U.S. Economy Created 339,000 Jobs in May, even as the Unemployment Rate Rose From 3.4% to 3.7%… The labor force participation rate and employment-population ratio were little changed, at 62.6% and 60.3%, respectively.
What it means— The number of jobs created was well beyond any mainstream forecast, and the jump in unemployment doesn’t jive with the steady labor force participation rate. Welcome to the world of disjointed government statistics. Part of the jump in jobs comes from the birth-death adjustment, wherein the U.S. Bureau of Labor Statistics guesses at the net number of jobs created and lost at companies not in their establishment survey. For May, the net, not–seasonally adjusted number was 231,000 new jobs. The seasonally adjusted version of the number probably added around 75,000 new jobs to the headline total.
The rising unemployment rate comes from the Household Survey, not the Establishment Survey. Even though the government shows 339,000 new jobs, in the Household Survey last month, 440,000 more people reported not having jobs. In an economy with more than 160 million people, this difference isn’t big enough to worry about, but it’s worth watching to see if a trend develops. As for the numbers in general, they give the central bankers cover for raising rates again if they so choose.
Debt Ceiling Deal All but Done… Negotiators for House Speaker Kevin McCarthy and President Biden reached a deal to raise the debt ceiling, which the House passed on Thursday morning. The Senate approved it late Thursday, and President Biden signed it.
What it means— At one point in the movie Blazing Saddles, the sheriff aims his pistol at his own head and, speaking in the third person, threatens to kill himself if anyone moves. The debt ceiling debacle reminds us of that scene, except in Congress it wasn’t witty or funny. Congress and the administration whipped up a crisis where none existed, and then “solved” it at the last minute through “hard work.” Gee, they should take a vacation; they must be exhausted. The deal suspends the debt ceiling until January 2025 but doesn’t require Congress to approve debt limits on the same schedule as the budget. That would make too much sense and, of course, it leaves us open to debt-ceiling fiascos in the future.
Initial Jobless Claims Remain Almost Flat, at 232,000… Initial jobless claims barely moved higher from 230,000. Continuing claims also inched up 6,000, from 1.794 million to 1.8 million.
What it means— The initial and continuing claims numbers show that employment hasn’t softened yet, which gives Fed Chair Powell and the other voting members of the Federal Open Market Committee the space they need to raise rates on June 14 or possibly hold rates steady while forecasting another hike later in the summer. Either way, expect the central bankers to report that lower rates in 2023 are off the table, just as they’ve been telling us for months.
Keep an eye on commercial real estate, where loans typically are adjustable. If short rates remain high, then debt service costs will rise. Building owners might send the keys back to the lenders, which tend to be regional banks and yield seeking investors in Commercial Mortgage Backed Securities (CMBS).
Commercial real estate is in the early stages of unwinding in major metro areas. Owners of CMBS debt lost 80% & 88% on foreclosures of two towers in Houston. The “One AT&T Tower” in downtown St. Louis was a 100% loss. Foreclosures are painful but do not set the “going price per foot” for survivors. In San Francisco, Union Bank sold its key property in the financial district to US Bank for 25% of the original listing price.
Atlanta Man and the ‘Boot Girls’ Are on a Mission to End Car Boots… Christian Verrette had had enough. After a private property owner booted Verrette’s ride in a parking lot one too many times, the tattoo artist found a way to beat the system. He bought a set of master keys for the most common car boots, so he could free his car whenever it was booted. Then, he wentmfurther and started selling master keys for $50 to anyone who wanted them. Given that property owners and vehicle boot companies regularly charge $75 or more per day and sometimes several multiples of that, getting your own get-out-of-jail-free keys seems like a no-brainer. A pair of friends who called Verrette to help out now call themselves Boot Baby and Boot Sheisty and have created a business helping people free their cars for $50 per boot. Entrepreneurial capitalism at work.
Since the story went viral in mid-May, these Boot Girls have been unlocking about 40 cars per day. Meanwhile, Verrette has sold another 1,200 keys, bringing in $60,000. The police say they aren’t doing anything illegal as long as they don’t damage or take the boots. However, that doesn’t absolve car owners from liability, since they still were trespassing when they were booted in the first place.
Data supplied by HS Dent Research
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