Labor Market Hits A Brick Wall: Job Openings Crater The Most Since The Financial Crisis
While one wouldn’t know it by looking at the BLS’ jobs report, which in November showed that a whopping 256K jobs were added, the JOLTS report issued moments ago showed a vastly different picture, one which if one didn’t know better would suggest that the US labor market hit a brick wall. Why? Because according to JOLTS, traditionally Janet Yellen’s favorite labor market report, job openings in November plunged by a massive 561K, from an upward revised 7.361MM to 6.800MM, the lowest monthly total since February 2018…
… the biggest sequential drop since August 2015…
… and the biggest annual drop since the financial crisis!
Is it possible that the BLS was simply caught fabricating data? Certainly: as a reminder, it was back in September 2013 that we caught the BLS lying about labor market data precisely when looking at the JOLTS report, although it is just as likely that after overrepresenting the strength of the labor market for the past two years, the BLS decided to finally catch down to reality at the end of 2019.
Commenting on the data, the BLS said that the job openings level decreased for total private (-520,000) and edged down for government (-42,000). The largest decreases in job openings were in retail trade (-139,000) and construction (-112,000). The number of job openings fell in the South and Midwest regions.
That said, there was a silver lining to today’s report: even at 6.8MM job openings this was still well above the total number of unemployed workers; in fact in November was the 21st consecutive month in which job openings surpassed unemployed workers.
Some more good news: the number of hires in November actually rose by 39K, and remains slightly above where the cumulative change in payrolls over the past 12 months suggests it should be.
Still, despite these two offsets, the near record plunge in job openings is a very loud, and very clear signal that something is breaking in the labor market, and if this trend continues, then the next logical escalation is a surge in layoffs as US employers retrench and force their existing workers to boost their productivity further.
Needless to say, a nearly 600K drop in job openings is not something one would see if the economy was firing on all cylinders as the stock market represents every single day.
UMich Sentiment Slips In Early Jan As Outlook Dips
Despite soaring stocks and a trade deal, University of Michigan Sentiment survey signaled a small decline from 99.3 to 99.1 in preliminary January data (with current conditions improving but the outlook dipping)…
Current economic conditions index rose to 115.8 vs. 115.5 last month.
Expectations index fell to 88.3 vs. 88.9 last month.
Buying Conditions were perceived to have improved for houses and durables but plunged for autos…
And finally, and perhaps most notably, inflation expectations jumped in January:
Expected change in median prices during the next year rose to 2.5% vs. 2.3% last month.
Expected change in median prices during the next 5-10 years rose to 2.5% vs. 2.2% last month.
About the impeachment of President Donald Trump she engineered with her Democratic majority, Nancy Pelosi said Wednesday: “It’s not personal. It’s not political. It’s not partisan. It’s patriotic.”
Seriously, Madam Speaker? Not political? Not partisan?
Why then were all eight House members chosen as managers to prosecute the case against Trump, who ceremoniously escorted the articles across the Capitol, all Democrats? Why did the articles of impeachment receive not a single Republican vote on the House floor?
The truth: The impeachment of Donald Trump is the fruit of a malicious prosecution whose roots go back to the 2016 election, in the aftermath of which stunned liberals and Democrats began to plot the removal of the new president.
This coup has been in the works for three years.
First came the crazed charges of Trump’s criminal collusion with Vladimir Putin to hack the emails of the DNC and the Clinton campaign and funnel them to WikiLeaks.
For two years, we heard the cries of “Treason!” from Pelosi’s caucus. And despite the Mueller investigation’s exoneration of Trump of all charges of conspiracy with Russia, we still hear the echoes:
Trump is Putin’s poodle. Trump is an asset of the Kremlin.
All we want, and what the American people deserve, is a “fair trial,” Democrats and their media collaborators now insist. But can a fair trial proceed from a manifestly deficient and malicious prosecution?
Consider. In this impeachment, we are told, the House serves as the grand jury, and Adam Schiff’s Intelligence Committee and Jerry Nadler’s Judiciary Committee serve as the investigators and prosecutors.
But the articles of impeachment on which the Judiciary Committee and the House voted do not contain a single crime required by the Constitution for impeachment and removal. There is no charge of treason, no charge of bribery or “other high crimes and misdemeanors.”
