It’s generally not wise to infer anything from monthly data as there is so much noise and so many revisions to come.
Nevertheless, in February, wage growth was negative for almost all industries across the board, which will raise many suspicions that the BLS Chef was working overtime with the data. Not sayin’, just thinkin’.
There was positive wage growth in some industries, led by textile and product mills, up 0.9 percent, and transportation and warehousing, coming in a close second with 0.7 percent wage growth in February. Apparel and financial activities led to the downside at -3.3 and -1.8 percent, respectively.
Another thing that stands out to me, personally, with the rank data — Feb ’21 to Jan ’22 growth rate — is the wage growth in barbershops and beauty salons, the second-highest over the 11 months.
Many will conclude it is most likely a measurement illusion as barber shops and salons were bouncing back from being shuttered for a few months at the beginning of the pandemic. Not in my experience, however.
The price I pay for a haircut is now is up 40 percent from what I paid before the pandemic, $25 to $35. It never included a shampoo and the place is not exactly a Foofoo salon.
Supply Chain Issues? Not!
O Lordy, she must have one helluva supply chain problem. Wondering if her scissors are stuck in one of those containers ships off the SoCal coast?
She deserves the raise, however, a dreamer who has raised three wonderful boys and just opened her own shop. God bless our immigrants, always the entrepreneur.
Missing Data
Note that all the industries in the tables are missing the February data as it takes more time to gather the more granular the sector, and is especially true for the wage data. AHE for most sub-industries are delayed at least a month from the headline NFP release.
We’re providing a deeper dive into Friday’s payrolls report with the Top 50 industries with the fastest and slowest payroll growth. It’s still difficult to discern any new trends or secular shifts in the makeup of the payroll data. Most of the Top 50 industries with the highest growth in payrolls appear to be in those hit hardest by COVID.
However, the household data is a different animal with the fluctuating labor participation rates and what many call “the Great Resignation.”
Payrolls are still in bounce mode, but the 50 industries with the slowest jobs growth deserve a closer look and deeper analysis. Our priors are that many of these sectors experiencing job losses in such a strong labor are Woolly mammoths headed for the tar pits.
Lack Of Visibility
There is still is a lack of clarity and uncertainty in the labor market from the initial COVID shock, now complicated by the economic shock caused by the invasion of Ukraine.
The COVID shock hit the labor market with such brute force it is still traumatized almost two years after the first case was discovered in the United States.
Molecules Still Haven’t Stabilized
It reminds me of when I was a sophomore in high school. My brother threw a pencil and hit me square in the eye about a centimeter from the pupil.
Long story short, the eye contracted an infection, and it was touch and go for a while as to whether my vision would be fully restored.
I spent two weeks in the hospital and received daily treatments at my ophthalmologist for over a year. I also had to sit out the baseball season because my vision was too cloudy to be an effective hitter, even several months after the initial injury.
I asked the doctor why the eye wasn’t healing. He explained that it suffered such penetrating trauma that the molecules were still moving around inside the eye and it would take several more months to stabilize.
It was over a year before I could see clearly, and I still had trouble with the curve.
Ditto for the economy, ditto for the labor market.
Later today we will post who is bringing home the bacon by looking at the industries with the fastest growth in average hourly earnings. Wait for it.
Missing Data
Note that many industries are missing the February data as it takes more time to gather the more granular the sector.
Sir Ernest John Pickstone Benn, 2nd Baronet, CBE (25 June 1875 – 17 January 1954) was a British publisher, writer and political publicist. His father, John Benn, was a politician, who had been made a baronet in 1914. He was an uncle of the Labour politician Tony Benn. – Wikipedia
The instant immiseration of a big economy [by sanctions] is unprecedented and will cause alarm around the world, not least in China, which will recalculate the costs of a war over Taiwan. The West’s priority must be to win the economic confrontation with Russia. Then it must create a doctrine to govern these weapons in order to prevent a broader shift towards autarky. – Economist
1997 Asian Financial Crisis Forces Indonesia’s Dictator From Office
During the 1997 Asian Financial Crisis, Indonesia was hit hardest. The economic and political chaos that ensued forced Indonesia’s Suharto government from power in May 1998, after ruling unopposed for 31 years. Something that domestic political pressure and periodic military unrest could not.
Suharto consolidated his power in 1967 after the 1965 military coup, which is the basis for the excellent Australian movie, The Year of Living Dangerously.
Massive capital flight from Indonesia coupled with its current account deficit caused the rupiah to lose 80 percent of its value against the dollar from August 1997 to January 1998.
