Medicare Agent News: Jobs, Geopolitics, and Jittery Markets

Tuesday, January 3, 2023

Jobs, Geopolitics, and Jittery Markets

By Nicholas Jasinski | Tuesday, August 2

Up and Down. House Speaker Nancy Pelosi is on the ground in Taiwan, and stock investors don't appear phased. The visit has attracted plenty of attention, as China considers Taiwan to be its territory and had been threatening retaliation against the United States if the trip went ahead.

"The rash of commentary on how this trip and its timing were such bad ideas seems not to have phased the stock market," said Peter Tanous, chairman of Lynx Investment Advisory, a Washington, D.C.-based RIA, and a former U.S. Army officer. "Perhaps traders had a better sense that WWIII was not in either China’s or the U.S.’s game plan. Of course, some retaliation by China can be anticipated, but traders expect that it will lean more toward a diplomatic response rather than a game of battleships at sea."

In fact, the stock market gapped up this morning at the very moment headlines began crossing the wires confirming Pelosi's plane had landed safely in Taiwan. By the early afternoon, indexes were positive or flat.

That left the market to focus on what's been weighing on investor sentiment for most of this year—a recent rally aside—namely tightening monetary policy, slowing economic growth, and the uncertain path of corporate earnings.

Stock indexes began to reverse, and fell through the afternoon to close near their lows of the day. The S&P 500 finished down 0.7%, with all 11 sectors in the red, the Dow Jones Industrial Average lost 1.2%, and the Nasdaq Composite slipped 0.2%.

This morning's Job Openings and Labor Turnover Survey—or JOLTS—showed 10.7 million job openings on the last business day of June, down from 11.3 million a month earlier. It was a larger drop than expected by economists but doesn't mean the U.S. labor market is falling apart.

The absolute number of openings remains very high relative to historical readings, and especially when compared with the number of workers seeking jobs in an economy with 3.6% unemployment. That ratio is something the Federal Reserve watches when it assesses the state of the labor market. It did ease slightly to 1.8 job openings per unemployed worker in June—but that compares with levels around 1.2 seen before 2020.

Amherst Pierpont Securities chief economist Stephen Stanley is skeptical that real, tangible job openings are actually falling as rapidly as the June data suggested. He wrote to clients today:

There is undoubtedly a good deal of fog in the job openings data. As they did with an array of raw materials, firms were probably padding their postings when they were having difficulty finding workers. As the economy cools, we may find that there was some doubling and tripling up in reported job openings, just as manufacturers were ordering more raw materials than they really needed because they were hoping to get as much as they could in a bottleneck-filled landscape.

So, bottom line, the U.S. labor market is far from showing signs of a recession. Things may be calming down from the most "egregiously overheated state," per Stanley, but conditions remain tight—that's good news for American workers, but bad news for those hoping the Fed would ease off of rate increases due to a deteriorating job market.

Next up on that front will be Friday's jobs data for July. Economists are expecting growth of 250,000 nonfarm payrolls and for the unemployment rate to hold at 3.6%.

As for monetary policy expectations today, San Francisco Fed president Mary Daly told CNBC that the central bank was “nowhere near almost done” raising interest rates to combat inflation. Separately, Chicago Fed president Charles Evans said that a third-straight 75 basis point hike in September might be appropriate, and said that "we want to get [policy] a little restrictive expeditiously." Those echoed comments by the Minneapolis Fed's Neel Kashkari over the weekend.

Altogether, the recent Fedspeak has been less-than supportive of the notion that peak hawkishness is in the rearview mirror. That has helped to reverse some of last week's rally.