April JOLTS report: evidence of a huge disconnect in the jobs market
– by New Deal democratThis morning’s JOLTS report for April confirmed anecdotal evidence that there have been a huge amount of unfilled job openings, and a comparatively weak level of actual hiring. Job openings soared to a level over 20% higher…
This morning’s JOLTS report for April confirmed anecdotal evidence that there have been a huge amount of unfilled job openings, and a comparatively weak level of actual hiring. Job openings soared to a level over 20% higher than at any point in the series before March. Meanwhile actual hires are less than 1% above their pre-pandemic high. Voluntary quits increased to an all-time high, while layoffs declined to a new all-time low. Total separations also increased.
This report has only a 20 year history, and so includes only two prior recoveries. In those recoveries:
first, layoffs declined
second, hiring rose
third, job openings rose and voluntary quits increased, close to simultaneously
The recovery from the worst of the pandemic almost one year ago at first followed this script, but the winter surge, which led to a few month of flat, or worse, jobs reports, disrupted that trend, and now there is yet another new pattern.
Let’s start out with layoffs and discharges (red) and total separations (blue), showing that these have followed their past patterns, as layoffs rapidly declined to a normal rate after last March and April. As noted above, this month’s report made yet another new series low:
Next, here is the series-long record of hiring (blue), quits (green, *1.75 for scale), and job openings (red):
Here is the zoomed-in look at the past several years:
What has been different this time around is that, after rapidly improving, hires declined again until bottoming in December and January, and have risen only tepidly since.
Two months ago I flagged the issue of whether “hires reassert themselves, as in the past two recoveries, or whether openings without actual hiring continue to soar as they did starting in 2015.” In March both happened, but in April, as I anticipated given the relatively subpar April employment report, the increase in actual hires is definitely lackluster.
Yesterday I read a news article (sorry, didn’t bookmark it) that appeared to anticipate all of the trends we saw in this report. Of people who lost jobs early in the pandemic, many of the older workers have chosen simply to retire (hence the record in voluntary quits). Others cited, in roughly equal percentages, (1) problems with child care, (2) job offers unattractive compared with continued enhanced unemployment benefits, and (3) that the jobs on offer paid significantly less than the jobs they had before the pandemic.
It is pretty obvious there is a disconnect in the jobs market, and all 3 of the above items are going to have to be addressed in some fashion.
Baltimore City Responds After Dozens Of Businesses Threaten Not To Pay Taxes
This weekend, the Baltimore Police Department (BPD) closed down multiple city streets around the Inner Harbor, in a stretch called "Fells Point," after dozens of local businesses threatened the new city government, run by Mayor Brandon Scott, to not pay taxes because they're "fed up and frustrated" with the outburst of violence.
Last week, 37 restaurants and small businesses sent a letter to the mayor's office titled "Letter to City Leaders From Fells Point Business Leaders." They threatened to stop paying city taxes and other fees until "basic and essential municipal services are restored." This comes as Madam State's Attorney Marilyn Mosby halted petty crimes during the pandemic and made such a measure permanent - the idea was to decrease violent crime, but that seems to have severely backfired.
What's happened in the historic bar strict is absolute mayhem at night, transformed into a dangerous area where violent and rowdy crowds have ruined the once pleasant atmosphere along with multiple shootings.
So this weekend, BPD closed down streets around Fells Point, which includes parts of Aliceanna, Thames, and Bond streets.
One of the 37 concerned business owners on the list is Bill Packo, who owns Barley's Backyard and has been operating in Fells Point for three decades. He spoke with WJZ13 about the out of control violence and public drunkenness:
"It's a shame. What they're letting happen to Fells Point is what they let happen in the Inner Harbor, and now it has made its way here," Packo said. "There's alcohol being sold by individuals out there, drugs, and clearly we all know about the shootings that took place last weekend. But there needs to be some control out there. There is none whatsoever."
BPD's mobile police command was spotted outside another shop in the bar district. It looks very dystopic.
Meanwhile, Scott, who was newly elected, skipped out on the virtual community town hall meeting on Thursday at 7 p.m that was to address the issues in Fells Point.
