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The last domino before a recession? Job losses

The next stage is to see total consumption demand be hit so negatively that it sends job openings down and jobless claims higher.
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Today’s job report came in better than anticipated, with 315,000 jobs created. We did have negative revisions of 107,000 to the prior two reports combined, and the unemployment rate rose to 3.7%. So what does this mean for the labor market and the larger economy? 

The job market is still pushing along fine as the need for labor continues in America. Job openings in America are still over 11 million, and the jobless claims data has stabilized in recent weeks. Let’s take a look at the American labor market.

From BLS:


Below are the areas where the report says jobs were created, and the construction job growth data is encouraging to see. Even though the builders are going to stop producing new single-family homes that aren’t already under contracted, they need to have the labor to finish the homes that have been started on or under contract and not started on yet. Also, we must be mindful that multifamily construction has been good this year, with rental demand still solid.


Here is a breakdown of the unemployment rate and educational attainment for those 25 years and older:

—Less than a high school diploma: 6.2%.
—High school graduate and no college: 4.2%
—Some college or associate degree: 2.9%
—Bachelor’s degree and higher: 1.9%



The unemployment rate did increase for those that don’t have a bachelor’s degree or higher. The labor force growth also rose in this report. When people talk about the unemployment rates rising in a positive jobs report, it tends to mean the labor force growth of people looking has also increased, as we have seen today.

If the unemployment rate gets below 3%, I tend to see that as negative, as the labor force growth isn’t very strong. People get fired and hired each month. This is why neither jobless claims nor the unemployment rate can ever really be zero.

For the rest of this century, If productivity stays weak and our labor force growth slows even more, the need for labor will be transparent in parts of the country that lack younger people.

For me, it’s always simple: economics is demographics and productivity, and the rest is stamp collecting. Housing economics is demographics and affordability. But for jobs, we are short of labor in certain parts of the U.S. with an older population pool that is leaving the workforce. Those immigrants and robots that were supposed to take all the jobs haven’t panned out. Job openings are over 11.2 million and much higher than what we had at the end of the great financial recession, which was a tad over 2 million.


Health of the economy?

My sixth recession red flag model was fully raised on the same day as the last jobs report. My model is not designed to be late or raised when we are in a  recession: it is created as a progression model to show you the history of economic cycles and when and when not to worry about a recession. 

For example, I never had the six recession red flags up in the previous economic expansion from 2010 until COVID-19 hit , which was the longest economic and job expansion in history. The economic data was getting better in late 2019, and in February of 2020, housing broke out.

However, the shock of COVID-9 was way too much to prevent a brief recession. I had to create a recovery model based on a pandemic; that was crazy and then some. However, the America is Back recovery model worked well in 2020, and I retired it on Dec. 9, 2020.

So now that all the recession red flags are raised, what am I looking for? The next stage is to see total consumption demand be hit so negatively that it sends job openings down and jobless claims higher. Then we can call this a U.S. job loss recession, following the pattern of recessions we have had post-World War II.

Why is housing in a recession but not the economy yet? Recessions are very simple to understand. These things tend to fall during a recession, and we are already seeing them fall in housing, just not in the economy.

– Sales
– Production
– Jobs
– Income


Recently on CNBC, I said that I agree with others who say housing is in a recession. I have to — I raised my fifth recession red flag for housing in June of this year.  

How does consumption get hit harder? Well, interest rates on credit cards, home equity lines, and mortgage rates are much higher than before 2022. With higher interest rates and higher inflation data, this is a test for the United States consumers, who haven’t been tested this century because the inflation growth rate had been low before 2021.

I will keep tracking more and more on consumption data and jobless claims data at this stage and will no longer be focusing on those six recession red flags. The last flag raised was that the leading economic index fell for the fifth month in a row. The first month was minor, I need to see four to six months of decline to raise it, which I did last month.





Overall, the labor market is running well. Jobless claims under 300,000 using a four-week moving average, still show that we don’t have any real stress in the labor market yet.


Traditionally this data line breaks hard to the upside when we are in an actual recession as companies are forced to fire people to ensure they’re in line with their business goals. We aren’t there yet, but now is the time to be mindful of it. The last time my six recession red flags were up was late in 2006, and the job loss recession didn’t happen until 2008, so we can have some time until the consumer breaks.

