Aftereffects, Fed Frustration & Private vs Public

HORRIBLE HURRICANE

Here’s how Hurricane Florence will impact economic data: initially, weekly first-time unemployment claims will rise, with the amount of the increase quickly telling us the hurricane severity. September auto sales will fall, but October sales will spike due to buyers replacing flood damaged cars. Similarly, September employment growth will weaken, but will probably be upwardly revised the following month. Housing will also be temporarily depressed.

LACKING LABOR

Y-o-Y job openings are up 11.9%, hires are up just 3.3%, and the number hired has declined three months in a row. Moreover, job openings exceed the number of unemployed by 659,000; they surpassed zero for the first time in March. Additionally, quit rates hit 2.4%, their highest rate since 4/01, and a record 25% of small businesses say finding qualified workers is problem #1. Labor’s in very short supply.

FED FRACAS

The Federal Reserve is struggling with four issues. Is the nearly inverted yield curve telling us to raise short-term rates more slowly lest we invert the curve and precipitate a recession? How economically growth sapping will trade wars be? What’s the fed funds rate that’s neither expansionary or contractionary, and how close to it are we? Lastly, how much should the Fed shrink its $4.2 trillion balance sheet? They’re busy.

RISK REVISION

10 years after Lehman Brothers failed, risk has migrated. In 2008, the six largest banks had $9 billion in assets; the four largest asset managers, $5 billion. Today, the same banks have $10 billion, but the same four lightly regulated asset manager behemoths have $16.5 billion. Similarly, at its 2009 nadir, non-banks originated 9% of home mortgages, now those less-regulated entities originate 52%.

CORPORATE CONTRACTION

While Elon Musk’s tweet about taking Tesla private was nonsense, it’s trend indicative. After peaking at roughly 8,000 firms in 1996, the number of US public companies has fallen steadily and is now about 4,000. Similarly, the number of IPOs has declined from about 600/year in the late 1990s to less than 200/year today. Why the de-equitizing? The surge in private capital, and its profoundly reduced investor scrutiny and legal requirements.

INCREASING INK

Among persons over 69, 10% have a tattoo; 13% of those 51-69 have body art. For those 36-50, 36% have a tat and for persons 18 to 35 it’s 47%. Moreover, the percentage of persons with two or more tattoos rises from 2% for those over 69 to 37% for those 18 to 35. No wonder this industry is growing 7.7%/year and generated $1.6 billion in 2017.

Source: Elliot Eisenberg, PhD., Chief Economist for GraphsandLaughs, LLC, an economic consulting firm serving a variety of clients across the United States. All rights reserved.

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