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US Jobs Report Is Set to Provide Some Solace to the Fed

BLOOM, Business, Canada, energy, PMN Business

Breadcrumb Trail Links PMN Business US employers are gradually dialing back the pace of hiring and hourly earnings are moderating, offering some solace to Federal Reserve policymakers in their bid to wrangle still-elevated inflation. Author of the article: Bloomberg News Vince Golle and Craig Stirling Published May 27, 2023  •  6 minute read Join the conversation 4qh5od4qu{i34rhjxowx{mz5_media_dl_1.png Bloomberg RSS Article content (Bloomberg) — US employers are gradually dialing back the pace of hiring and hourly earnings are moderating, offering some solace to Federal Reserve policymakers in their bid to wrangle still-elevated inflation. Advertisement 2 Story continues below This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Exclusive articles by Kevin Carmichael, Victoria Wells, Jake Edmiston, Gabriel Friedman and others. Daily content from Financial Times, the world’s leading global business publication. Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account. National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles, including the New York Times Crossword. SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Exclusive articles by Kevin Carmichael, Victoria Wells, Jake Edmiston, Gabriel Friedman and others. Daily content from Financial Times, the world’s leading global business publication. Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account. National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles, including the New York Times Crossword. REGISTER TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors. Article content For investors, though, economic data and monetary policy have taken a back seat to negotiations on the federal debt ceiling that are stretching into the final days before the US government risks defaulting. While lawmakers have narrowed differences, a final deal has yet to be struck. Financial Post Top Stories Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc. By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails or any newsletter. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300 Thanks for signing up! A welcome email is on its way. If you don’t see it, please check your junk folder. The next issue of Financial Post Top Stories will soon be in your inbox. We encountered an issue signing you up. Please try again Article content Government data on Friday are projected to show payrolls in the world’s largest economy increased by less than 200,000 in May, down from average monthly job growth of about 370,000 over the past year. Earnings are seen rising 0.3% from the prior month, when they posted the biggest advance in a year. Another report in the coming week is forecast to show the fewest open positions in two years. Although vacancies are still about 2 million above pre-pandemic levels, a fourth-straight monthly drop in April job openings would underscore a gradual loosening of the tight labor conditions that helped fuel inflation over the past year. Advertisement 3 Story continues below This advertisement has not loaded yet, but your article continues below. Article content The latest snapshots of the labor landscape will provide Fed officials with clues about the impact from tighter credit conditions, higher interest rates and brewing economic concerns.  Policymakers next meet on June 13-14 to decide whether another quarter-point hike in the benchmark rate is warranted after data this week showed faster inflation and resilient demand at the start of the second quarter. Fed officials scheduled to speak in the coming week include regional bank presidents Thomas Barkin of Richmond and Patrick Harker of Philadelphia, along with board member Philip Jefferson.  What Bloomberg Economics Says: “May jobs data are expected to show a slowdown in the pace of hiring — but not enough to put the Fed at ease. The choppiness of the monthly payroll data masks a gradual slowdown in the hiring pace since late-2021 — though the labor-market cooling has been slower than most analysis expected.” Article content Advertisement 4 Story continues below This advertisement has not loaded yet, but your article continues below. Article content —Anna Wong, Stuart Paul, Eliza Winger and Jonathan Church, economists. For full analysis, click here Further north, Statistics Canada will reveal gross domestic product for the first quarter, providing crucial insights into whether the economy is cooling enough for the Bank of Canada to hold rates steady next month.  Elsewhere, data showing slower euro-zone inflation, surveys of Chinese purchasing managers, and multiple GDP reports may grab investors’ attention.   Click here for what happened last week and below is our wrap of what else is coming up in the global economy. Asia Chinese purchasing-manager indexes will be a highlight in the region. On Wednesday, the official PMI is predicted by economists to show the deterioration in manufacturing easing slightly, while robust growth in the non-factory gauge is expected to slow. Advertisement 5 Story continues below This advertisement has not loaded yet, but your article continues below. Article content Australia’s inflation number for April, due the same day, may prove pivotal for observers of the Reserve Bank. The median forecast is for a slight acceleration, to 6.4%, though some economists reckon it will stay at the same pace or even slow.  