“It is possible that the numbers released last month were a blip”
Interest rate sensitive sectors continue on their blaze of glory, with headlines today of a default on a roughly half-billion dollar CMBS “backed by a portfolio of offices and stores” owned by a Finnish landlord Blackrock acquired in 2018. This comes on the heels of another article revealing that the company’s “marquee retail” Blackstone Real Estate Income Trust “limited investor withdrawals for the fourth straight month after it received significant redemption requests”. What’s more, given the fund’s rules, those seeking to withdraw money in March will likely need to jump on it early as the fund “limits quarterly redemptions to 5% of its net asset value”, and the January and February limits “were 2% in each month”. Illustrative of Taleb’s “it is much, much better to panic early than late”.
While the interest-rate-sensitive sectors are hitting the skids, the Fed’s hoped-for chain of events, i.e. higher rates slow the labor market, bringing down inflation and heading off the dreaded wage-price spiral (see airline pilots), is taking some hits this week. As the WSJ notes, government reports indicate the labor market is running hot, but the silver lining is demand for workers is showing “signs of slowing, a long-anticipated development that is appearing in private-sector job postings”. The journal dives into data from “two large online recruiting companies”, showing that “available jobs fell further this year, potentially foretelling a decrease in openings in coming Labor Department reports, and a slowdown in hiring this year”.
Indeed’s findings didn’t provide much by way of confirmation of labor market cooling. While the company did note that job postings were moderating, it concluded that “in short, the labor market is stubbornly strong” and while it “might waver in the face of even tighter monetary policy or an unforeseen shock to the global economy”, “the labor market is unlikely to weaken rapidly in the months ahead”.
This prognosis will not surprise those following the SBOI data, which we highlighted here and is commensurate with a 10% drop in JOLTS Private Hires over the next several months. In the meantime, the Fed’s Chris Waller endorsed the idea that “the [employment] numbers released last month were a blip, perhaps associated with unusually favorable weather” as Bostic emphasized that “slow and steady is going to be the appropriate course of action”. The market appears to be internalizing the latter adjective and is pricing in a 100% chance of 50bps or more divided over the next two Fed meetings.
P.S. Even after hostilities in Ukraine subside, the region’s agricultural productivity will feel the toxic effects of mercury, arsenic, dumped fuel, unexploded ordnance, and land mines.
P.P.S. While “unusually favorable weather” is suspected of having favorably skewed US jobs numbers, across the pond, it may be part of the reason that a German gas storage group believes “there is no chance of a shortage this winter”. This surplus does appear to have come at quite a cost, both fiscal and industrial. Programs designed “to shield consumers from rising energy prices” have entailed “massive fiscal interventions”. And chemical and “energy-intensive” industrial output has dropped significantly as companies like BASF pulled back production (and announced layoffs) amid energy product costs that are “significantly more than before Russia’s attack on Ukraine” and “high levels” of inflation.
