Jan 8, 2021

Axios Markets

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🎙 "Men, their rights and nothing more; women, their rights and nothing less." - See who said it and why it matters at the bottom.

1 big thing: Costs are rising
Data: UN FAO food price index; Chart: Axios Visuals

Year-end data from the U.S. and around the world show a consistent theme — steadily increasing prices.

Driving the news: The Food and Agriculture Organization’s food price index rose for the seventh straight month in December, rising to its highest in six years.

Where it stands: In most of the world, consumer price index (CPI) and personal consumption expenditure (PCE) readings are being held down by weak employment levels and minimal wage increases as well as the cost of elective purchases like hotel stays, airfares and apparel.

  • However, the cost of things like food and other goods has been creeping higher for most of the year.

By the numbers: The prices paid index for the U.S. services sector jumped to its highest level since early 2012 in November and hovered near that level last month, while the prices paid for the manufacturing sector rose to their highest since 2018 in December.

  • The market has been steadily pricing in higher inflation for months, with 5-, 10- and 30-year breakeven inflation rates breaching their highest levels in two years earlier this week.

What's happening: Supply chains are being disrupted and the pandemic is wreaking havoc on workforces across the globe. Additionally, like gold and most commodities, food supplies largely are priced in dollars, and as the dollar has fallen to its weakest level in more than 2½ years, food prices have risen.

Between the lines: The latest report from the Census Bureau found some 29 million American adults reported that their household sometimes or often didn’t have enough to eat in the last week.

  • That adds up to 14% of all adults in the country, a number that rises to 18% of adults with children, 21% of Latinos and 24% of Black adults.
  • Just 3.4% of adults reported that their household had “not enough to eat” at some point over the full 12 months of 2019.

The last word: “It’s particularly heartbreaking because before COVID hit, we were on a pathway to end childhood hunger and had seen remarkable progress over the last several years, all of which was undone in just a matter of months,” Lisa Davis, SVP of nonprofit Share Our Strength’s No Kid Hungry campaign, said on a call with reporters in December.

2. Catch up quick

Boeing will pay $2.5 billion to settle a criminal probe with the U.S. Justice Department for concealing information about its 737 MAX jet that was involved in two crashes that killed 346 people. (CNBC)

Bitcoin's price rose to more than $40,000, doubling its previous $20,000 all-time high in just 30 days. (Axios)

Hyundai said it is in early stage discussions with Apple to potentially develop an electric car. (CNBC)

The CEO of data marketing firm Cogensia was placed on a leave of absence after he was arrested and charged with unlawful entry into the U.S. Capitol during Wednesday's riot. (Business Insider)

"While there’s little evidence that the Fed’s corporate debt buy-up benefited society, its costs and unintended consequences are significant, with clear damage to competitiveness and productivity," former FDIC head Sheila Bair writes. (WSJ)

3. Red hot housing market will face rising rates, falling confidence

Reproduced from Realtor.com; Table: Axios Visuals

U.S. 30-year fixed mortgage rates hit another record low this week, falling to 2.65%, data released Thursday by Freddie Mac showed, but Americans are starting to worry that the goldilocks environment for home sales could be coming to an end.

What's happening: The decline in mortgage rates to the lowest in the 50-year history of the data has helped keep costs down for prospective buyers even as overall prices have skyrocketed thanks to a flood of demand and declining supply.

  • Nationally, housing inventory declined by 39.6% over the last year.

Pay attention: "[H]omebuyers can still take advantage of low rates to offset the steep rises in home prices that we’ve seen in most areas over the last year, but finding a home will continue to be challenging," Realtor.com chief economist Danielle Hale said in a statement.

The future outlook for mortgage rates is likely higher, Hale added, "thanks to a changing landscape in Washington."

  • On Thursday, yields on the 10-year U.S. Treasury note rose above 1.1%, the highest since March, as traders priced in higher chances of another big fiscal spending package from Congress.
  • The mortgage rate moves in line with 10-year yields as well as the rates set by mortgage servicers.

Watch this space: Fannie Mae's Home Purchase Sentiment Index dropped six points from November to December, as both buyers and sellers became far more pessimistic about making a deal.

  • The index fell to its lowest since May, with confidence among those who said it was a "good time to buy" falling by 5 percentage points and among those who said it was a "good time to sell" dropping by 9 percentage points.
4. Labor market is moving in the wrong direction

Data: U.S. Department of Labor via FRED; Chart: Axios Visuals

More than 1 million Americans filed for unemployment benefits for the first time last week, even as new applications for the Pandemic Unemployment Assistance program fell to their lowest level since March.

State of play: The $900 billion stimulus bill passed by Congress at the end of December extended the PUA program through at least March but also added a new verification process that forces applicants to reapply in order to reduce fraud.

  • That and President Trump's delay in signing the bill is likely why the number of first-time PUA claims fell from more than 310,000 for the week ending Dec 26 to 161,400 during the week ending Jan. 2, Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute, tells Axios.
  • That created "uncertainty/confusion about whether PUA would even exist," she says. "I assume the drop is temporary."

The intrigue: Seasonal adjustment caused another divergence in data, bringing the total number of claims down by 126,000 from the previous week, while the number of claims without accounting for seasonal factors rose by 145,000.

Yikes: Annual data from Challenger, Gray & Christmas found total layoffs in 2020 hit a record 2.3 million, a 289% increase from 2019.

What's next: A growing number of economists predict that today's nonfarm payrolls report will show the U.S. lost jobs in December, with Goldman Sachs, JPMorgan and other top Wall Street firms predicting a negative print.

The bottom line: Even the consensus expectation for 100,000 jobs added would be less than half of November's total and "a far cry from the million-plus job gains posted through the summer," notes S&P Global chief U.S. economist Beth Ann Bovino.

  • "With over 10 million jobs still lost, it will take at least 2 years before the 22 million jobs lost from COVID-19 are regained."

Thanks for reading!

Quote: “Men, their rights and nothing more; women, their rights and nothing less.”

Why it matters: On Jan. 8, 1868, Elizabeth Cady Stanton, Susan B. Anthony and Parker Pillsbury published the first edition of The Revolution, which became one of the most important periodicals of the women's movement.

  • The paper operated as the official voice of the National Woman Suffrage Association, featuring reporting and writing on controversial issues like divorce, prostitution and reproductive rights.