Succinct Summation of the Week's Events

Succinct Summation of the Week's Events:

Positives,

1)From the BLS payroll report, the household survey saw an increase of 268k and when combined with the 152k person rise in the labor force combined to drop the unemployment rate by one tenth m/o/m to 3.5%. The all encompassing U6 rate fell by 2 tenths to 6.7% after rising by a like amount in June. Job leavers as a % of the unemployed jumped up again to 14.6% from 13.2% and back near the recent highs. Average hourly earnings grew by .4% m/o/m and 4.4% y/o/y but with the drop in hours worked the average weekly figure was up 3.5% y/o/y. The participation rate was unchanged at 62.6% and the important 25-54 yr old cohort saw a rate of 83.4% vs 83.5% in June but that is still hovering around 21 yr highs.

2)The Q3 CEO Confidence survey rose 6 pts to 48 vs Q2 though still below the breakeven level of 50. They said, "Despite the brighter outlook, most CEOs still anticipated an economic downturn ahead. In Q3, 84% reported that they are preparing for a US recession over the next 12-18 months, compared to 93% in Q2. That said, the vast majority continued to expect a short and shallow US recession, with just 4% now expecting a deep US recession with major global spillovers, down from a high of 13% in Q4 2022. Meanwhile, the proportion of CEOs expecting no recession at all climbed steadily from 2% in Q4 2022 to 17% in the latest survey." About the short term economic outlook, "20% of CEOs said they expected economic conditions to improve over the next six months, up from 15%." On the flip side, "39% expected conditions to worsen, down significantly from 56%."

3)From the August Apartment List National Rent Report which covers July activity. On a m/o/m basis, rents rose .3% but are now down by .7% y/o/y. Apartment List is citing "sluggish demand and increasing supply" for the moderation. Specifically with supply, "our vacancy index has reached 7.3%, surpassing the peak vacancy rate measured at the height of the Covid pandemic. With a record number of multi family apartment units currently under construction, this vacancy rate will remain elevated in the near future."

4)Q2 productivity came in better than expected as also unit labor costs undercut expectations. Of note, we FINALLY got a y/o/y increase in productivity for the first time since Q4 2021 of 1.3% with unit labor costs slowing to a 2.4% gain y/o/y vs 3.6% in Q1, 4.9% in Q4 '22, 6.4% in Q3 '22 and 7% in Q2 '22. Thus, part of the deceleration in Q2 '23 is just the tough comparison to 7% in Q2 '22. 

5)After falling by $79.2b last week, bank deposits for the week ended 7/19 rebounded by $47b. Higher deposit rates, more generous CD rates are the levers the banks are trying to pull, especially after another Fed rate hike.