By 1998, Suharto became increasingly seen as the source of the country’s mounting economic and political crises, and prominent political figures began speaking out against his presidency…Rioting and looting across Jakarta and other cities began over the following days…On 20 May, there was a “massive show of force” from the military, with soldiers and armored vehicles on the streets of Jakarta. Facing a threat of impeachment from Harmoko, and having received a letter from 14 cabinet members rejecting the formation of a new cabinet, Suharto decided to resign. — Wikidpedia
Unlike Putin, Suharto didn’t have a real external enemy to deflect blame for the country’s economic woes, though the Malaysian Prime Minister Mahathir Mohamad did single out Geroge Soros. Sound familiar?
However, not himself personally, Soros’ firm did go after the vulnerable Asian currencies, as did Morgan Stanley and almost all the big Wall Street firms and hedge funds. But that is what they do. As one trader told me during the period, “these economies are so out of balance, it was like shooting fish in a barrel.”
Moreover, Indonesia was in a current account deficit and highly dependent on foreign capital. Russia, by comparison, runs a large current account surplus and is hardly dependent on the “hot money” foreign capital as they were, which led to their infamous 1998 default.
The head of Russia’s central bank, Elvira Nabiullina, is one of the world’s best, so we doubt the ruble is heading the way of the rupiah during the 1997 crisis though it’s too early to be sure.
It’s too early to speculate, and the two countries couldn’t be more different.
Russia and Indonesia during 1997 are two very different situations. Indonesia collapsed due to market forces exploiting the country’s economic vulnerabilities. Russia’s case, however, is similar to what happened during the first few quarters of the pandemic when the world’s policymakers flipped the global economy’s lights off. Similarly, Western government sanctions are flipping off Russia’s outside lights, and the darkness is rapidly spreading to the domestic economy.
Short-term Putin’s fate most likely depends on the support of his inner circle, the heads of the intelligence agencies, for example, which will be dependent on how the war unfolds.
Who knows, it’s way too early but we are highly doubtful the younger population will have much patience as they watch their country morph into another North Korea. Time will only tell.
One Last Thing – China
The Economist also writes,
Autocracies will be most nervous: they own half of the world’s $20trn pile of reserves and sovereign wealth assets. While China can inflict huge economic costs on the West by blocking supply chains, it is now clear that in the event of a war over Taiwan, the West could freeze China’s $3.3trn reserve pile…Over the next decade technological changes could create new payments networks that bypass the Western banking system.u
…Some of this fragmentation has become inevitable. But by applying sanctions to ever more countries over the past two decades, and now also raising their potential severity, the West risks pushing more countries to delink from the Western-led financial system than is desirable. — Economist
Will China Dump Its Treasury Securites?
The primary reason why nominal interest rates, and real rates, for that matter, are so low in the United States is that central banks, who are price insensitive, own 53.2 percent of all outstanding coupon Treasury securities as of the end of last year. The Fed held $4.9 trillion (29.4 percent) and foreign central banks $3.9 trillion (23.8 percent). In other words, similar to housing, there is an engineered shortage of coupon Treasuries relative to the amount of money in the global financial system, distorting interest rates.
Of the total foreign holdings of Treasuries, China is the second-largest, just behind Japan, owning over 27 percent of the foreign-held. The data are illustrated in the chart below.
We also suspect leaders in China are getting very nervous after seeing the West’s harsh sanctions on Russia, including the freezing of its central bank assets.
Is China Still Comfortable Holding Treasuries?
Seriously, folks, do you think the regime in China is as comfortable as it was at the beginning of the year, holding almost one-third of their foreign reserves in U.S. Treasuries after the events of the past ten days? We doubt it.
Watch This Signal
I began my professional career in the private sector, negotiating the sizeable commercial bank sovereign debt restructurings. If negotiations hit a snag, as they often did, we would watch the government’s action regarding their foreign reserves held in custody in the United States. If they began to move them out of the country, it was a signal they may be preparing to declare a debt payment moratorium and suspend payments to gain leverage in the negotiations — the nuclear option.
If, say, China begins to dump their Treasury holdings rapidly, it could very well signal they are preparing to take Taiwan. Just a theory and a hypothetical, or it could be they are becoming more politically risk-averse and hedging after observing what happened to Russia’s central bank.
If our speculation is correct, U.S. interest rates will be moving closer to a market-driven price. That is, much higher or forcing the Fed to step in to keep a lid on interest rates, which cause inflation to move higher.
The more they [sanctions] are used, the more countries will seek to avoid relying on Western finance..It would also lead to a dangerous fragmentation of the world economy.
…Today it is hard to park trillions of dollars outside Western markets, but in time more countries may seek to diversify their reserves by investing more elsewhere. – Economist
Dayam, the current world situation is starting to read like a Tom Clancy novel.
