Dow dropped 175, advancers slightly ahead of decliners & NAZ went up 35. The MLP index was off 1+ to the 223s & the REIT index fell 2+ to the 433s. Junk bond funds rose in price & Treasuries were little changed today. Oil crawled higher in the 115s (more below) & gold gained 22 to 1870.
AMJ (Alerian MLP index tracking fund)
Private payroll job growth slowed markedly in May, suggesting the tightest labor market in decades has made it difficult for businesses to fill a record number of open positions, according to the ADP National Employment Report. Companies added just 128K jobs last month, sharply missing the 300K gain that had predicted. It marked the worst month for job creation since Apr 2020, when the pandemic shut down a broad swath of the nation's economy, triggering Ms of layoffs across the nation. It's also a drop from last month's downwardly revised gain of 202K. "In April, the labor market recovery showed signs of slowing as the economy approaches full employment," said Nela Richardson, chief economist at ADP. "While hiring demand remains strong, labor supply shortages caused job gains to soften for both goods producers and services providers." The hiring deceleration largely stemmed from small businesses, as companies with fewer than 50 workers actually saw payrolls plunge by 91K last month. The decline was even more pronounced in businesses with fewer than 19 workers, with those employers accounting for the bulk of the losses last month, shedding 78K jobs. That's in part because the hottest inflation in 40 years, coupled with a persisting labor shortage & the high cost of attracting new employees, has made it difficult for small business owners to maintain their bottom line & retain workers. "Small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late," Richardson added. Large businesses that employ 500 or more workers helped to offset the decline, hiring 122K new workers last month. The bulk of the payroll increase stemmed from businesses with more than 1K employees, which saw a gain of 77K workers in May. Medium businesses, meanwhile, saw positions jump by 122K. The ADP release comes one day ahead of the more closely watched Labor Dept jobs report, which is expected to show that payrolls rose by 325K & the unemployment rate inched down slightly to 3.5%, the lowest level since the pandemic began in Feb 2020.
US companies added least amount of jobs in two years during May
Saudi Arabia is reportedly prepared to increase oil production if Russia's output falls substantially under the new sanctions imposed by the EU, according to people familiar with discussions. The price of oil traded 2% lower early today. US West Texas Intermediate (WTI) crude dropped to around $112 a barrel, after a 0.5% rise yesterday. Brent crude was down to $113 a barrel, after rising 0.6% the previous day. Up until now, Saudi Arabia has resisted calls by the White House to boost production, even though the price of oil has risen to its highest point in a decade. The kingdom has said it needed to keep spare capacity in reserve. Fears of an oil shortage increased after the EU launched another round of sanctions against Moscow, including a ban on importing seaborne cargo of Russian oil. A deal with the UK. that bars insurance of ships carrying the oil later this year could reportedly curtail Moscow's ability to redirect oil to other regions. The agreement to increase production could be announced at today's OPEC+ meeting. Production increases that were scheduled for Sep would be moved up to Jul & Aug.
Oil falls as Saudi Arabia ready to pump more if Russian output sinks
The US economy showed signs of decelerating in some parts of the
country during the spring as sky-high inflation, supply chain
bottlenecks & a labor shortage weighed on businesses, according to a
new Federal Reserve report. In its region-by-region roundup of anecdotal information known as the Beige Book, the Fed reported that economic activity slowed
in 4 of its 12 districts during the mid-Apr-May period
that the report covers as firms continued to struggle with rising
prices, a lack of available workers & disruptions from COVID-19. "Four districts explicitly noted that the pace of growth had slowed since the prior period," the report said. Although inflationary pressure remained "strong" over the past few
months, the Beige Book said that 3 Fed districts reported a
moderation in prices for some goods & services. Most businesses
continued to pass along higher costs to their consumers but noted
growing pushback, often in the form of buying less or choosing less
expensive brands. Some areas also reported some slack in the labor market. While most districts said employment rose "modestly or moderately," one
district "explicitly" reported that job growth slowed in the spring. "Some
firms in most of the coastal districts noted hiring freezes or other
signs that market tightness had begun to ease," the report continued. "However, worker shortages continued to force many firms to operate
below capacity."
Fed starts shrinking $8.9T balance sheet to combat sky-high inflation
More economic reports show the economy is doing good, but short of great. High inflation & rising interest rates, which are expected to rise further, are being felt by many businesses. However, the unemployment rate is low which is giving consumers the ability to buy more goods. Tomorrow's job report & unemployment data will be helpful in forecasting future growth.
Dow Jones Industrials
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