Category: Market Insights

The latest report released by the Bureau of Labor Statistics (BLS) showed that the U.S. labor market added 187,000 jobs in August 2023. Despite this steady pace of hiring, the unemployment rate jumped 0.3 percentage points to 3.8%, marking its highest level since February 2022.

The headline number of 187,000 additional jobs in August represents an uptick from the downwardly-revised 105,000 and 157,000 positions added in June and July, respectively. However, August jobs growth still marks a continued cooldown from the average monthly gains of 271,000 jobs reported over the prior 12 months.

While the unemployment rate rose to an 18-month high in August, the 3.8% level remains relatively low by historical standards. The jump in unemployment also came amid an increase in job seekers, as the civilian labor force grew by 736,000 during the month.

“The whisper number, or unofficial forecast, for August payrolls was weaker than the 187K gain we got, so that is encouraging. While some might be concerned about the uptick in the unemployment rate from 3.5% to 3.8%, it looks like it is mostly driven by an increase in the labor force as opposed to a jump in those unemployed,” remarked Shawn Snyder, Executive Director, Global Investment Strategist for J.P. Morgan. The BLS counts only those who are actively looking for work in its unemployment calculation, so the number of workers entering or rejoining the job market contributed to the uptick in the unemployment rate.

Although the persistent level of hiring suggests that the labor market remains resilient, the BLS also reported a more moderate pace of wage growth in August, which could indicate a reprieve in inflationary pressures. Average hourly earnings for all employees rose 0.2% in August, compared with a bump of 0.4% reported in July. This caused the year-over-year (YoY) wage increase to dip to 4.3% from the level of 4.4% recorded in the previous month.

Jobs growth in the construction industry trended higher in August, with gains of 22,000 slightly higher than the average monthly additions of 17,000 over the prior 12 months. Employment in social assistance saw similar results, with August’s increase of 26,000 topping the monthly average of 22,000 jobs added over the previous year. Healthcare posted strong gains, adding 71,000 positions in August. Despite monthly gains of 40,000 in leisure and hospitality, employment in the industry remains 1.7% below the pre-pandemic level of reported in February 2020.

Weakness in the labor market was concentrated in the transportation and warehousing industry, which shed 34,000 jobs in August. These declines stem primarily from the closure of a key trucking business.

Employment outlook

The addition of 187,000 jobs in August speaks to persistent strength in the labor market, even as the pace of hiring continues to cool from the accelerated levels of 271,000 over the prior 12 months.

The uptick in unemployment may not be the most welcome news for those seeking jobs or monitoring the labor market. However, the labor force participation rate – the percentage of people who are either employed or seeking a job – rose 0.2 percentage points in August after remaining flat over the prior two months. At 62.8%, labor force participation has reached its highest level since the sharp declines witnessed at the onset of the pandemic.

In addition to the previously mentioned trucking shutdown, the ongoing strikes by actors and writers in Hollywood may have dampened jobs growth in August.

From the Bureau of Economic Analysis:

EMBARGOED UNTIL RELEASE AT 8:30 a.m. EDT, Wednesday, August 30, 2023

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the second quarter of 2023 (table 1), according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.4 percent (refer to “Updates to GDP”). The updated estimates primarily reflected downward revisions to private inventory investment and nonresidential fixed investment that were partly offset by an upward revision to state and local government spending.

The increase in real GDP reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, and federal government spending that were partly offset by decreases in exports, residential fixed investment, and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased (table 2).

Compared to the first quarter, the acceleration in real GDP in the second quarter primarily reflected a smaller decrease in private inventory investment and an acceleration in nonresidential fixed investment. These movements were partly offset by a downturn in exports, and decelerations in consumer spending and federal government spending. Imports turned down.

Current‑dollar GDP increased 4.1 percent at an annual rate, or $268.6 billion, in the second quarter to a level of $26.80 trillion, a downward revision of $36.3 billion from the previous estimate (tables 1 and 3). More information on the source data that underlie the estimates is available in the “Key Source Data and Assumptions” file on BEA’s website.