The Federal Reserve is using the labor market as cover for their aggressive rate hike language, which I still believe it’s mostly jawboning. Some are saying that they won’t even cut rates during a recession if inflation is high; remember, these people talk a lot to try to communicate to markets. I am telling you this because the Federal Reserve members were very upset that mortgage rates fell and stocks rose. So, they decided to have a united front when talking to the media that they’re serious about raising rates and keeping them higher until inflation falls.

One final note: How can we prevent a recession? History is not on our side once all six recession red flags are up. However, due to the crazy data that this COVID-19 recovery had given us with the wild bullwhip effect of data, I have come up with one plausible theory.

With that in mind, here are the two ways we can avoid this recession:

1. Rates fall to get the housing sector back in line.

2. Growth rate of inflation falls, and the Fed stops hiking rates and reverses course, as it did in 2018.

Can this happen? We have a backdrop that says it can. If the Russian Invasion finds a peaceful resolution and China doesn’t invade Taiwan, then some of the X variable factors are removed with supply distribution. For now, we take the data one day at a time because we want to be the detective, not the troll.

The post The last domino before a recession? Job losses appeared first on HousingWire.

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Copper Soars, Iron Ore Tumbles As Goldman Says “Copper’s Time Is Now”

Copper Soars, Iron Ore Tumbles As Goldman Says "Copper’s Time Is Now"

After languishing for the past two years in a tight range despite recurring…

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Copper Soars, Iron Ore Tumbles As Goldman Says "Copper's Time Is Now"

After languishing for the past two years in a tight range despite recurring speculation about declining global supply, copper has finally broken out, surging to the highest price in the past year, just shy of $9,000 a ton as supply cuts hit the market; At the same time the price of the world's "other" most important mined commodity has diverged, as iron ore has tumbled amid growing demand headwinds out of China's comatose housing sector where not even ghost cities are being built any more.

Copper surged almost 5% this week, ending a months-long spell of inertia, as investors focused on risks to supply at various global mines and smelters. As Bloomberg adds, traders also warmed to the idea that the worst of a global downturn is in the past, particularly for metals like copper that are increasingly used in electric vehicles and renewables.

Yet the commodity crash of recent years is hardly over, as signs of the headwinds in traditional industrial sectors are still all too obvious in the iron ore market, where futures fell below $100 a ton for the first time in seven months on Friday as investors bet that China’s years-long property crisis will run through 2024, keeping a lid on demand.

Indeed, while the mood surrounding copper has turned almost euphoric, sentiment on iron ore has soured since the conclusion of the latest National People’s Congress in Beijing, where the CCP set a 5% goal for economic growth, but offered few new measures that would boost infrastructure or other construction-intensive sectors.

As a result, the main steelmaking ingredient has shed more than 30% since early January as hopes of a meaningful revival in construction activity faded. Loss-making steel mills are buying less ore, and stockpiles are piling up at Chinese ports. The latest drop will embolden those who believe that the effects of President Xi Jinping’s property crackdown still have significant room to run, and that last year’s rally in iron ore may have been a false dawn.

Meanwhile, as Bloomberg notes, on Friday there were fresh signs that weakness in China’s industrial economy is hitting the copper market too, with stockpiles tracked by the Shanghai Futures Exchange surging to the highest level since the early days of the pandemic. The hope is that headwinds in traditional industrial areas will be offset by an ongoing surge in usage in electric vehicles and renewables.

And while industrial conditions in Europe and the US also look soft, there’s growing optimism about copper usage in India, where rising investment has helped fuel blowout growth rates of more than 8% — making it the fastest-growing major economy.

In any case, with the demand side of the equation still questionable, the main catalyst behind copper’s powerful rally is an unexpected tightening in global mine supplies, driven mainly by last year’s closure of a giant mine in Panama (discussed here), but there are also growing worries about output in Zambia, which is facing an El Niño-induced power crisis.

