Photo courtesy of the Port of Los Angeles
Inside this Issue:
- Joba the Hut: Smiles Not Sobs with ~1m New Jobs
- The Delta Danger: Will Covid’s Mutations Cause Complications?
- Time to Taper? It is Finally Time for the Fed to Unwind?
- The Time of Paper: Merry Memories of Maine
- Airlines: Biz Travel Trouble
- General Motors: Profit Gains Despite Semicon Pains
- The Dollar Shortage: Causing Depression Since 2007
- Stable Stakes: Are Crypto-World Stablecoins a Systemic Threat?
- Missing Males: A Labor Market Mystery
- A Trunk for Your Junk: A Look at the High-Margin Self-Storage Business
- And This Week’s Featured Place: Los Angeles, California, Hollywood Dreams and Home Price Extremes
Quote of the Week
“What does non-transitory inflation actually look like? When does inflation become self-fulfilling? The short answer it is: It needs to be visible and sustainable in wages.”
-BMO Capital Market’s Ian Lyngen
Good news: The U.S. economy created 943,000 new jobs in July, an important sign of progress in the recovery from Covid. In most respects, the recovery has already happened. GDP is back to where it was and demand for many goods and services are stronger than ever. Not the labor market though. Even with its nearly 1m new jobs last month, 8.7m Americans remain unemployed, up from just 5.7m in February 2020. The unemployment rate, too, is not yet back to its pre-crisis lows (5.4% now, 3.5% then).
But the July job gains are indeed encouraging, representing “substantial further progress” toward conditions the Fed deems necessary before tapering monthly Treasury and MBS purchases (see Government section below). That’s the first step toward post-crisis monetary policy normalization, and it looks like an announcement on that will come before year end (maybe even at the Fed’s Jackson Hole summit later this month).
Note also that revised figures for May and June show more job gains than previously estimated—614,000 in May and 938,000 in June. So that’s nearly 2.5m new jobs created in the past three months, a sign of substantial further progress indeed. Americans, it seems, are getting back to work. But what President Biden calls a pandemic of the unvaccinated continues to threaten a return to economic normality, with many companies now abandoning plans to reopen offices this fall. Events are canceling too, like the New York Auto Show. Schools, however, are opening their doors across the country this month and next. Sure enough, 28% of last month’s job gains came from the education sector. Only leisure and hospitality—responsible for 40% of July’s job gains—made a greater contribution. Much of that was hiring by restaurants and bars.
There’s still the mystery of why labor participation rates—especially among males—remain depressed, continuing a decades-long trend (see the Markets section below for possible explanations). Average hourly earnings are up y/y, and by almost 10% in leisure and hospitality. Even in the context of elevated inflation, that’s good, even more so for anyone not buying or renting a car.