The price index for gross domestic purchases increased 1.7 percent in the second quarter, a downward revision of 0.2 percentage point from the previous estimate. The PCE price index increased 2.5 percent, a downward revision of 0.1 percentage point. Excluding food and energy prices, the PCE price index increased 3.7 percent, a downward revision of 0.1 percentage point.

Personal Income

Current-dollar personal income increased $232.1 billion in the second quarter, a downward revision of $3.9 billion from the previous estimate. The increase primarily reflected increases in compensation (led by private wages and salaries), personal income receipts on assets (both personal interest income and personal dividend income), personal current transfer receipts (led by government social benefits), and rental income of persons (table 8).

Disposable personal income increased $284.5 billion, or 5.9 percent, in the second quarter, an upward revision of $36.3 billion from the previous estimate. Real disposable personal income increased 3.3 percent, an upward revision of 0.8 percentage point.

Personal saving was $892.3 billion in the second quarter, an upward revision of $22.7 billion from the previous estimate. The personal saving rate—personal saving as a percentage of disposable personal income—was 4.5 percent in the second quarter, an upward revision of 0.1 percentage point.

Gross Domestic Income and Corporate Profits

Real gross domestic income (GDI) increased 0.5 percent in the second quarter, in contrast to a decrease of 1.8 percent in the first quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.3 percent in the second quarter, compared with an increase of 0.1 percent in the first quarter (table 1).

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $10.6 billion in the second quarter, compared with a decrease of $121.5 billion in the first quarter (table 10).

Profits of domestic financial corporations decreased $47.8 billion in the second quarter, compared with a decrease of $9.4 billion in the first quarter. Profits of domestic nonfinancial corporations increased $17.1 billion in the second quarter, in contrast to a decrease of $102.9 billion in the first quarter. Rest-of-the-world profits increased $20.2 billion in the second quarter, in contrast to a decrease of $9.2 billion in the first quarter. In the second quarter, receipts increased $18.2 billion and payments decreased $2.0 billion.

Updates to GDP

With the second estimate, downward revisions to private inventory investment and nonresidential fixed investment were partly offset by upward revisions to state and local government spending, exports, consumer spending, federal government spending, and residential investment. Imports were revised up. For more information, refer to the Technical Note. For information on updates to GDP, refer to the “Additional Information” section that follows.

	Advance Estimate	Second Estimate
	(Percent change from preceding quarter)
Real GDP	2.4	2.1
Current-dollar GDP	4.7	4.1
Real GDI	…	0.5
Average of Real GDP and Real GDI	…	1.3
Gross domestic purchases price index	1.9	1.7
PCE price index	2.6	2.5
PCE price index excluding food and energy	3.8	3.7

First Quarter Wages and Salaries

BEA’s standard practice for first-quarter estimates of wages and salaries is to incorporate data from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages (QCEW) program as part of the annual update of the National Economic Acccounts. New QCEW data for the first quarter of 2023 will be incorporated into next month’s release along with the 2023 Comprehensive Update of the National Economic Accounts (refer to box below for details).

Notice on Upcoming Data Including Comprehensive Updates

BEA will release initial results from the 2023 comprehensive update of the National Economic Accounts, which include the National Income and Product Accounts as well as the Industry Economic Accounts, on September 28, 2023. The update will present revised statistics for GDP, GDP by industry, and gross domestic income. For details, refer to Information on Updates to the National Economic Accounts.

The initial results of the comprehensive update of the Regional Economic Accounts will be released on September 29.

GDP by industry and GDP by state news releases for the second quarter of 2023 will be released this fall. BEA will send out an advisory with the exact days and times when they become available.

Personal income by state for the second quarter will be released as scheduled on September 29.