On Wednesday, copper prices jumped on huge volumes after smelters in China held a crisis meeting on how to cope with a sharp drop in processing fees following disruptions to supplies of mined ore. The group stopped short of coordinated production cuts, but pledged to re-arrange maintenance work, reduce runs and delay the startup of new projects. In the coming weeks investors will be watching Shanghai exchange inventories closely to gauge both the strength of demand and the extent of any capacity curtailments.

“The increase in SHFE stockpiles has been bigger than we’d anticipated, but we expect to see them coming down over the next few weeks,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said by phone. “If the pace of the inventory builds doesn’t start to slow, investors will start to question whether smelters are actually cutting and whether the impact of weak construction activity is starting to weigh more heavily on the market.”

* * *

Few have been as happy with the recent surge in copper prices as Goldman's commodity team, where copper has long been a preferred trade (even if it may have cost the former team head Jeff Currie his job due to his unbridled enthusiasm for copper in the past two years which saw many hedge fund clients suffer major losses).

As Goldman's Nicholas Snowdon writes in a note titled "Copper's time is now" (available to pro subscribers in the usual place)...

... there has been a "turn in the industrial cycle." Specifically according to the Goldman analyst, after a prolonged downturn, "incremental evidence now points to a bottoming out in the industrial cycle, with the global manufacturing PMI in expansion for the first time since September 2022." As a result, Goldman now expects copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25.’

Here are the details:

Previous inflexions in global manufacturing cycles have been associated with subsequent sustained industrial metals upside, with copper and aluminium rising on average 25% and 9% over the next 12 months. Whilst seasonal surpluses have so far limited a tightening alignment at a micro level, we expect deficit inflexions to play out from quarter end, particularly for metals with severe supply binds. Supplemented by the influence of anticipated Fed easing ahead in a non-recessionary growth setting, another historically positive performance factor for metals, this should support further upside ahead with copper the headline act in this regard.

Goldman then turns to what it calls China's "green policy put":

Much of the recent focus on the “Two Sessions” event centred on the lack of significant broad stimulus, and in particular the limited property support. In our view it would be wrong – just as in 2022 and 2023 – to assume that this will result in weak onshore metals demand. Beijing’s emphasis on rapid growth in the metals intensive green economy, as an offset to property declines, continues to act as a policy put for green metals demand. After last year’s strong trends, evidence year-to-date is again supportive with aluminium and copper apparent demand rising 17% and 12% y/y respectively. Moreover, the potential for a ‘cash for clunkers’ initiative could provide meaningful right tail risk to that healthy demand base case. Yet there are also clear metal losers in this divergent policy setting, with ongoing pressure on property related steel demand generating recent sharp iron ore downside.

Meanwhile, Snowdon believes that the driver behind Goldman's long-running bullish view on copper - a global supply shock - continues:

Copper’s supply shock progresses. The metal with most significant upside potential is copper, in our view. The supply shock which began with aggressive concentrate destocking and then sharp mine supply downgrades last year, has now advanced to an increasing bind on metal production, as reflected in this week's China smelter supply rationing signal. With continued positive momentum in China's copper demand, a healthy refined import trend should generate a substantial ex-China refined deficit this year. With LME stocks having halved from Q4 peak, China’s imminent seasonal demand inflection should accelerate a path into extreme tightness by H2. Structural supply underinvestment, best reflected in peak mine supply we expect next year, implies that demand destruction will need to be the persistent solver on scarcity, an effect requiring substantially higher pricing than current, in our view. In this context, we maintain our view that the copper price will surge into next year (GSe 2025 $15,000/t average), expecting copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25’

Another reason why Goldman is doubling down on its bullish copper outlook: gold.

The sharp rally in gold price since the beginning of March has ended the period of consolidation that had been present since late December. Whilst the initial catalyst for the break higher came from a (gold) supportive turn in US data and real rates, the move has been significantly amplified by short term systematic buying, which suggests less sticky upside. In this context, we expect gold to consolidate for now, with our economists near term view on rates and the dollar suggesting limited near-term catalysts for further upside momentum. Yet, a substantive retracement lower will also likely be limited by resilience in physical buying channels. Nonetheless, in the midterm we continue to hold a constructive view on gold underpinned by persistent strength in EM demand as well as eventual Fed easing, which should crucially reactivate the largely for now dormant ETF buying channel. In this context, we increase our average gold price forecast for 2024 from $2,090/toz to $2,180/toz, targeting a move to $2,300/toz by year-end.