So weak is the case for impeachment that the elite in this city is demanding that the Senate do the work the House failed to do.
The Senate must subpoena the documents and witnesses the House failed to produce, to make the case for impeachment more persuasive than it is now.
Not our job, rightly answers Mitch McConnell.
The Senate is supposed to be an “impartial jury.”
But while there is a debate over whether Republicans will vote to call witnesses, there is no debate on how the Senate Democrats intend to vote — 100% for removal of a president they fear they may not be able to defeat.
Consider Trump’s alleged offense: pressing Ukrainian President Volodymyr Zelenskiy to investigate Burisma Holdings and Hunter Biden.
Assume Zelenskiy, without prodding, sent to the U.S., as a friendly act to ingratiate himself with Trump, the Burisma file on Hunter Biden.
Would that have been a crime?
Why is it then a crime if Trump asked for the file?
The military aid Trump held up for 10 weeks — lethal aid Barack Obama denied to Kyiv — was sent. And Zelenskiy never held the press conference requested, never investigated Burisma, never sent the Biden file.
There is a reason why no crime was charged in the impeachment of Donald Trump. There was no crime committed.
Not political, said Pelosi. Why then did she hold up sending the articles of impeachment to the Senate for a month, after she said it was so urgent that Trump be impeached that Schiff and Nadler could not wait for their subpoenas to be ruled upon by the Supreme Court?
Pelosi is demanding that the Senate get the documents, subpoena and hear the witnesses, and do the investigative work Schiff and Nadler failed to do.
Does that not constitute an admission that a convincing case was not made? Are not the articles voted by the House inherently deficient if the Senate has to have more evidence than the House prosecutors could produce to convict the president of “abuse of power”?
Can we really have a fair trial in the Senate, when half of the jury, the Democratic caucus, is as reliably expected to vote to remove the president as Republicans are to acquit him? What kind of fair trial is it when we can predict the final vote before the court hears the evidence?
It is ridiculous to deny that this impeachment is partisan, political and personal. It reeks of politics, partisanship and Trump-hatred.
As for patriotic, that depends on where you stand — or sit.
But the forum to be entrusted with the decision of “should Trump go?” is not a deeply polarized Senate, but with those the Founding Fathers entrusted with such decisions — the American people.
In most U.S. courts, a prosecution case this inadequate, with prosecutors asking the court itself to get more documents and call more witnesses, and so visibly contaminated with malice toward the accused, would be dismissed outright.
Mitch McConnell should let the House managers make their case, and then call for a vote to dismiss, and treat this indictment with the contempt it so richly deserves.
“Bernie Will Play Dirty” – Former VT Gov Bashes Sanders As Feud With Warren Cools
Former Vermont Gov. Peter Shumlin, who led the state as a Democrat from 2011 to 2017 has some harsh words for Bernie Sanders.
During a free-for-all interview with Politico, Shumlin, who recently endorsed Joe Biden, accused Sanders of trying to “Hillarize” Elizabeth Warren.
Specifically, Shumlin criticized Sanders’ attempts to portray Warren as an “elitist”, aperception that helped to deeply undermine the Clinton campaign.
Shumlin warned that Sanders doesn’t feel any “loyalty” to the Democratic Party, and won’t hesitate to put his own interests above the party’s.
The reason? Shumlin said Sanders, a self-described Democratic Socialist, and his supporters feel that they can pass a “purity test” that no Republicans and very few Democrats can pass.
Because of this, Sanders won’t hesitate to “play dirty,” Shumlin said.
“What I’ve seen in Bernie’s politics is he and his team feel they’re holier than the rest. In the end, they will play dirty because they think that they pass a purity test that Republicans and most Democrats don’t pass,” said Shumlin. “What you’re seeing now is, in the end, even if he considers you a friend, like Elizabeth Warren, Bernie will come first. That’s the pattern we’ve seen over the years in Vermont, and that’s what we are seeing now nationally.”
Finally, Shumlin reminded his audience that Sanders first major electoral triumph was defeating the Democratic Mayor of Burlington.
