Labor Market Data Trump Pop in Services PPI

QUICK QUILL — The larger-than-expected gain in services PPI cheapened Treasuries, allowing better entry points for those with conviction in the long long-duration narrative. The accelerating trend in layoffs, punctuated by expectations for wages and pricing power tumbling to three-year lows in New York service sector, suggests upside has little-to-no way of being sustained. Capitalize on the opportunity into the inevitability of more layoff announcements accompanying the earnings of retailers who were not the winners of the 2023 holiday shopping season.

TAKEAWAYS

  1. At 22,000 in 2023, average WARN notices per month in the Top 15 states were about twice their 2021 and 2022 levels; despite January starting at an even brisker pace, consumers seem unaware, as seen by UMich Higher Unemployment Expectations ticking downwards to 30%
  2. Despite CPI’s echo upside in Friday’s PPI, the 10-year Treasury yield only rose by 5 basis points last week; core crude and intermediate goods PPI remained in deflation while core finished goods PPI fell to 2.4% YoY, within the ballpark of the pre-pandemic 2% average
  3. PPI Services rose 0.6% MoM in January, the fastest since April 2022; ;moving oppositely, Expected Prices Received & Wages in the NY Fed February service survey fell to a 3-year low while Employment Expectations remained in contraction for a 3rd straight month
Posted in Quick Quill.