Much more in the full Goldman note available to pro subs.

Tyler Durden Fri, 03/15/2024 - 14:25

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The millions of people not looking for work in the UK may be prioritising education, health and freedom

Economic inactivity is not always the worst option.

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Taking time out. pathdoc/Shutterstock

Around one in five British people of working age (16-64) are now outside the labour market. Neither in work nor looking for work, they are officially labelled as “economically inactive”.

Some of those 9.2 million people are in education, with many students not active in the labour market because they are studying full-time. Others are older workers who have chosen to take early retirement.

But that still leaves a large number who are not part of the labour market because they are unable to work. And one key driver of economic inactivity in recent years has been illness.

This increase in economic inactivity – which has grown since before the pandemic – is not just harming the economy, but also indicative of a deeper health crisis.

For those suffering ill health, there are real constraints on access to work. People with health-limiting conditions cannot just slot into jobs that are available. They need help to address the illnesses they have, and to re-engage with work through organisations offering supportive and healthy work environments.

And for other groups, such as stay-at-home parents, businesses need to offer flexible work arrangements and subsidised childcare to support the transition from economic inactivity into work.

The government has a role to play too. Most obviously, it could increase investment in the NHS. Rising levels of poor health are linked to years of under-investment in the health sector and economic inactivity will not be tackled without more funding.

Carrots and sticks

For the time being though, the UK government appears to prefer an approach which mixes carrots and sticks. In the March 2024 budget, for example, the chancellor cut national insurance by 2p as a way of “making work pay”.

But it is unclear whether small tax changes like this will have any effect on attracting the economically inactive back into work.

Jeremy Hunt also extended free childcare. But again, questions remain over whether this is sufficient to remove barriers to work for those with parental responsibilities. The high cost and lack of availability of childcare remain key weaknesses in the UK economy.

The benefit system meanwhile has been designed to push people into work. Benefits in the UK remain relatively ungenerous and hard to access compared with other rich countries. But labour shortages won’t be solved by simply forcing the economically inactive into work, because not all of them are ready or able to comply.

It is also worth noting that work itself may be a cause of bad health. The notion of “bad work” – work that does not pay enough and is unrewarding in other ways – can lead to economic inactivity.

There is also evidence that as work has become more intensive over recent decades, for some people, work itself has become a health risk.

The pandemic showed us how certain groups of workers (including so-called “essential workers”) suffered more ill health due to their greater exposure to COVID. But there are broader trends towards lower quality work that predate the pandemic, and these trends suggest improving job quality is an important step towards tackling the underlying causes of economic inactivity.

Freedom

Another big section of the economically active population who cannot be ignored are those who have retired early and deliberately left the labour market behind. These are people who want and value – and crucially, can afford – a life without work.

Here, the effects of the pandemic can be seen again. During those years of lockdowns, furlough and remote working, many of us reassessed our relationship with our jobs. Changed attitudes towards work among some (mostly older) workers can explain why they are no longer in the labour market and why they may be unresponsive to job offers of any kind.

Sign on railings supporting NHS staff during pandemic.
COVID made many people reassess their priorities. Alex Yeung/Shutterstock

And maybe it is from this viewpoint that we should ultimately be looking at economic inactivity – that it is actually a sign of progress. That it represents a move towards freedom from the drudgery of work and the ability of some people to live as they wish.

There are utopian visions of the future, for example, which suggest that individual and collective freedom could be dramatically increased by paying people a universal basic income.

In the meantime, for plenty of working age people, economic inactivity is a direct result of ill health and sickness. So it may be that the levels of economic inactivity right now merely show how far we are from being a society which actually supports its citizens’ wellbeing.

David Spencer has received funding from the ESRC.

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Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

By Autumn Spredemann of The Epoch Times

Tens of thousands of illegal…

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Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

By Autumn Spredemann of The Epoch Times

Tens of thousands of illegal immigrants are flooding into U.S. hospitals for treatment and leaving billions in uncompensated health care costs in their wake.