In India, GDP data for the first quarter out on Wednesday may show a pickup, with both domestic and overseas demand helping to boost growth.  Thailand’s central bank is likely to raise its rate by a quarter point the same day, with Sri Lankan officials also due to deliver a verdict on monetary policy.  And in Japan, industrial production on Wednesday is expected by economists to have increased for a third month in April. For more, read Bloomberg Economics’ full Week Ahead for Asia Advertisement 6 Story continues below This advertisement has not loaded yet, but your article continues below. Article content Europe, Middle East, Africa The latest reading of euro-zone inflation on Thursday may draw significant attention, with the data expected to show frustratingly slow progress for the European Central Bank in tamping down price pressures.  Headline consumer-price growth is seen weakening to 6.3% in the 20-nation currency area, while the underlying measure that strips out volatile elements such as energy may be little changed at 5.5%. Both readings would remain well above the ECB’s 2% target.  National reports before then will probably underscore divergence across the region. Spanish inflation on Tuesday is expected to slow to 3.3%, while readings in France, Italy and Germany the next day may all remain above 6%.  Advertisement 7 Story continues below This advertisement has not loaded yet, but your article continues below. Article content Central-bank governors from Croatia, Austria and Italy are among the ECB policymakers scheduled to speak, and minutes from the May 4 meeting will be released on Thursday. The institution’s latest financial-stability report, due the previous day, will also draw attention, not least after banking-sector turmoil in the US and Switzerland. It’ll be quiet in the UK, which starts the week with a public holiday, as does much of Europe. A speech by Bank of England official Catherine Mann on Wednesday and consumer-lending data the next day are among the main events there. Swiss GDP on Tuesday may show the economy barely growing in the first quarter after flat-lining the prior three months. That’s still respectable considering the economy’s integration with that of Germany, which suffered a recession.  Advertisement 8 Story continues below This advertisement has not loaded yet, but your article continues below. Article content Swedish first-quarter GDP data will be released the same day, with no growth anticipated by economists after a drop in the prior period. The European Commission predicts the country will face the European Union’s worst economic slump in 2023. Several Russian reports will be published on Wednesday, including industrial production, weekly inflation, retail sales, wages and unemployment. Looking south, Turkey releases growth data on Wednesday. The election there will be closely watched as President Recep Tayyip Erdogan faces Kemal Kilicdaroglu in a runoff on Sunday.  Erdogan did better than polls predicted in the first round on May 14, falling just short of the 50% threshold needed to avoid another round of voting. The markets favor him to secure another term. Advertisement 9 Story continues below This advertisement has not loaded yet, but your article continues below. Article content In Africa on Monday, Kenya’s rate-setting committee is poised to leave borrowing costs unchanged as it monitors the impact of a jumbo hike in March after inflation softened last month.  The following day, Lesotho, whose currency is pegged to South Africa’s rand, will probably follow its neighbor and hike rates. And on Wednesday, nearby Mozambique’s officials may keep the benchmark rate steady for a fourth straight meeting. For more, read Bloomberg Economics’ full Week Ahead for EMEA Latin America The minutes of Banco Central de Chile’s May 12 meeting, to be released on Monday, will likely echo the post-decision communique’s central takeaway: the slow pace of disinflation gives policymakers little choice but to hold at 11.25% for the foreseeable future. Advertisement 10 Story continues below This advertisement has not loaded yet, but your article continues below. Article content The minutes of Banxico’s May 18 meeting should underscore the board’s concern that the inflationary outlook is “complicated and uncertain,” so the Mexican central bank will need to keep rates high — they’re now at a record 11.25% — and stable for an extended period of time. Banxico’s quarterly inflation report posted mid-week may see economic output forecasts raised while those for inflation are revised down on the back of a strong peso and a jump in foreign investment fueled by near-shoring.  Four of the region’s big five economies will release unemployment data. Joblessness is heading back up in Brazil and Chile after recovering from pre-pandemic levels, hovering near post-pandemic low in Colombia, while sitting at a record low 2.39% in Mexico. Latin America’s biggest economy likely rebounded in the first three months of 2023 on one-time factors such as government social stipends and a strong harvest. Most analysts see Brazil heading into at least four years of below-average growth, posing a significant challenge to President Luiz Inacio Lula da Silva’s agenda. For more, read Bloomberg Economics’ full Week Ahead for Latin America —With assistance from Robert Jameson, Laura Dhillon Kane, Monique Vanek and Paul Richardson. Share this article in your social network Comments Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. 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Iraq Offers Region Multi-Billion Dollar Project for Europe-Asia Link

