Labor Risks Arise Despite Wartime Fiscal Spending

QUICK QUILL — Visible stress in the labor market is manifest even with extended fiscal support. The nonresidential construction sector is increasingly driven by structural, not cyclical forces. And the inventory cycle has yet to run its course. The financial markets resemble a mourner navigating the stages of grief from denial to acceptance.


  1. Despite the NBER flagging a two-month recession from March to April 2020, April saw real PCE trough precisely because of CARES Act payments beginning in that month; stimulus has buoyed the economy since, with federal outlays up 16.4% YoY in July and a budget deficit of 9% of GDP
  2. Indeed job postings are down and Challenger job cuts are up in 83% of industries, respectively; the CHIPS Act has lifted nonresidential construction, but more than half of the YoY gain has been in Computer/Electronics Mfg, while other subsectors have rolled over since peaking in May
  3. At -$1.8 billion, the real change in inventories was negative in Q2 for the first time in two years; meanwhile, the Too High-Too Low spread for Customers’ Inventories in ISM’s August Mfg data stayed negative for a fourth straight quarter, flagging more supply compression in Q3’s GDP data
Posted in Quick Quill.