China, China, China

One for you, one for you, one for everyone! 

The latest Job Openings and Labor Turnover Survey (JOLTS) report showed we had 7.49 million job openings in March while there were only 5.8 million unemployed workers. This marks thirteen straight months where the number of job openings has exceeded the number of unemployed workers as companies are struggling to find the right type of people to fill these jobs. This is a massive opportunity that a previous stock pick (LRN) is addressing. Job openings saw big gains for transportation, warehousing, construction, and real estate while job openings fell slightly for the federal government. 

Moral of the story: While the pace of hiring has slowed since the fall and the number of job openings has come down from record highs, the labor market continues to be the shining star of the US economy’s strength with unemployment rate basically at a 50-year low and more job opportunities than we can fill. 

The “He said, Xi said” Drama is Back 

Remember how we were talking about trade tensions with China a few months ago and everyone was on edge? And then remember how it seemed like a resolution was near so we stopped being so worried? Well apparently there was a sudden change of heart in the White House over the weekend and trade tensions with China dominated headlines and market sentiment all week as Trump hiked tariffs on $200 billion worth of Chinese goods from 10% to 25% at midnight on Thursday. China has already promised “necessary countermeasures” this week. Oh good.

Moral of the story: The market had priced in a resolution on this front so we saw stocks take a beating this week as worries reemerged about a potential trade war and its impact on US and global economies. I’m also worried about tariffs putting upward pressure on prices (aka inflation) and pushing the Fed into a corner in terms of their policies. 

Speaking of Inflation…

April CPI inched up 0.30%, coming in slightly below expectations, and two thirds of this increase was driven by gas prices increasing 5.7%. This increase in gas prices was offset by declining prices for apparel and other key consumer goods. PPI increased even more modestly, only rising 0.20% in April. 

Moral of the story: Despite surging gas prices and the tight labor market, inflation has remained contained this year, giving the Fed reason to pause on policy rate hikes. The Fed believes this recent softness in pricing pressure to be temporary plus we now have increased tariffs on $200 billion worth of goods, so I don’t see reason for inflation to remain this muted for much longer. If these factors do suddenly cause upward pressure on prices, however, all eyes will be on the Fed.