Next release, September 28, 2023, at 8:30 a.m. EDT
Gross Domestic Product (Third Estimate)
Corporate Profits (Revised Estimate)
Second Quarter 2023 and Comprehensive Update

By Vishesh Raisinghani

It’s no secret that some of America’s largest cities are losing residents. And while New York’s losses slowed in 2022, the nation’s largest metropolitan area has seen substantial declines since the COVID-19 pandemic reshaped the world’s work and leisure habits.

So where is everyone headed? To the American South, it turns out.

According to Census Bureau data, between April 2020 and July 2022, New York’s estimated population slumped from 8.80 million to 8.34 million, a drop of roughly 468,000 residents — nearly 5.3% of the city’s total population. Much of this loss was recorded between 2020 and 2021.

San Francisco lost 7.5% of its residents between 2020 and 2022, accounting for a greater loss of total population than New York.

So where did all those residents land? Census data indicates many went south. Georgetown, Texas saw a huge spike in population: more than 14.4% in 2022 alone. In fact, four out of the top five cities with populations of 50,000 or more that saw the biggest population increases were in Texas.

Additionally, more than 126,000 New Yorkers have exchanged their drivers licenses for Florida identifications since the beginning of 2021, according to Fox Business, which cited data from the state’s Department of Highway Safety and Motor Vehicles.

CONSUMER PRICE INDEX – JULY 2023

From the U.S. Bureau of Labor Statistics:

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2 percent in July on a seasonally adjusted basis, the same increase as in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.2 percent before seasonal adjustment.

The index for shelter was by far the largest contributor to the monthly all items increase, accounting for over 90 percent of the increase, with the index for motor vehicle insurance also contributing. The food index increased 0.2 percent in July after increasing 0.1 percent the previous month. The index for food at home increased 0.3 percent over the month while the index for food away from home rose 0.2 percent in July. The energy index rose 0.1 percent in July as the major energy component indexes were mixed.

The index for all items less food and energy rose 0.2 percent in July, as it did in June. Indexes which increased in June include shelter, motor vehicle insurance, education, and recreation. The indexes for airline fares, used cars and trucks, medical care, and communication were among those that decreased over the month.

The all items index increased 3.2 percent for the 12 months ending July, slightly more than the 3.0-percent increase for the 12 months ending in June. The all items less food and energy index rose 4.7 percent over the last 12 months. The energy index decreased 12.5 percent for the 12 months ending July, and the food index increased 4.9 percent over the last year.

From the Gothamist:

Cannabis sales figures released on Monday show that the dispensary run by the nonprofit Housing Works exceeded its revenue expectations for the first six months. But it’s unclear whether other early licensees who have struggled with New York state’s slow rollout of the retail industry will be able to replicate this success.

The state’s cannabis program has prioritized granting licenses to nonprofits like Housing Works as well as people whose lives were affected by prohibition. In late December, when Housing Works opened New York’s first legal recreational marijuana dispensary in the East Village, a line stretched around the block, and it sparked a flurry of local news coverage. But the initial hype was not a guarantee of sustained sales — especially given how many unlicensed dispensaries were selling untaxed weed nearby.

The Housing Works shop sold $12 million worth of edibles, flower and other marijuana products in its first six months, averaging $2 million a month. That’s twice the monthly revenue the nonprofit was projecting when it launched, according to Matthew Bernardo, president of Housing Works, which provides health care, housing and social services.

“We were very pleased and it was really successful from day one,” Bernardo said. The dispensary did about $40,000 in sales within three hours of opening on Dec. 29, the nonprofit said.

Because state officials have been slow to open other dispensaries, Housing Works accounts for more than a third of the $33.4 million the state’s legal recreational marijuana industry generated in its first six months. But more than 400 retail licenses have now been distributed, and other shops are coming online one by one. As of Friday, seven legal dispensaries operated across the five boroughs, and 17 had opened statewide, not counting a handful of delivery-only operations.

The state’s legal recreational cannabis industry generated $33.4 million from sales in its first six months. Housing Works brought in more than a third of that revenue.

