MARKETS ON THE MOVE – P8 INSIGHTS
A detailed look at economic implications
Crude Oil
Labor: Our Primary Concern
Freight, Fuel, & Resin
The US COVID-19 response injected about $6 trillion into the economy – an amount roughly equivalent to one quarter of the country’s annual GDP . This was unprecedented, and the results have been very peculiar; we have had two quarters of negative real GDP growth, meeting the technical definition of a recession, but the labor market is still historically tight (the opposite of what we usually see during a recession). Some key stats: • The JOLTS survey is reporting 11.2 million job openings in the US – double the normal rate, and nearly unchanged since December 2021 • Non-farm Payroll numbers have been exceeding forecasts by a lot – by 105% in July • Compared to Feb 2020, the “professional and business services” sectors are employing 986,000 additional people • Compared to Feb 2020, the manufacturing sector is (only) employing 41,000 more people • Interest rates are forecast to peak at around 4% in March of 2023 On its own, the Fed’s interest rate regime is probably not enough to slow the job market (and therefore inflation). According to GDP data, US consumers are decreasing their spending on goods (-1.1% contribution to GDP) but increasing their spending on services (+1.8% contribution to GDP) . With inflation running hot and the COVID- 19 stimulus behind us, it’s unclear how long the US consumer can continue this spending growth. Our forward-looking view suggests that, when the consumer’s spending slows, the JOLTS number will fall, then the payroll numbers will fall, and then the surging labor costs should cool down.
There’s a global energy shortage:
• US Diesel exports are at a ten-year high • East Coast diesel supplies recently hit a 30-year low • Unless we experience a large economic decline, there is little reason for the energy markets to ease.
WOGS
Natural Gas
Proteins
• Beef exports should be +3% for the year while production falls 1%. • Recessionary buying behavior generals shows a rotation out of beef and into less expensive protein like eggs. This factor may help keep egg prices supported.
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