October 8, 2023

US Hiring Surges, Bolstering Case for Another Fed Rate Hike

📰 News Organizations

  • US Hiring Surges, Bolstering Case for Another Fed Rate Hike. Payrolls jumped 336,000 in September, topping all forecasts, illustrating a durable labor market. Unemployment rate held at 3.8%, and wages rose less than estimated.

  • Kaiser Workers End 3-Day Strike For Now. Kaiser Permanente workers returned to the job Saturday without a contract agreement following a three-day strike. Strikes may resume later if a deal is not reached soon.

  • UAW Ended the Week Without Expanding. This is the first week that the union will not expand the work stoppages at GM, Ford Motor after GM agreed to include battery cell workers under the company’s national agreement.

  • Tesla Cuts Model 3 And Model Y Prices In The U.S. After Car Deliveries Fall. Tesla lowers Model 3 starting price to $38,990 from $40,240 after reporting Q3 deliveries of 435,059 vehicles, falling short of analyst expectations and a decline from the previous quarter.

  • U.S. 10-Year Yield Jumps Back Near 16-Year High After Jobs Report. U.S. Treasury yields rose Friday, with the 10-year nearing a 16-year high, up by nearly 13 basis points at 4.839%, after the jobs data came in stronger than economists anticipated.

  • Amazon Launches First Satellites in Bid to Challenge SpaceX’s Starlink. A rocket carrying two Amazon prototype satellites lifted off Friday afternoon from a Florida launchpad. Amazon expects the mission to demonstrate how the satellites perform in space.

🐦 Twitter

  • Backdrop for housing looks eerily familiar to sharp slowdown we saw this same time last year when rates jumped. The move in 2022 was 5% to 7% Aug-Oct, and it slowed everything quickly, including prices. Source.

  • Why were wage gains tame despite the jump in hiring? Much of the hiring was in leisure/hospitality where wages tend to be low. Next biggest gains were education and health services along with trade/transportation - middle wage sectors. Source.

  • Companies in the US's sun belt and rust belt seem to be preparing for mass layoffs. WARN notices, which large firms have to file if they plan to lay off more than 50 people, show that filings by firms in these regions have increased sharply in recent months. Source.

  • The US labor force participation rate among 25-54 year olds (prime working age) remained at 83.5% in September, the highest since May 2002. Source.

  • Consumer goods imports remain in a downtrend. On a rolling 12-month basis, they’re down by nearly 8% (still among the worst declines over the past few decades). Source.

  • Beneath the headline numbers the details look pretty soft landing-ish — wage growth softer, aggregate weekly payrolls around 5% annualized, household report a bit softer. Source.

At today’s stock-market party, very few stocks are invited. The gap between the winners (tech and energy) and losers (utilities and real estate) is huge. If the S&P 500 was all tech and energy, it would be at 5000; if it was all utilities and real estate, it would be half that.

Jurrien Timmer

📓 Online Publications

  • Exxon Mobil Closing In on Megadeal With Shale Driller Pioneer. An acquisition of Pioneer, with a market cap of around $50 billion, would give Exxon a dominant position in the oil-rich Permian Basin of West Texas and New Mexico.

  • Goldman Sachs Launches Platform for Third-Party ETFs. Goldman launched its ETF fund accelerator platform, intended to help smaller third-party funds enter the $10 trillion ETF market. It also wants to make clear that there is no possibility of a conflict of interest.

  • Most Perilous Time of Year to Overprice. 24% of homes that are considered significantly overpriced according to Opendoor’s internal valuation model end up being delisted in the fall months, compared to 19% throughout the rest of the year.

  • High Mortgage Rates Are Shaping Fall’s Housing Market. 10.1% fewer home sellers listed their homes in September compared with the same month last year. The total number of homes for sale is also down annually by 4.4%.

  • Short-Term Bonds Amidst Rate Dynamics. Currently, attractive yields can be earned in short and intermediate-term bonds and can experience a rally if interest rates decline. Long-term returns in long bonds has become less compelling.

🎧 Podcasts

  • Higher For Longer Worries. Central banks say that interest rates will have to remain higher for longer to get inflation under control. But the idea is making investors nervous. Stock markets have tumbled and long-term bond yields have soared over the past few weeks. Source(1:19)

  • Dollar intervention Doom Loop. A Dollar intervention Doom Loop risk is arising in Asia as local authorities sell dollar assets to counter a strong dollar, potentially increasing US treasury yields and widening the yield spread, creating a potential cycle of intervention and risk. Source(12:21)

  • Global Economic Headwinds Ahead. A strengthening dollar and reduced supply from currency and interest rate volatility pose challenges to the global capital system, introducing potential headwinds in asset markets and the economy, and departing from the Goldilocks environment. Source(9:46)

  • US National Debt Soars $275B in a Day. There is a surge in national debt, as reported by the Treasury Department, which spiked by $275 billion in a single day. This highlights the severity of the fiscal situation, attributed to escalating rates and excessive spending. Source(12:56)

  • Possible Consumer Demand Drop For AI. We’re going to see more specialized AI bots come out for tasks like homework, sports, and investing, with the real challenge being when consumer use begins to tally off and enterprises are still building to keep consumer interest. Source(34:58)

  • SEC Sues Elon Musk to Enforce Subpoena. The SEC asked a San Francisco federal court to order Elon Musk to comply with the ongoing investigation of his 2022 takeover of Twitter. Musk was scheduled to provide testimony to the SEC on Sept. 15 but failed to appear. Source(2:21)