In the West, there exists a specialized form of triskaidekaphobia, a fear of the number 13. Not that we can pronounce it, but we’ll hear more about paraskevidekatriaphobia as this Friday the 13th looms. But did you know that it wasn’t Judas — the 13th, last, and most notorious guest to arrive at the Last Supper on Maundy Thursday – who put the day on the Biblical map? While Jesus was crucified the day after, on the Friday after his 13th guest betrayed him, the day is also when Adam and Eve ate the forbidden fruit from the Tree of Knowledge. Following that first sin, Friday is the day Cain murdered his brother, Abel, the day the Temple of Solomon was toppled, and the day Noah set sail in his Ark into the Great Flood. For many reading this, our shared paraskevidekatriaphobia was created in Hollywood, by a screenwriter clever enough to dream up Jason Voorhees, the hockey-masked killer in the 1980s horror slasher, “Friday the 13th.”
As for what’s got the Street spooked, forget this Friday the 13th. Even as Truflation, with its 0.97 correlation with the headline Consumer Price Index (CPI), meanders around 2.50%, investors are petrified by inflatiophobia as September’s CPI release approaches in 72 hours. The year-over-year (YoY) headline is expected to tick down to 3.6% from 3.7%; its core counterpart, ex-food and energy, is forecast to fall to 4.1% from 4.3%.
With deference to the financial media, which will fan fears’ flames in coming days, what truly ails investors is Powellphobia. Allowing a picture to speak 1,000 words, Simplify Asset Management’s Michael Green begged to differ with the structurally higher inflation narrative: “Despite empirically falling inflationary pressures, this looks NOTHING like the demand shock from the 1970s (upper left chart).” While plain to see, the talking heads are being egged by certain economists who see the data for what they are and deny it. Better to talk their books than acknowledge Powell is hiding behind specious data to kill the Fed Put, which we applauded from Day One. (If not now, we ask, then when?)
Because technicals and fear are playing such a large role in negating fundamentals, it’s tempting to ignore the data. We warn against being short-sighted. When markets are as stretched as they are, a catch-up to the fundamentals is inevitable. As for Thursday’s CPI, we would remind you that the CPI is the product of the same Bureau of Labor Statistics (BLS) no longer standing on pretense. In the week of September 8th, which preceded BLS’ survey week of September 12th, Lightcast weekly Job Openings in Leisure and Hospitality were -13.3% vis-à-vis their January 2020 benchmark. Somehow, with the 42% who bothered responding to the survey, the BLS found 96,000 new workers in the sector, nearly triple their prior three-month average. That miracle on Main Street didn’t hold a candle to that which occurred in office towers and business parks across America. Forget Lightcast’s -43.9% of openings in the week of September 8th for Professional and Business Services, after three months with average losses of -6,000, Professional and Business Services produced 31,000 fresh jobs.
The irony is the economics establishment warns against relying on the survey of 60,000 households that produces the unemployment rate in the Household Survey (HH). When adjusted to the methodology used to produce non-farm payrolls, household employment fell, by -7,000 in September (blue line). But here’s the thing – the response rate was just north of 70%, nearly 30 percentage points (pps) above the nonfarm survey. Moreover, the HH reports a loss of 692,000 full-time jobs in the last three months; the level is below that of March 2023. Though noisy, the HH survey links up directionally with LinkUp data. Of the 10,000 employers it tracks, there were roughly 5.2 million active job listings, down 5.0% over August 2023 and -10.4% YoY (green line).
Only a word stronger than “specious,” applies to the BLS’ insult to injury. It wasn’t enough that a third of headline job creation was attributable to government. To break the seven-month downward streak, revisions to July and August were positive, but that was pure government. Private sector revisions, as is the case for all of 2023, were negative.
Into this breach stepped this Friday’s Bloomberg headline: “Low Rated Subprime Auto ABS Tightest in Year.” At 550 basis points, spreads on BB-rated paper are two pps below when Silicon Valley Bank blew up (yellow line). We get the shorter maturities compared to mortgages. But auto finance is treacherous as the population of under-water borrowers soars amidst rising joblessness. Per Equifax’s latest, 60-day delinquencies for auto accounts and balances are at the highest levels since the economy emerged from the Great Financial Crisis (aqua and purple lines).
To liven it up, let’s commemorate the end of Octoberfest with the latest from the National Beer Wholesalers Association. After bottoming December at 30.0, a record low (orange bars), its Beer Purchase Index (BPI) recovered to 54, where it hovered through July. As Closings, as tallied by DailyJobCuts.com, have climbed back up from the summer’s six per day to the last three months’ eight-nine per day (red bars), the BPI has fallen back below the 50-diffusion-dividing line to 45. With luck, Octoberfest gave October a seasonal boost. Just in case, as we await CPI and Friday the 13th, do your part, and grab a six-pack of Pumpkin Ale.