…the second phase of the Japanese offensive: an economic attack, where Japan engineers the collapse of the U.S. stock market by hiring a programmer who is a consultant for an exchange firm to insert a logic bomb into the system, which when triggered blocks the storage of all trade records made after noon on Friday. They also assassinate the President of the Federal Reserve Bank. – Wikipedia
The Times They Are a-Changin’.
Here’s to hoping the policymakers have thought this through and have a contingency plan.
“All kingdoms are monarchies but not all monarchies are kingdoms.”
Queen Elizabeth’s husband [late husband] Prince Philip [was] related to the Romanovs through both his mother and his father. Philip is the grandnephew of Alexandra Romanov, Nicholas II’s wife, and the last Tsarina of Russia. He is also a cousin to the Russian royal family.
Philip’s children and grandchildren, including William and Harry, are therefore related to the Romanovs as well.
In fact, when the remains of two children thought to be Maria and Alexei Romanov were found in a field in 2007, it was Prince Philip’s DNA that was used to identify them, news which was revealed in 2016. – Town & Country
How is Queen Elizabeth related to other European monarchs?
William Edward Simon was an American businessman and philanthropist who served as the 63rd United States Secretary of the Treasury. He became the Secretary of the Treasury on May 9, 1974, during the Nixon administration. After Nixon resigned, Simon was reappointed by President Gerald Ford and served until 1977 when President Jimmy Carter took office. – Wikipedia
Tesla (TSLA), the poster child of the latest leg of the bull market, which began in March 2020, is again testing what has been its unpenetrable support at the 200-day moving average. The stock has to hold here. Maybe, maybe not.
Tesla stock is now in a bear market, down 31 percent from its January 4th high.
Crypto Crash
Moreover, Elon’s crypto hobby isn’t faring much better.
Bitcoin is down 47 percent from its wait for it… 9/11 high, and down 13 percent from the Crypto Super Bowl just eight days ago. Where art thou Tom Brady and Matt Damon?
Seriously, folks, do real currencies fall 50 percent in value in three months?
Mayor Of New York
The new mayor of New York City could have been in a world of pain and a lot poorer,
The above illustrates Bitcoin (BTC) fails the currency test, at least on two accounts: a stable store of value and a unit of account. Furthermore, BTC is, at best, a very inefficient medium of exchange, and we’re not even so sure about that.
My Bitcoin bros were all lathered up that the new mayor agreed to be paid in BTC.
Not so fast,
Adams officially received his first paycheck yesterday [Jan 21], which was converted to Bitcoin and Ethereumthrough cryptocurrency exchange Coinbase. According to the New York Post, the NYC mayor receives biweekly paychecks of about $5,900, amounting to a salary of $258,750 a year. – The Verge
You got that, folks? Converted to and not paid in crypto.
Major Adam’s salary is denominated in a unit of account of $258,750 per year and then converted to crypto and not the 3.77 BTC that would have been the case at the exchange rate when he made the announcement. Lucky for him.
God bless the early adopters who have made a killing, but it’s sad, in our opinion, to see an entire generation duped by what has now become a social movement. We blame the regulators who have allowed the markets to morph into the circus they have become.
We could be way wrong, and opinions about the future only become fact in hindsight, but we have seen this picture too many times, just with a different script and other actors.
Save Us Elon!
I wouldn’t be surprised to see an Elon Tweetfest soon. We love that guy, but we think he could use a little more maturity in his Tweeting.
Much cheaper than when Elon hosted Saturday Night Live last May and when he Tweeted the above. Dogecoin is down 82 percent from its high last May.
A store of value?
We don’t think so, and neither does Mr. Market.
Looks Like Elon Has Some Competition
In its annual Top Picks, Consumer Reports highlights the standout cars, SUVs, and trucks across in 10 distinct categories. Tesla has dominated the electric vehicle category, with the Model 3 holding the EV Top Pick honor for the past two years. But now the Ford Mustang Mach-Ehas earned the accolade based on its Overall Score, which factors road-test score, predicted reliability, owner satisfaction, and safety. – Consumer Reports
If an automaker wanted to convert people from EV skeptics to EV evangelists, it’s hard to imagine a better vehicle for the job than the Ford Mustang Mach-E. It arrives in the familiar shape and size of the crossovers Americans love, at a price that competes with gas-powered alternatives, and with a design that gets noticed. The Mach-E has the range and charging speed to wave off the most common EV criticisms, and thanks to Electrify America’s recent work, there’s a nationwide charging network that makes long interstate trips not just possible but tolerable. – Car and Driver
As our CK would lecture us — cash flow, profits, and divies, baby. Old fashion? You bet your sweet something.
Global Macro Monitor 