BLOOM, Business, energy, PMN Business

Article content (Bloomberg) — Iraq is pitching a $17 billion network of roads and railways it says will help the region transport energy resources, goods and passengers, government spokesman Basim Al-Awadi told reporters in Baghdad.   The “Development Road” project — billed as a link between Asia and Europe — would stretch from Faw Port in Iraq’s southern province of Basra to Turkey in the north. Iraq is looking to bring together its neighbors to finance the giant project, estimated to produce about $6 billion in revenue a year, according to Al-Awadi. Article content The project would be constructed in three stages; the first will end in 2028, the second in 2038 and the third in 2050. Investments will be directed to railways, with $10.5 billion to construct 1,200 kilometers (745 miles) rail infrastructure and to buy new trains.  Another $6.5 billion would go toward building the same length of highways. This road would be able to transport 5-6 million containers and millions of passengers a year. The network would begin operating in 2028. “Iraq aspires to expand the Development Road after 2028 to be a new window for exporting gas and crude oil from Iraq and neighboring countries to Turkey and Europe to meet future energy consumption requirements,” Al-Awadi told reporters. Iraqi Prime Minister Mohammed Shia Al-Sudani said in a televised speech that the Faw port will be the gate for this economic activity and it will be foundation stone for a non-oil, sustainable economy and a link to serve Iraq’s neighbors and the region. “Railways and highways will facilitate the transportation of goods, and the jobs that these projects will create will be a positive imprint that will move the people of the region to a stage of integration,” Al-Sudani said. 

U.S. ‘won’t tolerate’ China’s ban on Micron chips-Raimondo

Business, PMN Business, PMN Technology, REU

Article content DETROIT — The United States “won’t tolerate” China’s effective ban on purchases of Micron Technology memory chips and is working closely with allies to address such “economic coercion,” U.S. Commerce Secretary Gina Raimondo said on Saturday. Raimondo told a news conference after a meeting of trade ministers in the U.S.-led Indo-Pacific Economic Framework talks that the U.S. “firmly opposes” China’s actions against Micron. Article content These “target a single U.S. company without any basis in fact, and we see it as plain and simple economic coercion and we won’t tolerate it, nor do we think it will be successful.” Article content China’s cyberspace regulator said on May 21 that Micron, the biggest U.S. memory chip maker, had failed its network security review and that it would block operators of key infrastructure from buying from the company, prompting it to predict a revenue reduction. The move came a day after leaders of the G7 industrial democracies agreed to new initiatives to push back against economic coercion by China — a decision noted by Raimondo. “As we said at the G7 and as we have said consistently, we are closely engaging with partners addressing this specific challenge and all challenges related to China’s non-market practices.” Raimondo also raised the Micron issue in a meeting on Thursday with China’s Commerce Minister, Wang Wentao. She also said the IPEF agreement on supply chains and other pillars of the talks would be consistent with U.S. investments in the $52 billion CHIPS Act to foster semiconductor production in the United States. “The investments in the CHIPS Act are to strengthen and bolster our domestic production of semiconductors. Having said that, we welcome participation from companies that are in IPEF countries, you know, so we expect that companies from Japan, Korea, Singapore, etc, will participate in the CHIPS Act funding,” Raimondo said. (Reporting by David Lawder; Editing by Chizu Nomiyama)

Michael Brush: Memorial Day weekend is a traveler’s nightmare but it’s a dream for travel-related stocks

Business, NEWS

If the jam-packed Memorial Day travel conditions have you thinking there must be an investment play in all the chaos, you are right. Post-pandemic wanderlust is real. It is only going to pick up from here. And the trend is not yet fully priced in to travel-related stocks. Here’s more detail on three key business drivers and four of the best stock plays on this theme, according to insiders. 