“Don’t forget, the first office he won was beating the Democratic mayor of Burlington. He never endorsed most Democrats until his Senate career,” Shumlin said. “The only way he could win the Senate seat and avoid a Democrat winning the nomination and splitting the vote in the general election has been to run for the Democratic nomination, win it and immediately turn it down.”
After losing to Clinton in the rigged Democratic primary, Sanders was a good sport, and agreed to campaign for Clinton, eventually appearing at more than 80 events as a surrogate.
Does that sound like someone who has no respect or loyalty to the party?
NHTSA Evaluating Petition To Investigate 500,000 Tesla Vehicles For Unintended Acceleration
Just hours after we reported that the NTSB would be investigating a fatal Tesla Model X crash in February, we now learn that the U.S. National Highway Traffic Safety Administration has begun an investigation into a petition it has received regarding certain Tesla models.
According to Bloomberg, the petition involves “unintended acceleration in vehicles”.
The NHTSA says its Office of Defects received the defect petition on December 19 and that the request applied to model year 2012 through 2019 Tesla Model S vehicles, model year 2016 through 2019 Tesla Model X vehicles and model year 2018 through 2019 Tesla Model 3 vehicles. This totals about 500,000 Tesla vehicles.
The petitioner cited 127 consumer complaints to the NHTSA involving 123 separate vehicles. These reports included 110 crashes and 52 injuries.
Yesterday we reported that the NTSB said its going to convene a meeting on February 25 to examine the probable cause of a fatal Tesla accident that took place in California in 2018.
Autopilot was engaged in 38 year old Apple engineer Walter Huang’s Model X prior to the accident, as we have reported. The NTSB and NHTSA are now investigating a “number of crashes” where Autopilot was involved, according to Automotive News.
Last week, for instance, the NHTSA also said it was investigating a December 29th crash of a Model 3 that a passenger dead after the Model 3 collided with an inanimate fire truck in Indiana. It’s also investigating another crash on the same date where a Model S ran a red light and struck a Honda, killing its two occupants.
And, of course, it is no surprise to us that the NHTSA has not made a determination as to whether or not an investigation is warranted regarding the new petition yet. Because if it isn’t clear as day to them at this point, we’re not sure what it’s going to take to wake these regulators from the half decade long slumber they’ve been in.
The risk of oil supply disruptions from around the world has diminished, and rising non-OPEC production provides a “solid base from which to react to any escalation in geopolitical tension.”
In its January Oil Market Report, the International Energy Agency (IEA) said that there is plenty of oil sloshing around, despite the U.S. and Iran nearly going to war.
“We cannot know how the geopolitical situation will play out over time, but for now the risk of a major threat to oil supplies appears to have receded,” the IEA said.
“As was the case following the attacks on Saudi Arabia in September, once the initial fears of a sustained supply shock subsided, the Brent price rapidly gave up its $4/bbl spike.”
Oil inventories held in OECD countries is 9 million barrels above the five-year average, and there are also plenty of strategic stockpiles to call upon in the event of an outage, the agency said.
Still, while geopolitical risk has “faded,” it has not gone away entirely. The Trump administration may have refrained from all-out war against Iran, but the assassination of General Soleimani took the confrontation to new heights.
While Trump’s speech earlier this month was widely interpreted as one of “de-escalation,” he also prefaced his comments by saying Iran would never have a nuclear weapon. But, sanctions, “maximum pressure,” and the assassination of one of its top leaders will obviously provoke a response. With little left to lose, Tehran is backing out of most of its commitments under the 2015 nuclear agreement, a deal that the U.S. already exited nearly two years ago.
All of which is to say the countries are seemingly locked on a collision course. The world breathed a sigh of relief when the two countries backed away from the brink, but there are decent odds that the conflict flares up again in the not-so-distant future. There are few pathways for actual de-escalation, absent an overhaul of U.S. policy.
At the same time, Iran has already lost much of its oil supply due to sanctions. So, the additional supply risk is concentrated in Iraq, where the U.S. and Iran conflict is actually playing out. “Recent events have shown that Iraq is a potentially vulnerable supplier, just as its strategic importance has grown,” the IEA said. The agency noted that Iraqi oil exports have doubled since 2010, from 2 million barrels per day (mb/d) to 4 mb/d. China and India each import roughly 1 mb/d of supply from Iraq.
