By Nicholas Colas of DataTrek Research
The $64 question for the US labor market is how close are we to full employment in a post-pandemic world? One way we can assess this topic is by looking at the current employment status of younger Americans. This cohort was disproportionately hurt after the Financial Crisis, particularly when it came to underemployment. It took a hot labor market and years of economic growth to incorporate them into the labor force and into positions that matched their skill levels. Did the Pandemic Recession cause the same problem all over again, or are we in a better spot now?
#1: Here’s how young workers with and without a college degree are faring relative to prior cycles using data from the New York Fed (rates calculated as a 12-month moving average back to 1990):
The unemployment rate for recent college graduates (aged 22 to 27) with a bachelor’s degree or higher fell to 5.4 percent in September 2021 (latest available data) from a high of 13.3 pct in June 2020 during the pandemic. The lows of the last 3 economic cycles were 3.5 pct (November 2019), 3.0 pct (May 2007) and 3.7 pct (November 2000). Average: 3.4 pct, or 2 percentage points below the current rate.
The unemployment rate for all college grads (aged 22 to 65) was 2.9 pct as of September versus a high of 8.0 pct in June 2020. The lows of the last 3 cycles were 2.0 pct (January 2020), 2.0 pct (March 2007) and 1.7 pct (December 2000). Average: 1.9 pct, down 1 percentage point from the current rate.
The unemployment rate of young workers without a bachelor’s degree (aged 22 to 27) was 8.8 pct in September 2021 versus a high of 21.5 pct in June 2020. The lows of the last 3 cycles were 5.8 pct (June 2019), 7.4 pct (May 2007) and 6.0 pct (October 2000). Average: 6.4 pct, or down 2.4 percentage points from the current rate
Takeaway: each cohort’s unemployment rate has improved much more quickly than after the Great Recession. Young workers without higher education have the furthest to go to reach their lowest average unemployment rate of the last 3 cycles, followed by recent college grads and all college grads. Young workers without a college degree always take the longest to get pulled back into the labor force after recession given that doing so requires an especially strong economy.
#2: Underemployment (“the share of graduates working in jobs that typically do not require a college degree”):
The underemployment rate of all college grads was 33.0 pct as of September. The lows of the prior 3 economic cycles were: 33.4 pct (December 2019), 33.2 pct (August 2008) and 31.4 pct (June 2000). Average: 32.7 pct
The underemployment rate of recent college grads was 41.0 pct in September 2021. The lows of the past 3 cycles were: 40.2 pct (September 2018), 40.6 pct (January 2008) and 36.6 pct (April 2001). Average: 39.1 pct.
Takeaway: the underemployment rates of college grads and recent college grads are much lower than the last recovery. Both are currently just above their lowest average underemployment rates of the last three cycles. By contrast, they took much longer to improve after the Dot Com Bubble and Financial Crisis, particularly in the case of recent college grads.
Here are our three takeaways from this data:
Unemployment among recent college grads and younger workers without a college degree continues to fall at a brisk clip, but they are not yet at the point of full employment as compared to the prior three cycles. The unemployment rate for recent college grads is currently around levels reached in 2014/early 2015 after the Financial Crisis, and 2016 in the case of younger workers without a degree. Again, much better than the last cycle, but still room for improvement relative to three decades of history. While that likely means overall full employment is still a way off, it does give employers a couple of pools of talent from which to hire amid labor shortages and near-record high levels of job openings. Whether that helps the US labor market bridge the gap of still 4.2 million jobs missing since before the pandemic will come down to two considerations: 1) both recent grads and younger workers without higher education lack experience, so employers will need to be willing to invest in training, and 2) employers may need to loosen their job requirements of having a college degree.
Recent grads are much less likely to be underemployed than after the Financial Crisis, which yields two major positives on the consumer spending front: 1) adequate employment relative to young workers’ higher education level should mean they have more discretionary income, and 2) they should be less delayed with purchasing a home, having kids and all the purchases that come with those life milestones. This should help US economic growth, and in turn, the pace of further hiring.