1) Global airline traffic rose 52.4% in March compared to the year before, says the International Air Transport Association (IATA). Air-travel growth in the Asia-Pacific region was phenomenal at 159%. Growth in Europe was strong at 37%, and North American growth was 17%.  2) Air-travel growth will continue. A recent IATA survey found 79% of travelers are planning a trip between June and August. Forward bookings released in the May 16 report show 135% travel growth ahead in Asia-Pacific, 40% growth in Europe, and 14% growth in North America. Globally, traffic is now at 88% of March 2019 levels. This suggests room for more growth.  3) Insiders at travel-related companies are buying their company’s shares in large size. This tells us the expected travel growth is not priced in to these stocks.  The best way to play the travel growth trend is to buy the travel-related stocks of companies where insider buying is strongest. Here are four to consider: 1. Delta Air Lines (DAL) As air travel grows sharply, capacity constraints make the post-pandemic wanderlust even more lucrative for airlines. This supports price increases.  Delta Air Lines
DAL,
+0.39%
recently reported first-quarter passenger revenue was 50% higher than in the first quarter of 2019, while flight capacity was flat. Rising costs have held back profit growth. But summer bookings are strong and the cost picture improves in the second half of 2023.  Costs rose because of the need to train thousands of new employees and renegotiate supplier contracts. Delta will also refurbish some airport hubs in coming months. But then these profit drains should recede, leading to a better cost picture in the second half.  Delta Air Lines is one of the better legacy carriers to invest in because it attracts business travelers. Its cabin format offers business travelers a variety of options, and its credit card partnership with American Express
AXP,
+4.08%
pulls them in, too.  By valuation metrics such as forward- and reverse p/e and price to sales, Delta trades at about a 50% discount to five-year trailing valuations. This explains why a director with a decent buying record recently bought $500,000 worth of stock at around $33 to $34 per shares, according to EZ Insider, an insider-tracking website provided by The Washington Service.  Delta is not “forever hold” stock. Its sector tailwinds will not last forever. And the airline sector has a long history of irrational price wars. Those bad old days could return at some point.  2. Caesars Entertainment (CZR) When travelers get off their flights, many will end up at the casino tables and hotel rooms of this giant gaming company.  From humble beginnings in Reno NV during the Great Depression, Ceasars Entertainment
CZR,
+1.81%
has grown into the largest U.S. casino company. It also operates under the Harrah’s, Horseshoe, and Eldorado brands. The company has 51 properties in 16 states with 47,200 hotel rooms.  Ceasars reports losses, but revenue growth has been phenomenal as people hit the road again. First-quarter revenue grew 23.5% to $2.83 billion. Casino revenue was up 22.7%. Food and beverage operations grew 26%, while hotel revenue grew 31.3%.  Both leisure and convention demand are up sharply and capacity is tight, so pricing power is back. Ceasars gets 40% of its revenue from Las Vegas and 49% from regional properties. Ceasars also has a relatively small but promising digital-gaming business. The company boasts 60 million loyalty customers it can entice into digital gaming. While Ceasars is a good wanderlust play, it is also a gamble, ironically. One risk is that it has no moat around its business. As states continue to expand gaming, this casino giant faces fresh competition. The company has a lot of debt at $13.2 billion. But it also has nearly $1 billion in cash, and it has been paying down that debt. Ceasars expects to retire $1 billion worth of debt in 2023. If the U.S. does endure a sharp recession this company will suffer, but recession is not in my forecast.  Morningstar analyst Dan Wasiolek has an $81 a share fair-value estimate on the company, meaning this is what he thinks the stock is worth now. The stock is much lower at around $42; Ceasars gets a four-out-of-five star rating at Morningstar. A director agrees the stock looks cheap. He bought $1.1 million worth at $45 in April, according to EZ Insider.  3. General Dynamics (GD) While General Dynamics
GD,
+0.44%
is known as a defense contractor, it also makes business jets. This is the business that will continue to pick up as post-Covid wanderlust continues. The company sells Gulfstream business jets and has an aircraft servicing arm. Besides travel growth, the business jet division will benefit from new models over the next few years, called G700, G800, and G400. General Dynamics stock has been weak because for the first quarter, reported in late April, General Dynamics offered a surprise decline in operating margins, particularly at Gulfstream. The company also said the second quarter will be “aberrant” due to supply chain issues hitting Gulfstream and some defense businesses, and contract delays. It says these issues probably won’t resolve until the third quarter. That’s not far off, which means the recent stock weakness looks buyable.  One insider agrees. A director with a solid buying record recently purchased $1 million worth of stock at $214.47. This is a good signal, and a confirmation that the current problems hurting first quarter results will probably go away — as the company predicts.  4. Apple Hospitality (APLE) The “other Apple,” this real estate investment trust (REIT) based in Virginia owns 220 hotels. Apple Hospitality
APLE,
-0.21%
operates in urban, high-end suburban and developing markets in 37 U.S. states. The hotels operate under brands including Marriott, Hilton, Hampton, Courtyard and Hyatt Place.  Apple Hospitality has a lot of exposure to Southern states that are benefiting from robust migration trends. Its biggest presence is in Florida, Texas, Alabama, Arizona, Virginia and California.  Thanks to post-pandemic wanderlust, occupancy and room rates were considerably higher in the first quarter. This drove revenue up by 19.6% to $311.4 million. Room rates grew 11% to $152 from $137, and occupancy was up 7.5%, to 72% from 67%. The all-important hotel metric “revenue per available room” advanced 19% to $109.50 from $92. Net income grew 83% to $32.9 million from $18 million. Management guided for continued growth — not surprising given the travel trends. “Booking trends remain strong, the supply picture is favorable, and improvements in business travel have lifted midweek occupancies in recent weeks,” said CEO Justin Knight when Apple Hospitality released quarterly results on May 2.  Despite the vastly improved business trends, the stock has gone nowhere in the past year, which seems odd. Apple Hospitality pays a decent 6.5% yield. A cluster of insiders bought $103,000 worth of stock in March and May at $15.50 a share.  Michael Brush is a columnist for MarketWatch. At the time of publication, he owned CZR. Brush has suggested DAL, CZR and GD in his stock newsletter, Brush Up on Stocks. Follow him on Twitter @mbrushstocks Read: Expect big crowds for the summer travel season — and big prices, too Plus: Gas will be much cheaper this Memorial Day Weekend. Now, for all the bad news.