The House Committee on Homeland Security recently released a report illustrating that from the estimated $451 billion in annual costs stemming from the U.S. border crisis, a significant portion is going to health care for illegal immigrants.

With the majority of the illegal immigrant population lacking any kind of medical insurance, hospitals and government welfare programs such as Medicaid are feeling the weight of these unanticipated costs.

Apprehensions of illegal immigrants at the U.S. border have jumped 48 percent since the record in fiscal year 2021 and nearly tripled since fiscal year 2019, according to Customs and Border Protection data.

Last year broke a new record high for illegal border crossings, surpassing more than 3.2 million apprehensions.

And with that sea of humanity comes the need for health care and, in most cases, the inability to pay for it.

In January, CEO of Denver Health Donna Lynne told reporters that 8,000 illegal immigrants made roughly 20,000 visits to the city’s health system in 2023.

The total bill for uncompensated care costs last year to the system totaled $140 million, said Dane Roper, public information officer for Denver Health. More than $10 million of it was attributed to “care for new immigrants,” he told The Epoch Times.

Though the amount of debt assigned to illegal immigrants is a fraction of the total, uncompensated care costs in the Denver Health system have risen dramatically over the past few years.

The total uncompensated costs in 2020 came to $60 million, Mr. Roper said. In 2022, the number doubled, hitting $120 million.

He also said their city hospitals are treating issues such as “respiratory illnesses, GI [gastro-intenstinal] illnesses, dental disease, and some common chronic illnesses such as asthma and diabetes.”

“The perspective we’ve been trying to emphasize all along is that providing healthcare services for an influx of new immigrants who are unable to pay for their care is adding additional strain to an already significant uncompensated care burden,” Mr. Roper said.

He added this is why a local, state, and federal response to the needs of the new illegal immigrant population is “so important.”

Colorado is far from the only state struggling with a trail of unpaid hospital bills.

EMS medics with the Houston Fire Department transport a Mexican woman the hospital in Houston on Aug. 12, 2020. (John Moore/Getty Images)

Dr. Robert Trenschel, CEO of the Yuma Regional Medical Center situated on the Arizona–Mexico border, said on average, illegal immigrants cost up to three times more in human resources to resolve their cases and provide a safe discharge.

“Some [illegal] migrants come with minor ailments, but many of them come in with significant disease,” Dr. Trenschel said during a congressional hearing last year.

“We’ve had migrant patients on dialysis, cardiac catheterization, and in need of heart surgery. Many are very sick.”

He said many illegal immigrants who enter the country and need medical assistance end up staying in the ICU ward for 60 days or more.

A large portion of the patients are pregnant women who’ve had little to no prenatal treatment. This has resulted in an increase in babies being born that require neonatal care for 30 days or longer.

Dr. Trenschel told The Epoch Times last year that illegal immigrants were overrunning healthcare services in his town, leaving the hospital with $26 million in unpaid medical bills in just 12 months.

ER Duty to Care

The Emergency Medical Treatment and Labor Act of 1986 requires that public hospitals participating in Medicare “must medically screen all persons seeking emergency care … regardless of payment method or insurance status.”

The numbers are difficult to gauge as the policy position of the Centers for Medicare & Medicaid Services (CMS) is that it “will not require hospital staff to ask patients directly about their citizenship or immigration status.”

In southern California, again close to the border with Mexico, some hospitals are struggling with an influx of illegal immigrants.

American patients are enduring longer wait times for doctor appointments due to a nursing shortage in the state, two health care professionals told The Epoch Times in January.

A health care worker at a hospital in Southern California, who asked not to be named for fear of losing her job, told The Epoch Times that “the entire health care system is just being bombarded” by a steady stream of illegal immigrants.

“Our healthcare system is so overwhelmed, and then add on top of that tuberculosis, COVID-19, and other diseases from all over the world,” she said.

A Salvadorian man is aided by medical workers after cutting his leg while trying to jump on a truck in Matias Romero, Mexico, on Nov. 2, 2018. (Spencer Platt/Getty Images)

A newly-enacted law in California provides free healthcare for all illegal immigrants residing in the state. The law could cost taxpayers between $3 billion and $6 billion per year, according to recent estimates by state and federal lawmakers.

