The Market Today

Job Openings and Jobs-Hard-to-Fill Data Show Labor Supply Problem

by Craig Dismuke, Dudley Carter


Mortgage Applications Remain Soft: Mortgage applications for the week ending June 4 fell 3.1% as refi apps dropped another 5.1% and purchase apps ticked up 0.3%.  Since January, purchase apps are now down 23% while refi apps are down 37%. The average 30-year mortgage rate dipped 2 bps to 3.15%.

Inventories Likely to Begin Rebounding in 2H21: The April Wholesale trade inventories data will be released at 9:00 a.m. CT.


10-Year Yield Takes Out Bottom of April-to-May Range With Close at Lowest Level Since March 10: Stocks closed mixed Tuesday with the Dow and S&P 500 little changed on both sides of breakeven and the Nasdaq up 0.3%, supported by a daily move lower and flatter for the Treasury curve. Treasury yields declined early as U.S. equity futures dipped ahead of U.S. trading following a disappointing small business optimism survey and reports of widespread website outages across the globe caused by network issues at hosting company Fastly Inc. The drop in yield accelerated as the 10-year yield took out a closing low from late last month that had represented the bottom end of a strong two-month trading range. The JOLTS report released at 9 a.m. CT didn’t have a major market impact but did reinforce concerns that labor supply issues are intensifying and could pose the risk of slowing the recovery (more below). While the 10-year yield ended up off its daily low, the 3.6-bp decline to 1.533% left the benchmark yield at its lowest level since March 10.

Global equities were mixed again overnight and U.S. equity futures continued to dawdle within reach of record levels as investors await tomorrow’s CPI report for May. Because of the requisite blackout period, Fed officials’ public responses to the data will have to wait until after next Wednesday’s policy meeting. However, the ECB will announce its latest policy plans tomorrow around the same time the U.S. inflation report is released. Any insight into tapering plans at both central banks will be the key focus from those meetings. While possible tapering of monthly bond purchases by central banks had led yields higher in recent months, slower hiring in the U.S. has helped pull the yield curve back down. That decline continued Wednesday, with the 10-year yield dropping an additional 3.2 bps at 7:20 a.m. CT to 1.50%, the lowest non-intraday level since 1.483% on March 3. The 5-year yield also fell to its lowest level since early March.


Job Openings Hit a Fresh Record As Labor Supply Concerns Continue to Build: The latest JOLTS report showed job openings rose from 8.29mm in March (revised up from 8.12mm) to 9.29mm in April, exceeding economists’ expectations by more than 1.0mm openings and marking a new all-time high for the series back to 2000. The 998k increase was led by continued strength in leisure and hospitality demand, which added 391k new positions, and a gain of more than 100k each for manufacturing; trade, transports, and utilities; and other services. Mining and logging was the only industry to report a drop in job openings. The juxtaposition of record openings and a growing expanse of evidence pointing to a worker shortage – data released earlier Tuesday showed a record number of small businesses unable to find qualified applicants to fill positions – with the more than 9.3mm individuals reporting as unemployed, 7.1mm individuals outside of the labor force but who want to work, and the more than 15.4mm still receiving unemployment assistance has become a major focus. The data indicate the labor market’s recent slowing is more related to supply issues than to a weakening in demand for workers. Separate from but consistent with the openings figure, job quits hit a new all-time high and layoffs fell to a new all-time low, reiterating the unusual tightness for a recessionary labor market.

Infrastructure Talks Take New Direction, Senate Passes $250 Billion Bipartisan Bill: Negotiations between President Biden and a group of Republican Senators for a possible infrastructure bill were called off late Tuesday afternoon without a deal. From the Wall Street Journal’s report, “An exchange of offers last week did little to resolve the major disputes, with Republicans continuing to reject Mr. Biden’s ideas for raising revenue and the White House arguing that the Republicans’ plan was too small. …’We all know as a caucus we will not be able to do all the things the country needs in a bipartisan way,’ [Senate Majority Leader] Schumer said Tuesday, adding that the party would explore reconciliation, …‘And it may well be that part of the bill that’ll pass will be bipartisan, and part of it will be through reconciliation,’ he added. …Mr. Schumer pointed to efforts from a bipartisan group of lawmakers as another possible path towards reaching a compromise. … In a sign that the White House is open to changing its focus in talks, Mr. Biden spoke with members of the bipartisan group, including Sen. Bill Cassidy (R., La.), on Tuesday.”  After talks broke down, the Senate passed a $250 billion bill, with bipartisan support, to assist U.S. manufacturers in their competitiveness with China.

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