SVET Markets Weekly Update (August 29, 2022)

29 Aug 2022 by rate3

As Powell’s Jackson Hall speech aftershocks continue to reverberate through all trading desks across the world, providing fresh fuel to bear market motors, macroeconomic releases of the upcoming week do not promise to be so consequential as Chairman depressing rhetoric. Nonetheless, with so much of nervousness spread almost equally among global assets funds managers and private capitals holders you never can tell what piece of news might ignite the next panic sale (or buy).

So it might be a good idea to keep one ear opened for the following releases:

JOLTs Job Openings report for July issued by U.S. Bureau of Labor Statistics (BLS) on Tuesday August 30 at 10.00 AM; Institute for Supply Management’s (ISM) Manufacturing PMI for August released Thursday September 01 at 10.00 AM together with Payrolls (including, Non Farm, which is the most watched, Manufacturing and Government) for August posted by BLS on Friday September 02 at 8:30 AM; US Unemployment Rate for August revealed to public by BLS at the same day and hour as its payroll estimates.

In its previous Job Openings and Labor Turnover Summary for June BLS stated: (QUOTE) … the number and rate of job openings decreased to 10.7 million (-605,000) and 6.6 percent respectively. The largest decreases in job openings were in retail trade (-343,000), wholesale trade (-82,000), and in state and local government education (-62,000). … (EQ)

It is a pretty sizable reduction in available jobs compare to March, when openings reached its highest (11.9 million). After that there was a slight drop to 11.7 mln in April and then to 11.3 mln in May, followed by a June’s crash to the most recently reported 10.7 mln. Most analytics predict further decline to 10.5 mln in July. However, even if that decrease is more dramatic than anticipated it is unlikely to shake the FED’s resolution to crash the markets even further.

The second potentially consequential release scheduled for this week — ISM Manufacturing Index — is issued by a private, allegedly non-profit organization — Institute for Supply Management.

This bureaucratic construct is pretty ancient. It traces its root back to 1915, when it was known as ‘National Association of Purchasing Agents (N.A.P.A.)’. It was founded as a cross-states lobbying group aimed to ‘Impress the business world with the importance of the purchasing function to economic well-being’ (according to its chapter).

NAPA jumped to prominence in Washington DC during the WW2 when its lobbyists impressed on politicians minds the importance of standardized requirements and regulations during wartime production. However, its real growth started only in 1974, when NAPM (NAPA was renamed to the National Association of Purchasing Management, Inc. in 1968) introduced the Certified Purchasing Manager (C.P.M) qualification, which effectively converted it into the Middle Age Guild Gatekeeper directing and charging anyone, wishing to enter ‘their’ professional field.

The Purchasing Manager’s Index (PMI) was introduced in 1982 and since 1989 the U.S. Department of Commerce began using it as one of its Leading Indicators. Since that time FED board gatherings use ISM (NAPM changed its name to Institute of Supply Management in 2001) PMI as one of factors to consider while forming its rate policies.

Nonetheless, PMI is by far not as prominent from policymakers stand point as, for example, Personal Consumption Expenditures (PCE) Price Index calculated by U.S. Bureau of Economic Analysis. Regardless its corporatist megalomaniac agenda ISM is still expressing views on the present economic situation of more or less free agents — employees of private businesses. Obviously, their opinions can not be as important for career bureaucrats as those of their own peers. Additionally, govs executives not only do not understand entrepreneurs — many of them secretly disdain and even fear them as those they can not directly control.

If that was not the case FED might have been paying more attention to the fact that ISM PMI was consistently going down from its 63.7 pick in 2021 (the highest reading — 69.9 — was showed by PMI in 1983) to its 59.7 low in August of the same year. Even after it jumped to 58.6 in February 2022 (after reaching a new 57.6 low in January) it was obvious that US economy doesn’t need a Chairman to cool down the US economy with the Keynesian anachronistic instruments of ‘centralized economic management’. This economy (as any other technologically advanced markets orientated economy) might effectively manage itself without reinventing the 1930th socialists planning machine of Stalin’s appratchiks.

The latest PMI report indicates: (QUOTE) The July Manufacturing PMI registered 52.8 percent, down 0.2 percentage point from the reading of 53 percent in June. … This is the lowest Manufacturing PMI figure since June 2020, when it registered 52.4 percent. (EQ) Analytics projections put it to 52.0 in August anticipating a further slide of optimism about growing perspectives of US economy (PMI above 50 indicates growth) among purchasing managers.

If analytics are correct and PMI doesn’t sleep below 50 neither this nor the next several months it might only encourage FED board members to take even more drastic actions to ‘curb the inflation’ by ruining US population in a process. Obviously, all those 14 recessions which FED orchestrated during the past 100 years is not enough to prove Keynesian’s theories obsolescence.

So much so, as the third set of important macro indicators releases scheduled for this Friday wrapped by U.S. Bureau of Labor Statistics into their monthly Employment Situation Summary is expected by analytics to confirm the fact that official unemployment rate is not bulging from 3.5 percent which, according to U.S. Bureau of Labor Statistics officials, it reached in June and kept in July (prior it was on 3.6 since March 2022).

(QUOTE from BLS July Summary) Total nonfarm payroll employment rose by 528,000 in July, and the unemployment rate edged down to 3.5 percent … Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care. Both total nonfarm employment and the unemployment rate have returned to their February 2020 pre-pandemic levels. (EQ)

This survey is produced, as officially stated, (QUOTE) based on surveys of 131,000 businesses and government agencies, representing approximately 670,000 individual worksites (EQ)

However, the unemployment rate consistent reduction (it stood at 5.2 in August 2021) which is continuing despite all other economic indicators significant deterioration has been repeatedly questioned by many independent observers. Nonetheless, as all of them have absolutely no say in how this antic but well oiled statistics generating mechanism function, it will keep producing results fitting to current FED policies more often than not.

All in all the govs pyramidal juggernaut owned by privileged, unaccountable bureaucracy and designed to force us into the involuntary compliance with ruling apparatus most extravagant directives, have proved its sturdiness and inability to adapt to new worlds requirements. It is very unlike that this machine might be change any time soon unless some major cataclysm destroys its freeing the ground for modern, decentralized governance information networks made of willingly cooperating humans.