Packo called out Scott for not attending the meeting:
"It's an embarrassment to the city. It's an embarrassment to the mayor no matter what the schedule was," he said.
Again, as we've said before, the chaos in Fells Point comes as the city descends into what could be the most violent period ever. Mosby has halted police officers going after petty crimes that have inadvertently backfired. Another liberal-run town with good intentions in policies not exactly panning out as they thought.
Local news WMAR2's Eddie Kadhim interviewed a man who summed up the city's response in Fells Point:
One Man's opinion on the city response in Fells Point from a man who comes fishing down here every weekend. pic.twitter.com/mhO9GMj3qw
Another man said the violent crime in low-income neighborhoods is just spilling over into the downtown area.
"Why should Fells Point get help when so many other areas are suffering”. A fair question that I am hearing a lot. I talked to Munir Bahar @thecorcommunity about the violence that plagues the WHOLE city and how it trickles down EVERYWHERE into what he called this “powder keg”. pic.twitter.com/SKDfSzSCnJ
Visualizing The History Of US Inflation Over 100 Years
Is inflation rising?
The consumer price index (CPI), an index used as a proxy for inflation in consumer prices, offers some answers. In 2020, inflation dropped to 1.4%, the lowest rate since 2015. By comparison, inflation sits around 5.0% as of June 2021.
Given how the economic shock of COVID-19 depressed prices, rising price levels make sense. However, as Visual Capitalist's Dorothy Neufeld notes, other variables, such as a growing money supply and rising raw materials costs, could factor into rising inflation.
To show current price levels in context, this Markets in a Minute chart from New York Life Investments shows the history of inflation over 100 years.
U.S. Inflation: Early History
Between the founding of the U.S. in 1776 to the year 1914, one thing was for sure - wartime periods were met with high inflation.
At the time, the U.S. operated under a classical Gold Standard regime, with the dollar’s value tied to gold. During the Civil War and World War I, the U.S. went off the Gold Standard in order to print money and finance the war. When this occurred, it triggered inflationary episodes, with prices rising upwards of 20% in 1918.
However, when the government returned to a modified Gold Standard, deflationary periods followed, leading prices to effectively stabilize, on average, leading up to World War II.
The Move to Bretton Woods
Like post-World War I, the Great Depression of the 1930s coincided with deflationary pressures on prices. Due to the rigidity of the monetary system at the time, countries had difficulty increasing money supply to help boost their economy. Many countries exited the Gold Standard during this time, and by 1933 the U.S. abandoned it completely.
A decade later, with the Bretton Woods Agreement in 1944, global currency exchange values pegged to the dollar, while the dollar was pegged to gold. The U.S. held the majority of gold reserves, and the global reserve currency transitioned from the sterling pound to the dollar.
1970’s Regime Change
By 1971, the ability for gold to cover the supply of U.S. dollars in circulation became an increasing concern.
Leading up to this point, a surplus of money supply was created due to military expenses, foreign aid, and others. In response, President Richard Nixon abandoned the Bretton Woods Agreement in 1971 for a floating exchange, known as the “Nixon shock”. Under a floating exchange regime, rates fluctuate based on supply and demand relative to other currencies.
A few years later, oil shocks of 1973 and 1974 led inflation to soar past 12%. By 1979, inflation surged in excess of 13%.
The Volcker Era
In 1979, Federal Reserve Chair Paul Volcker was sworn in, and he introduced stark changes to combat inflation that differed from previous regimes.
Instead of managing inflation through interest rates, which the Federal Reserve had done previously, inflation would be managed through controlling the money supply. If the money supply was limited, this would cause interest rates to increase.
While interest rates jumped to 20% in 1980, by 1983 inflation dropped below 4% as the economy recovered from the recession of 1982, and oil prices rose more moderately. Over the last four decades, inflation levels have remained relatively stable since the measures of the Volcker era were put in place.
Fluctuating Prices Over History
Throughout U.S. history. there have been periods of high inflation.