A faster labor market recovery for young workers should help overall productivity. Many younger workers missed out on formative first real job experiences after the Great Recession, so the sooner they train now the more effective they will be for companies and the greater economy.
Bottom line: while unemployment among younger workers still exceeds the best levels of prior cycles, its rapid progress shows the US economy is getting closer to full employment more quickly than initially anticipated. Additionally, this is nothing like the environment after the last crisis when young college educated workers had to take jobs that did not leverage their education. They are entering a labor market hungry for workers, affording them the ability to find suitable jobs and pay which should in turn provide a boost to both US economic growth and productivity for years to come.
DB: Is The World Learning To Live With The Virus?
DB: Is The World Learning To Live With The Virus?
After a day of zigzags on the virus front, we end with some encouraging observations from Deutsche Bank’s Jim Reid who shows in his "chart of the day" that according to global mobility data,..
After a day of zigzags on the virus front, we end with some encouraging observations from Deutsche Bank's Jim Reid who shows in his "chart of the day" that according to global mobility data, most of the world is back close to pre-pandemic levels of mobility (at least on a population-weighted basis) even if the GDP-weighted figure still lags, partly due to some of the larger DM economies still being down vs. February 2019.
Regardless, as Reid observes, the graph shows that "on both measures mobility is notably above last year’s levels. This helps show why reasonably strong YoY growth shouldn’t be too difficult to attain in H1 2022. In H1 2021, the world wasn’t that mobile."
This is good news because it means that - at least so far- as the winter covid wave and Omicron hit us, aggregate mobility hasn’t yet dipped. This, according to Reid, shows that either people are learning to live with the virus more or that it’s too early to tell as travel and domestic restrictions, only very recently imposed, have yet to fully take their toll, with more possibly to come.
To be sure, Austrian mobility has declined significantly with Germany also drifting lower. So where restrictions have been imposed there has been a consequence.
A more detailed heatmap of global mobility is shown below.
To be sure, the swing factor to winter mobility will be Omicron. For those readers looking for good news, the second chart from Reid shows that in South Africa covid fatalities from the Omicron wave have not responded to the rise in cases in the same manner as prior ones (with a 12-day lag).
While it is still very early days with the data subject to revisions, Reid notes that "we are getting more and more (albeit patchy) evidence that the new variant is less severe. So much now depends on how more transmissible it is, especially in heavily-vaccinated populations." Reid says that he leans on the optimistic side here "but it seems the number of Omicron cases are building fast enough that we should get some decent data very soon on how its impacting well-vaccinated countries."
Global Trade Case(s) Behind Global ‘Growth Scare’
The US Census Bureau today reported that US imports of goods and services reached a record monthly high of $290.7 billion in October 2021. Just goods alone, the figure was $241.1 billion, which was 11% greater than the previous peak set way back in Octobe
The US Census Bureau today reported that US imports of goods and services reached a record monthly high of $290.7 billion in October 2021. Just goods alone, the figure was $241.1 billion, which was 11% greater than the previous peak set way back in October 2018. With (questionable) media accounts continuing to highlight West Coast port traffic, there may not otherwise seem any end in sight to the “inflationary” goods boom as consumer spend themselves to the moon.
The money illusion, however, is creating the impression of just this sort of trend. Fortunately, the Census Bureau also gives us a crude measure to specifically import (and export) volumes adjusting for prices. When doing so, October 2021 imports of goods were a price-adjusted 6% more than they had been in October 2018.
While that in itself is a big difference, more so is the one since March this year. Even in nominal terms, US demand for foreign goods has clearly slowed way down from the frenetic pace begun during last year’s reopening. It’s still rising (as is imports of services), yet all of it and more is attributable to “inflation”, or mere price changes.
And even in the best months, nominal inbound trade remains well off the prior trend.