In New York, where the illegal immigration crisis has manifested most notably beyond the southern border, city and state officials have long been accommodating of illegal immigrants’ healthcare costs.

Since June 2014, when then-mayor Bill de Blasio set up The Task Force on Immigrant Health Care Access, New York City has worked to expand avenues for illegal immigrants to get free health care.

“New York City has a moral duty to ensure that all its residents have meaningful access to needed health care, regardless of their immigration status or ability to pay,” Mr. de Blasio stated in a 2015 report.

The report notes that in 2013, nearly 64 percent of illegal immigrants were uninsured. Since then, tens of thousands of illegal immigrants have settled in the city.

“The uninsured rate for undocumented immigrants is more than three times that of other noncitizens in New York City (20 percent) and more than six times greater than the uninsured rate for the rest of the city (10 percent),” the report states.

The report states that because healthcare providers don’t ask patients about documentation status, the task force lacks “data specific to undocumented patients.”

Some health care providers say a big part of the issue is that without a clear path to insurance or payment for non-emergency services, illegal immigrants are going to the hospital due to a lack of options.

“It’s insane, and it has been for years at this point,” Dana, a Texas emergency room nurse who asked to have her full name omitted, told The Epoch Times.

Working for a major hospital system in the greater Houston area, Dana has seen “a zillion” migrants pass through under her watch with “no end in sight.” She said many who are illegal immigrants arrive with treatable illnesses that require simple antibiotics. “Not a lot of GPs [general practitioners] will see you if you can’t pay and don’t have insurance.”

She said the “undocumented crowd” tends to arrive with a lot of the same conditions. Many find their way to Houston not long after crossing the southern border. Some of the common health issues Dana encounters include dehydration, unhealed fractures, respiratory illnesses, stomach ailments, and pregnancy-related concerns.

“This isn’t a new problem, it’s just worse now,” Dana said.

Emergency room nurses and EMTs tend to patients in hallways at the Houston Methodist The Woodlands Hospital in Houston on Aug. 18, 2021. (Brandon Bell/Getty Images)

Medicaid Factor

One of the main government healthcare resources illegal immigrants use is Medicaid.

All those who don’t qualify for regular Medicaid are eligible for Emergency Medicaid, regardless of immigration status. By doing this, the program helps pay for the cost of uncompensated care bills at qualifying hospitals.

However, some loopholes allow access to the regular Medicaid benefits. “Qualified noncitizens” who haven’t been granted legal status within five years still qualify if they’re listed as a refugee, an asylum seeker, or a Cuban or Haitian national.

Yet the lion’s share of Medicaid usage by illegal immigrants still comes through state-level benefits and emergency medical treatment.

A Congressional report highlighted data from the CMS, which showed total Medicaid costs for “emergency services for undocumented aliens” in fiscal year 2021 surpassed $7 billion, and totaled more than $5 billion in fiscal 2022.

Both years represent a significant spike from the $3 billion in fiscal 2020.

An employee working with Medicaid who asked to be referred to only as Jennifer out of concern for her job, told The Epoch Times that at a state level, it’s easy for an illegal immigrant to access the program benefits.

Jennifer said that when exceptions are sent from states to CMS for approval, “denial is actually super rare. It’s usually always approved.”

She also said it comes as no surprise that many of the states with the highest amount of Medicaid spending are sanctuary states, which tend to have policies and laws that shield illegal immigrants from federal immigration authorities.

Moreover, Jennifer said there are ways for states to get around CMS guidelines. “It’s not easy, but it can and has been done.”

The first generation of illegal immigrants who arrive to the United States tend to be healthy enough to pass any pre-screenings, but Jennifer has observed that the subsequent generations tend to be sicker and require more access to care. If a family is illegally present, they tend to use Emergency Medicaid or nothing at all.

The Epoch Times asked Medicaid Services to provide the most recent data for the total uncompensated care that hospitals have reported. The agency didn’t respond.

Continue reading over at The Epoch Times

Tyler Durden Fri, 03/15/2024 - 09:45

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