A Jobs Report Whiff, Climbing Yields, and Extra Inflationary Pressures Accumulate

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The US created just 194,000 jobs in September, well below the expected 500,000, according to Friday’s DOL report. Participation in the labor force also declined, which meant that wage sums remained well below the pre-Covid trend, exacerbated labor shortages and laid the foundation for further wage inflation. The disappointing report pushed government bond yields – and general inflation expectations – higher on Friday, but has the past year anchored interest rate expectations artificially low? And how will investors react if they rise seriously? Commodities have now erupted and, coupled with lingering concerns in the supply chain, are adding to the inflationary fire. On the international stage: China has added power rationing to its real estate problems – another factor likely to exacerbate global supply chain shortages – and producer prices in Japan have been high for more than a decade. Could inflation be in sight for the world’s third largest economy, which is still untouched?

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1. Despite a record number of job vacancies, new jobs disappointed dramatically in the past month:

Source: The Daily Shot, 11/10/21

2. While the unemployment rate has fallen to 4.8%. It looks like the pandemic has pushed ~ 8 million workers out of the labor market, causing labor shortages in many industries …

Source: The Daily Shot, 11/10/21

3. Will wages become an important driver of inflation?

Source: The Daily Shot, dated 10/12/21

4. Individually, Americans saved at a breathtaking pace in 2020. Together? Not as much…

Source: The Daily Shot, 11/10/21

5. Another Source of US Debt? Hey what’s a trillion left?

Source: The Wall Street Journal, 8/10/21

6. The interest continues to slide:

Source: The Chart Store, dated 10/10/21

7. Yes, interest rates have risen. But interest rates have gotten so low that in a vacuum, one can hardly worry about a reasonable rise in interest rates. The problem may be that the world is now used to it and expects the ultra-low interest rates to continue. These investors could face a rude awakening.

Source: The Daily Shot, 11/10/21

8. Despite a strengthening USD, commodities have broken out:

Source: The Chart Store, dated 10/10/21

9. China’s trade war with Australia and its ban on Australian coal backfired. Coupled with high demand, China is now rationing power in many provinces.

Source: The Daily Shot, dated 10/12/21

10. Chinese real estate debt contagion is spreading. We mentioned earlier that this is the largest market of any kind in the world. There are currently around 1.6 million acres of new housing underway in China. Delaware, the entire state, has only 1.27 million acres.

Source: The Wall Street Journal, 10/11/11

11. The PPI in Japan is nearing its highs for several decades:

Source: The Daily Shot, dated 10/12/21

This article was contributed by Beaumont Capital Management, a subscriber on the ETF Strategist Channel.

For more information like this, visit BCM’s blog at blog.investbcm.com.

For more news, information and strategies, visit the ETF Strategist Channel.

Disclosure: The charts and infographics included on this blog are typically based on third-party data and are believed to be accurate. The comment contained is the opinion of the author and can change at any time. Any reference to specific securities or investments is for illustrative purposes only and should not be construed as investment advice or a recommendation of action. Individual securities mentioned can be held in customer accounts. Past performance is no guarantee of future results.

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