From the New York State Cannabis Control Board

For Bernard Allulli, who has a license to open a dispensary in Manhattan, the initial sales figures from Housing Works are encouraging. “It helps with investors, obviously, for those numbers to be released, because people know that this is a real thing,” Allulli said.

Still, he said he felt Housing Works had certain advantages.

“I’m not going to be on Broadway and Eighth Street right on top of NYU, and I’m not the first shop that opens up that has all of that press behind them,” Allulli said.

At Housing Works, deliveries currently account for about 5% to 7% of sales, and Bernardo said the goal is to expand that segment of the business. “We are trying to get the word out,” he said.

So far, Housing Works delivers to parts of Manhattan and Brooklyn as well as Long Island City in Queens.

Part of the appeal of legalizing marijuana was to generate more tax revenue for the state. Housing Works created about $1.8 million in sales tax in its first six months. New York’s recreational cannabis retailers generated an estimated $4.3 million in sales tax revenue during that time, based on overall sales figures from the state’s Cannabis Control Board.

Tax revenue from the recreational cannabis program is supposed to go towards education, grants to community organizations and drug treatment programs.

Meanwhile, Housing Works is using its cannabis revenue to bolster its social programs, including housing and job training for people re-entering the community after being incarcerated, Bernardo said.

He added that the company is planning to launch a cannabis job training program where people can shadow employees at the Housing Works dispensary, so they can either work there or elsewhere in the legal weed industry.

From NYTimes.com

By Jeanna Smialek

July 12, 2023

Inflation cooled significantly in June, offering some of the most hopeful news since the Federal Reserve began trying to tame rapid price increases 16 months ago — and boosting the chances that the central bank might be able to stop raising interest rates after its meeting this month.

The Consumer Price Index climbed 3 percent in the year through June, according to data released Wednesday, less than the 4 percent increase in the year through May and just a third of its roughly 9 percent peak last summer.

That overall measure is being pulled down by big declines in gas prices that could prove ephemeral, which is why policymakers closely watch a more slimmed-down version: the change in prices after stripping out food and fuel costs. That metric, known as the core index, offered news that was even better than what economists had expected.

The core index climbed 4.8 percent compared with the previous year, down from 5.3 percent in the year through May. Economists had forecast a 5 percent increase. And on a monthly basis, it climbed at the slowest pace since August 2021.

Slower inflation is unquestionably good news, because it allows consumer paychecks to stretch further at the gas pump and in the grocery aisle. And if inflation can come down sustainably without a big increase in unemployment or a painful economic recession, it could allow workers to hang on to the major gains they have made over the past three years: progress toward better jobs and pay that has helped to chip away at income inequality.

The White House, which has spent over a year on the defensive over rising prices, celebrated the fresh report, with President Biden calling the current economic moment “Bidenomics in action.” And stocks soared as investors bet that the Fed would be able to be less aggressive in its fight against inflation — even halting its interest rate increases after a final July move — in light of the new data.

“This is very promising news,” said Laura Rosner-Warburton, senior economist and founding partner at MacroPolicy Perspectives. “The pieces of the puzzle are starting to come together. But it’s just one report, and the Fed has been burned by inflation before.”

Fed officials are likely to avoid declaring victory just yet. Policymakers are still trying to assess whether the moderation is likely to be quick and complete. They do not want to allow price increases to linger at slightly elevated levels for too long, because if they do, consumers and businesses could adjust their behavior in ways that make more rapid inflation a permanent feature of the economy.

That’s why officials have signaled in recent weeks that they are likely to raise interest rates at their meeting on July 25 and 26. Policymakers had also indicated that one or more additional rate moves could be warranted after that.

Dear New Yorkers,

The economic numbers are mixed again this month. On the positive side, employment in New York City is now back at 99% of pre-pandemic levels, even with layoffs in technology. Restaurants and hotels, which took the hardest hit, are back at 95%.