As the chart below illustrates, at least four distinct periods of high inflation have emerged between 1800 and 2010. The GDP deflator measurement shown accounts for the price change of all of an economy’s goods and services, as opposed to the CPI index which is a fixed basket of goods.
It is measured as GDP Price Deflator = (Nominal GDP ÷ Real GDP) × 100.
According to this measure, inflation hit its highest levels in the 1910s, averaging nearly 8% annually over the decade. Between 1914 and 1918 money supply doubled to finance war efforts, compared to a 25% increase in GDP during this period.
U.S. Inflation: Present Day
As the U.S. economy reopens, consumer demand has strengthened.
Meanwhile, supply bottlenecks, from semiconductor chips to lumber, are causing strains on automotive and tech industries. While this points towards increasing inflation, some suggest that it may be temporary, as prices were depressed in 2020.
At the same time, the Federal Reserve is following an “average inflation targeting” regime, which means that if a previous inflation shortfall occurred in the previous year, it would allow for higher inflationary periods to make up for them. As the last decade has been characterized by low inflation and low interest rates, any prolonged period of inflation will likely have pronounced effects on investors and financial markets.
Visualizing The Biggest Companies In The World In 2021
Since the COVID-19 crash, global equity markets have seen a strong recovery. The 100 biggest companies in the world were worth a record-breaking $31.7 trillion as of March 31 2021, up 48% year-over-year. As a point of comparison, the combined GDP of the U.S. and China was $35.7 trillion in 2020.
PwC ranked the largest publicly-traded companies by their market capitalization in U.S. dollars. It’s also worth noting that sector classification is based on the FTSE Russell Industry Classification Benchmark, and a company’s location is based on where its headquarters are located.
Within the ranking, there was a wide disparity in value. Apple was worth over $2 trillion, more than 16 times that of Anheuser-Busch (AB InBev), which took the 100th spot at $128 billion.
In total, 59 companies were headquartered in the United States, making up 65% of the top 100’s total market capitalization. China and its regions was the second most common location for company headquarters, with 14 companies on the list.
Risers and Fallers
What are some of the notable changes to the biggest companies in the world compared to last year’s ranking?
Tesla’s market capitalization surged by an eye-watering 565%, temporarily making Elon Musk the richest person in the world. Food delivery platform Meituan and PayPal benefited from growing e-commerce popularity with their market capitalizations growing by 221% and 151% respectively.
Tech companies TSMC and ASML Holdings were also among the top 10 risers, thanks to a shortage of semiconductor chips and growing demand.
On the other end of the scale, Swiss companies Nestlé, Novartis, and Roche Holding were all among the bottom 10 companies by market capitalization growth. China Mobile was the only company to decline with a -12% change. The company was delisted from the New York Stock Exchange as a result of an executive order issued by former president Donald Trump, and recently announced its intention to list on the Shanghai Stock Exchange.
A Sector View
Across the 100 biggest companies in the world, some sectors had higher weightings.
Technology had the highest market capitalization and was also the most common sector, with Big Tech dominating the top 10. Companies in the consumer discretionary, financials, and health care sectors also had a strong representation in the ranking.
Despite having only five companies on the list, the energy sector amounted to almost 10% of the top 100’s market capitalization, mostly due to Saudi Aramco’s whopping valuation.
An Uncertain Recovery
From near market lows on March 31, 2020, all sectors saw increases in their market capitalization. However, top 100 companies in some sectors outperformed their respective industry index, while others did not.
Basic materials and industrials, both cyclical sectors, were high performers in the top 100 and outperformed their respective industry indexes. Technology companies also outperformed, and accounted for $255 billion or 31% of all shareholder distributions by the top 100, far more than any other sector. Apple alone spent $73 billion on share buybacks and $14 billion in dividends in the 2020 calendar year.
On the other hand, the worst-performing sectors in the top 100 were health care, utilities, and energy. While the index performance for health care and utilities was also relatively poor, the wider energy sector performed fairly well.
It’s perhaps not surprising that all sectors saw positive returns since their low levels in March 2020, buoyed by fiscal stimulus and central bank policies. As countries begin to reopen, will the value of the biggest companies in the world continue to climb?