In real terms, more or less, the Census Bureau believes the volume of goods has actually declined by 1.5% over these particular seven months when bond yields have fallen, curves have flattened, and deflationary signals proliferated long before either delta or omicron variants to the coronavirus.
Imports coming from the US’s largest trading partners are actually substantially less than they had been several years ago – indicating that much of what’s been shipped to America hasn’t been the usual traded stuff (not just missing autos). The manufacture of consumer goods, in particular, coming from China and Europe hasn’t matched the rhetoric surrounding either the goods boom or the “inflation” created by it.
Quite a lot of nominal trade, then, is the US import of high- and higher-priced raw materials rather than mainly due to booming consumer spending.
This volume difference, or money illusion, has been spotted all over the world. It has been more difficult to pick up in places like China, for all the usual reasons of questionable data, questionable data collection practices (discontinuities), and perhaps even a sprinkle of politics like those made by the particulars of this pandemic.
For instance, without factoring prices, there’s been a huge difference in data for what should be two sides of the same thing: US imports from China, as estimated by the Census Bureau; Chinese exports to the US, as estimated by its General Administration of Customs.
Yet, for most of this year – focused more so since March 2021 – the Chinese claim a whole lot more goods have been sent to the United States than the United States estimates has been received from China. Once upon a time, the data had largely matched, and when it may not have the discrepancy was nowhere near this huge.
There are any number of potential reasons for this, though only one, to my view, seems plausibly able to satisfactorily explain what is a mostly post-COVID divergence: the ongoing “trade wars” leading Chinese shippers to reroute goods through intermediary countries to avoid certain tariffs; lags in shipping times that have gotten lag-gier with purported US port difficulties; or, perhaps pricing differences on the most basic level.
It’s the last one that potentially includes at least a little bit of history; the Chinese practice of over-invoicing goods (having used Hong Kong as the staging point for this accounting fiction) so as to import more US$s for “exported” goods on the back end outside the scrutiny of financial authorities.
This would certainly fit given the dollar shortage which has been plaguing China all year, as the data makes plain, but especially February 2021 forward fitting the same timeframe.
In addition to what would be a very different kind of money illusion in terms of Chinese exports, there’s the same one applied to China’s imports from around the rest of the world (not the US; the Chinese buy very little of American products or services).
China’s GAC says imports into that country continue to rise at a seemingly decent rate, up a sizzling 31.7% year-over-year in October, yet much of that change is attributable to base effects first before even getting to possible price effects. The 2-year change (annual rate) was only 17.4%, which only sounds still-terrific outside of historical context.
Recent 2-year rates of change in China’s imports aren’t any different from 2018’s, which should already ring substantial alarm bells given how 2018’s import activity left the rest of the world facing a substantial shortfall (in trade) and downturn/recession long before COVID would plague China.
And, again, the money illusion in Chinese trade masks what in volume must be even less than 2018; not just rates of change, also absolute terms. Using the iron ore example I had presented last month, with iron prices collapsing since July the illusion is now far less misleading.
But if we’re really looking to confirm or deny the world’s developing “growth scare” from this global trade perspective, we don’t even need to adjust for prices to see how Chinese demand for more finished goods – like in the US – has tailed off dramatically only from there going back all the way to the end of last year.
China’s imports from Europe, Germany expressly, have declined by a sizable amount compared to last December, a downturn which amplified around, like a whole lot of things globally, July.
Even with nominal prices up as far as they have gone on traded items and goods, this data from China aligns only-too-well with “growth scare” as it would if the Chinese internal economy was at the forefront of growing weakness – prices included.
These import figures certainly corroborate the same trends coming from places like Germany which are global bellwethers largely for how closely tied German industry is with China’s internal demand situation (that never seems to match inflationary narratives in whichever time period).
Altogether, on the surface there appears to be, from an American perspective, an inflationary boom still booming. All the while, at the very least something changed after March and April in the US besides prices. More concerning, something more changed in that same wrong direction for China (therefore Europe and elsewhere) also entering summer.