But the bank failures at Silicon Valley Bank and Signature Bank pose serious new concerns (and remind us of the importance of strong public policy to manage risk, even when fast-talking lobbyists push to eliminate it). Inflation remains stubbornly high, and now the Fed’s ongoing efforts to combat it through interest rate increases could have implications for other mid-sized banks already under scrutiny by their depositors. And if banks become even more reluctant to make new loans, the likelihood of a recession grows.

Meanwhile, the ongoing arrival of families seeking asylum has pushed the shelter census to its highest levels ever, as the housing market remains tight. (Check out our issue brief, which details the contracts the City is entering into to provide shelter – and outlines the work needed to help people get out of shelter).

The City’s budget is mixed-news, too. Higher-than-expected revenues thus far will help to balance the budget for this fiscal year and next. But new labor contracts, declines on Wall Street, and the end of federal pandemic aid portend big gaps in the following years. (See our analysis of the Mayor’s Preliminary Budget and my testimony to the City Council).

For Women’s History Month, our spotlight focuses on the “care economy,” which has long been neglected and undercompensated, despite the centrality of care workers to all of our families, precisely because nurturing our kids and caring for our elders has been characterized as “women’s work.”

If we learned anything from the pandemic, it should drive us to better value care work. As the data shows, it has largely been public policy – raising the minimum wage, adding a small but meaningful boost for home care workers, and “pay parity” for childcare workers in the public and nonprofit sectors – that has achieved modest pay raises for home care and childcare workers in NYC, a workforce that remains largely low-income women of color.

Don’t let the mixed economic signals keep you from enjoying the first hints of spring. While you’re watching for the first blooms, we’ll keep watching the numbers.

Sincerely,

Brad Lander

Federal Reserve Chair Jerome Powell said that “Financial conditions are tightening after SVB’s collapse and could slow the economy, Powell says The U.S. banking industry is robust, but the recent failure of a few regional banks could have unintended consequences that slow down the economy, according to Federal Reserve Chair Jerome Powell. Powell described the banking system in a press conference following the most recent Federal Open Markets Committee meeting as “sound and resilient” but said the central bank was monitoring a change in the availability of credit for consumers and businesses. related investing news “Financial conditions seem to have tightened, and probably by more than the traditional indexes say. The question for us though is how significant will that be, what will be the extent of it, and what will be the duration of it,” Powell said. “We’ll be looking to see how serious is this and does it look like it’s going to be sustained. And if it is, it could easily have a significant macroeconomic effect, and we would factor that into our policy decisions,” he added.

On Wednesday, the Fed increased its benchmark interest rate by a quarter of a percentage point, but according to its forecasts, there will only be one more increase this year. According to the head of the central bank, tighter financial conditions brought on by banks making more stringent lending decisions could have a similar effect as additional rate hikes from the Fed. Powell’s remarks follow significant pressure this month on regional banks. Due in large part to the rapid increase in interest rates devaluing the bank’s bond portfolio and causing significant paper losses, Silicon Valley Bank failed, becoming the second-largest failure in American history. While other banks have been able to handle the rate hikes, Powell said that SVB’s management “failed badly” in managing its interest rate risks. There have been significant deposit outflows at other banks, including First Republic and PacWest. A new Bank Term Funding Program was established by the Fed to aid banks in accessing capital, but since the facility’s launch on March 12 regional banks’ stock prices have fallen in choppy trading.

Although Powell refrained from saying explicitly that all deposits are now guaranteed, he said that deposit flows have stabilized over the past week and that Americans should feel confident about the security of their money. “What I’m saying is you’ve seen that we have the tools to protect depositors when there is a threat of serious harm to the economy or to the financial system, and we’re prepared to use those tools. I think depositors should assume that their deposits are safe,” he said. The collapse of Silicon Valley Bank has led to more scrutiny on the Federal Reserve’s supervisory role over banks, especially from Sen. Elizabeth Warren (D-MA). The Fed is conducting an internal review of potential regulatory issues around SVB, led by Vice Chair for Supervision Michael Barr, and Powell said he expects investigations from outside the central bank as well.”

From CNBC