“Iraq’s rising capacity has been very welcome as sanctions have reduced Iran’s exports to only 0.3 mb/d and Venezuela’s production has collapsed,” the IEA wrote.
Left unsaid was that those outages were both the result of U.S. sanctions.
Putting aside the geopolitical risk, the agency said that prices will likely remain subdued this year because non-OPEC supply continues to grow faster than demand.
Non-OPEC countries will add 2.1 mb/d this year, while demand will rise by 1.2 mb/d.
Unlike in previous years, U.S. shale won’t dominate the supply growth picture, at least not entirely. The sector will likely see a “marked slowdown,” accounting for 52 percent of non-OPEC supply growth, down from an 84 percent average between 2017 and 2019. Instead, Norway, Brazil, Canada, Australia and Guyana will add new barrels.
The bottom line is that OPEC+ still faces a predicament.
“Even if they adhere strictly to the cuts, there is still likely to be a strong build in inventories during the first half of 2020,” the IEA said.
“OPEC crude production would fall to 29.3 mb/d in January if there were to be full compliance and steady output from Libya, Iran and Venezuela. That is still 700 kb/d above the 1Q20 call on OPEC crude and 900 kb/d above the 2Q20 call.”
In other words, unless OPEC+ cuts further, the oil market faces persistent oversupply in the first half of this year.
Housing Starts Soar To Highest Since 2006 As Permits Plunge
Following October and November’s bounce in starts and permits, and despite solid sales and mortgage application data, analysts expected a mixed picture for housing data today (with growth in starts slowing and permits shrinking).
However, the data was extreme to say the least with Housing Starts soaring 16.9% MoM (highest since Oct 2016) and Building Permits shrank 3.9% MoM (worse than the -1.5% exp).
This pushed Starts to their highest since Dec 2006, but permits declined to weakest since September.
All four regions posted a gain in starts, with the Midwest, South and West showing the best pace since 2006. Starts in the Northeast were the highest since August.
Under the hood, Starts were dominated by a 32% surge in multi-family units (though single-family starts rose 11.2% MoM)…
Multi-family Starts soared 75% YoY…
But, the more forward-looking permits disappointed…
Even so, the strong overall reading on starts corroborates a jump in developers’ confidence. U.S. homebuilder sentiment posted the highest back-to-back readings since 1999 in December and January amid a jump in prospective buyers and a bump in the sales outlook.
Bloomberg notes that the data indicate residential construction added to fourth-quarter growth after contributing in the previous quarter for the first time since the end of 2017. While weather may have played a role in the month’s data, demand has been fueled by mortgage rates near a three-year low as the job market remains resilient and wage gains help put money into the pockets of potential homebuyers.
Trader: Nothing Like A Lousy Number To Make Markets Happy
Global stock trading screens are a sea of green this morning, despite a slew of key data coming in below expectations and doing anything but confirming the market’s narrative that everything’s about to be awesome again.
Overnight saw the big one from China disappoint with economic growth the weakest in 29 years. But, as Bloomberg’s Richard Breslow notes, if you want to feel good about the equity market today, there is no need to look further than today’s U.K. retail sales report. It was a stinker. Following close on the heels of Wednesday’s CPI miss.
The market pricing of the chances of a cut in rates as soon as this month are now showing an expectation that it is just about baked in the cake. And this at a time when surveys show that most economists think it is too early for a move. When have we seen that before? The U.K. economy may not be as influential as it once was on global matters, but it is still of material consequence.
And every stock index loves it when a major central bank moves to the left.
Progress on trade matters between the U.S. and China is a positive development. It doesn’t matter if it isn’t as good as it gets.
Increasing talk of election year fiscal stimulus in the U.S. has stock investors rubbing their hands together. But nothing gets them more stoked than rate cuts and the possibility of more QE.
Yesterday, two of Germany’s leading industry groups, the BDI and BGA, urged the government to do more to stimulate the economy. Yes there have been green shoots trying to poke their heads out of the ground. But, as the BDI’s managing director said, “Better-than-expected still doesn’t mean good.”