Just how much has become more serious weakness is a matter for statistics and the nominal illusion. Even if we can’t accurately figure it, in one sense it doesn’t necessarily matter.
For an inflationary boom, a real one for the whole system, there shouldn’t be any ambiguity let alone so many clear cases of the wrong factors and outcomes. And that’s before observing outright, outstanding weakness in very clear-cut fashion from the one place on Earth the rest of Earth is counting on – and has been told to count on – to pull the global economy up the whole rest of the way from a mess now almost two years old.
There are goods flowing, as there always are, it’s these too many questions and outright contradictions which leave the world’s bond curve(s) too much to its deepening skepticism. There be landmines, alright.
Gold Trends 2021: Price Sheds 6 Percent Following Record 2020
Click here to read the previous gold trends article. After soaring to an all-time high of US$2,058.40 per ounce during 2020, gold has faced headwinds in 2021.Values for the yellow metal started the year at US$1,898, but the level proved unsustainable…
Click here to read the previous gold trends article.
After soaring to an all-time high of US$2,058.40 per ounce during 2020, gold has faced headwinds in 2021.
Values for the yellow metal started the year at US$1,898, but the level proved unsustainable and gold had sunk to US$1,700 — still its year-to-date low — by the end of the first quarter.
Positivity in the second quarter pushed the precious metal to its annual high in May, when the price touched US$1,903; however, it soon retreated to the US$1,760 range a few weeks later.
Since then, the currency metal has struggled to breach US$1,800, and many experts are pinning its price volatility on broader monetary issues. Read on for a look at trends that impacted gold in 2021.
Gold trends 2021: Key headwinds keeping the metal down
Speaking to the Investing News Network, Brian Leni, editor of Junior Stock Review, explained that 2020’s pandemic response led to a massive expansion of global debt and was accompanied by low interest rates, “which the market knows is a recipe for disaster, but it keeps the ‘party’ going, so to speak.”
This environment facilitated gold’s 32 percent price increase between January and August of last year, and ultimately allowed the yellow metal to end 2020 up 21.18 percent from its January start of US$1,552.30.
“Over the last year, however, the gold price has drifted mostly downward,” Leni said.
“In my view, this isn’t because of any fundamental gold market reason. I think that negative price action is the market predicting or expecting the US Federal Reserve to raise interest rates to quell the rampant inflation that we have endured over the last 12 to 16 months.”
With economic stimulus winding down and growing uncertainty emerging around new COVID-19 variants, the Fed is in a precarious position.
“The problem for the Fed is twofold,” Leni said. “First, debt levels are so high that any significant interest rate hikes at this point could easily destabilize the market, causing a cascade effect around the world.”
He continued, “Second, the broader stock market is at all-time highs. Easy money, low interest and lockdowns have given the public more access or interest in the stock market than ever.”
The result is a delicate situation the Fed will have trouble balancing.
“If the Fed raises rates and begins its tightening process, I have no doubt that this will be negative for the broader stock market,” Leni noted. “It’s a big risk to many people’s savings, and the Fed knows it.”
Because of this, he thinks it will be challenging for the Fed to raise rates to the projected 0.25 or 0.5 percent amount in 2022 without causing a widespread ripple effect.
“Ultimately, an investment in gold is an investment in real money,” added Leni. “Real money that can’t be debased and is not simultaneously someone else’s liability.”
Gold trends 2021: ETF outflows preventing price growth
After dropping to a year-to-date low of US$1,700 in Q1 and rallying to this year's high point of US$1,903 in Q2, gold remained rangebound between US$1,700 and US$1,800 for most of Q3.
In addition to the factors mentioned by Leni, gold's flat price performance in the third quarter has been attributed to a 7 percent decline in investment demand from the exchange-traded fund (ETF) segment. This trend continued in October, when gold ETF holdings shed 25.5 tonnes.
