As of last month, the U.S. labor market fully recovered the number of jobs lost due to the pandemic, in less than half the time it took after the previous downturn. A staggering 528,000 jobs were added in July, pushing the total up the number of wages above the level of February 2020.
However, the good news could be bad news in this case, as the new jobs report could prompt the Federal Reserve to tighten more aggressively than planned to curb growth. This could decisively trigger the recession that many market watchers believe we have already entered, with real gross domestic product (GDP) having contracted for two consecutive quarters, inflation hovering at historic highs and a service sector shrinking.
Also, US yields fell to their deepest level since 2000. On Friday, the yield on the two-year government note closed at 3.24%, the 10-year at 2.83%, a spread of 41 basis points. Every recession in the past few decades has been preceded by an inversion of the yield curve, so we may be in the very late stages of the business cycle.
It will be interesting to see what Jay Powell & Co. decides to do at the next Federal Open Market Committee (FOMC) meeting, scheduled for September 20-21.
Americans are driving less, but lower fuel costs could be a game changer
Another sign that parts of the economy may be slowing? Lower demand for fuel coupled with falling gas prices. Data from the Energy Information Administration (EIA) show that this summer, Americans are consuming less gasoline per day than in the summer of 2020, when almost everyone was stuck at home eating. King Tiger on Netflix.
Gas prices above $5 a gallon seem to be a bigger deterrent to getting out of your house than fear of Covid and government-mandated lockdowns.
The decline in driving activity is consistent with the results of a recent survey conducted by the American Automobile Association (AAA). The nonprofit found that 88% of Americans were driving less because of higher gas prices. Three-quarters of respondents said they were combining errands on every trip, while 56% said they were cutting back on shopping and eating out.
Interestingly, only 13% of people surveyed said they were driving a more fuel-efficient vehicle in response to rising gas prices; virtually no one, or 2% of respondents, said they were switching to an electric vehicle (EV).
The EIA will report last week’s fuel consumption numbers on Wednesday, and I expect to see demand pick up again above 2020 levels now that gas prices have fallen for more than 50 straight days after peaking at the national average of all-time high of $5.02. June 14.
For many Americans, the holidays will happen “no matter what.”
Another recent survey, this one by McKinsey & Co., shows that many Americans are still planning a vacation this summer “no matter what,” even though inflation remains a top concern. Nearly 70% of respondents said they were taking a trip regardless of rising prices, Covid, a possible economic slowdown or other concerns.
That positive sentiment was echoed by Booking Holdings CEO Glenn Fogel, who told CNBC this week that Americans “will continue to travel, and they will travel more and more over the long term.”
Fogel joined the network to discuss Booking’s incredible second quarter financial report. The online travel agency, which owns popular brands such as Priceline, Kayak and OpenTable, recorded more room-night bookings in the three months ended June 20 than in any quarter in 2019, before the pandemic. Total revenue was $4.3 billion, nearly double what it was in the prior quarter, while net income was $857 million, compared to a net loss in the same quarter last year.
Looking ahead, Fogel expects record revenue in the third quarter, and bookings for the final quarter of the year are currently about 15% ahead of the same period in 2019.
We’re bullish not only on Booking.com, but also on rivals Tripadvisor and Expedia, whose shares have recovered their losses and then some as gas prices retreated from all-time highs on June 14.
Shipping Giant Maersk Posts Record Results
In addition to consumers, lower gas costs are beneficial to industries that consume large quantities of liquid petroleum fuels. These include airlines and shipping container companies, the latter of which is still experiencing worsening congestion at ports in North America, Europe and China, according to shipping giant AP Moller-Maersk.
The world’s second-largest shipping company is often seen as a barometer of the global shipping industry, and if that’s the case, Maersk’s second-quarter results should put investors’ minds at ease. The Copenhagen-based company reported record revenue of $21.7 billion in the June quarter and net profit of $8.6 billion, also a new quarterly record.
Based on these impressive results, Maersk is raising its full-year guidance from $30 billion in EBITDA (earnings before interest, taxes, depreciation and amortization) to $37 billion. It has also raised its free cash flow (FCF) estimate from $19 billion to “above” $24 billion. Maersk’s Board of Directors is also increasing the company’s share buyback program to $3 billion for 2022-2025, up from $2.5 billion previously.
Some financial media have drawn attention to the fact that Maersk moved 7.4% fewer containers in the second quarter compared to the same quarter last year, but as the company itself points out, this is due to increasing port congestion, not a significant slowdown. on demand. According to the Census Bureau, new orders for durable manufactured goods rose to $272.6 billion in June, a 2% increase from May. Shipments of manufactured goods have also risen 13 of the past 14 months since June.
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