As one of ECB President Christine Lagarde’s biggest fans, I continue to maintain confidence that, ultimately, she will be able to wring some action out of the German government. But all of the European and euro bulls need to accept the reality that it doesn’t count until they show us the money. And it remains true that the global economy won’t ever be able to “run hot,” as we understand the concept, without Europe contributing its fair share.
All of the trade recommendations calling for the much-anticipated move in bund yields back to the lofty zero level may have to wait for some confirmation from the foreign exchange market, where implied volatility in the options market continues to suggest that we are going nowhere fast. Little episodes of short-term, event-driven optimism continue to have little influence on the pricing for the longer-dated outlook. That can always change, but it is devilishly difficult to anticipate.
Europe aside, the economic results out of China were quite good (except for GDP).
Who wouldn’t want numbers like these? With a dovish PBOC to boot. At least we know there is one country where there is demand for automobiles. Chinese equities had a so-so session but with reportedly so much new money having been piling into that market it wasn’t a bad performance ahead of the weekend. Of greater note, and importance for the moment, Asian equities as a group had a solid showing, in sympathy, and have their sights again set on the spike high from earlier this week.
The very crowded emerging market currency trade continues to hang in there. This is something to keep an eye on. Trending assets can, by definition, stay over-bought for a long time, but the risk also increases. This market can correct a fair way without doing anything wrong in the grand scheme of things. Nevertheless, it is a sign that carry and risk remain in vogue.
The dollar continues to go nowhere, but remains resilient, despite its naysayers. I’m not sure why I keep being told that if the euro goes up and breaks resistance, it will be a bullish sign.
Also watching the 10-year Treasury versus bund spread. That spread narrowing is a popular trade that is showing signs of being called into question.
Perhaps the most interesting question in the short-run is how the Treasury yield curve behaves. It’s a little steeper on the 20-year announcement. But things won’t really get interesting, and perhaps more volatile, until we see it do so in a bear market.
UN Warns Of Slowbalisation As Economic Growth In 2019 Plunged To Lowest In Decade
The U.N.’s annual report, the World Economic Situation and Prospects 2020, has said the global economy recorded its lowest growth in a decade in 2019, falling to 2.3% as a result of the U.S. and China trade war and sharp pullbacks in investment.
The report warns of slowbalisation will define the global economy in the early 2020s. Growth is expected to pick up slightly across the world from 2.3% last year to 2.5% in 2020, but that depends on the effectiveness of monetary policy and if all trade disputes can be resolved.
The U.N. warned that if trade disputes aren’t resolved this year, geopolitical tensions spiral out of control, and for whatever reason, central banking monetary policies are ineffective in stimulating growth, then the global economy could register a depressing 1.8%.
It said that slowbalisation “threatens to undermine progress towards eradicating poverty, raising living standards, and creating a sufficient number of decent jobs.”
To give readers a sense of the below-trend growth seen across the world, actually starting before the trade war. The U.N. had global growth forecasts of 3.2% in 2017, 3% in 2018, and 3% in both 2019 and 2020. Obviously, that’s not the case today, and the global economy is rapidly slowing as central banks are freaking out with over $1 trillion in money printing in the last four months and 80 rate cuts over the previous 12 months.
The report noted that 2019 was the slowest year in global growth since the financial crisis a little over a decade ago, with all major economies sharply slowing except Africa.
“This slowdown is occurring alongside growing discontent with the social and environmental quality of economic growth, amid pervasive inequalities and the deepening climate crisis,” it said.
The U.N. said the epicenter of the slowdown is the “global manufacturing” recession that spread across most G20 countries.
It said the shift in trade policies between the U.S. and China also led to declining investment in major economies and will lead to slower economic growth in the years ahead. Trade disputes also weighed heavily on commodity prices, especially crude and petroleum products, and industrial metals.
“A significant number of countries are still suffering from the effects of the 2014-2016 commodity price downturn, which has resulted in persistent output losses and setbacks in poverty reduction,” the U.N. said.
U.N. Secretary-General António Guterres warned: “These risks could inflict severe and long-lasting damage on development prospects. They also threaten to encourage a further rise in inward-looking policies, at a point when global cooperation is paramount.”
Global central banks have had no other choice but to print like crazy and hyperinflate asset prices as their ammunition to combat the next global crisis is running low.