"Global gold ETF holdings fell to 3,567 tonnes (US$203 billion) during the month — notching year-to-date low levels — as investor appetite for gold diminished in the ETF space following price declines in August and September," an October World Gold Council gold ETF report states.
In comparison to 2020’s record-setting 877 tonnes of inflows, so far 2021 has seen outflows of 269.1 tonnes and modest inflows of 87.6 tonnes. What's more, six of the last 10 months have registered net outflows in the gold-backed ETF segment. The ETF exodus has been attributed to investors adding more risk to their portfolios.
That said, Juan-Carlos Artigas, head of research at the World Gold Council, noted that 2021’s outflows seem disproportionate because 2020, especially Q3, was such a record-setting period for the gold ETF space.
However, he did point out that significant moves in the gold price tend to be influenced by the investment demand segment on a short- to mid-term basis. Looking longer term, overall demand from all segments — including jewelry, technology and bars and coins — is the price driver.
As investment demand shed 7 percent, or 831 tonnes, the gold price was further impacted by total mine production, which ballooned to 959.46 tonnes, up almost 90 tonnes from Q2’s 876.77 tonnes and significantly higher than the 842.72 tonnes mined in the first quarter.
All of gold’s headwinds combined in late September, forcing the metal to a six month low of US$1,726.10.
Gold trends 2021: Inflation threat gaining traction
As new lockdowns began to emerge toward the end of the year, and stronger variants of COVID-19 started to be detected, some positivity in the broader markets began to erode.
This uncertainty benefited the yellow metal, which edged higher throughout October, starting the session at US$1,761 and ending the 31 day period at US$1,775.
“Gold price strength happened amid higher nominal yields: gold had been generally inversely correlated with nominal bond yields this year,” a November WGC report notes. “However, a rise in inflation expectations outweighed the move in nominal rates and resulted in lower real rates.”
As inflation began to exhibit signs of being more structural and less transitory in the fourth quarter, gold appeared to benefit from the looming uncertainty.
"If you look at the performance of interest rates versus gold over the last 20 years, as interest rates go up, gold sells off,” said Gareth Soloway, chief market strategist at InTheMoneyStocks.com, in early November.
"We haven't seen gold sell off, we've seen gold more chop sideways over the last couple of months as interest rates have gone up. And what that again tells us is that the market is starting to realize inflation is here, and big money is buying every single dip on gold. So I continue to be very, very bullish on gold over the longer term.”
Watch Soloway discuss where gold may go in the months ahead.
These factors are anticipated to be further heightened by changes in asset allocation, which have been fueled by historically low interest rates, pushing investors to add risk to their portfolios earlier in the year. “Because of that, investors are looking for ways to hedge some of that exposure, and that can be supportive of gold,” Artigas said.
By the end of November, gold had rallied to a 60 day high of US$1,803.20 ahead of December volatility courtesy of the Omicron variant, which hampered air travel and forced countries to reimplement quarantine-style protocols.
The spreading variant pushed markets lower during the first week of trading in December. However, gold also faced headwinds, retracting to the US$1,762 level before rebounding to the US$1,780 range.
Gold trends 2021: Industry waiting for a market correction
Despite gold's lackluster 2021 performance, those in the industry have a positive outlook for next year, with many suggesting that the Fed won't be able to stay in control for much longer.
Barisheff explains why gold is the best investment right now.
"The market is due for a major correction. What will cause it and when it will happen is anybody's guess — it could be tomorrow, it could be six months from now," said Nick Barisheff, CEO of BMG Group, who advises investors shed some of their risk when initial losses start to mount.
Rather than rushing to cash, a popular move amid market turmoil, he has other ideas. "Instead of taking your money off the table and going into cash … you go to gold (because cash is devaluing daily),” Barisheff said.
“Gold will at least hold its own and probably appreciate ... so by sitting it out in gold you can wait until the market finishes correcting and then buy back in.”
Don't forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.stimulus pandemic covid-19 fed federal reserve etf quarantine interest rates stimulus gold
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