past year, rising from $438 to $1,670 and then falling back $783. Falling lumber costs will hopefully re-ignite the homebuilding sector which should help alleviate the acute housing shortage.

The manufacturing sector grew in June, according to the ISM Report. Shortages of all types continue to hamper manufacturing growth: ” “Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing levels of demand. Record-long raw-material lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to parts shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.” I found the worker absenteeism issue to be interesting. I wonder if it is simply COVID-19 driven, or is something else going on.

Construction spending fell 0.2% MOM but is up 7.5% YOY. Resi construction is up 28% YOY, but the lockdowns of a year ago are probably affecting the numbers.

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