Wow!   September’s labor report vastly disappointed.  Non-farm and private sector payrolls increased by 194k and 317k, respectively, versus estimates of a 500k and 450k increase.

The unemployment rate declined to 4.8% versus an estimate of 5.1%.  Average hourly earnings rose by 0.6% versus the estimate of a 0.4% gain.  The LPR declined to 61.6% from 61.7%.

In a nutshell, people are not returning to work.  It is a supply issue.  Volumes can be written as to why.  However, the repercussions are inflationary.

Wages are 50% higher than expected.  Supply chain bottlenecks will not be resolved in the intermediate future because people are not returning to the workforce.

Is tapering going to commence in November/December as widely expected?

There are more questions than answers.

Markets were initially unfazed by the data but as the reality of the data began to sink in, Treasuries again sold off and the yield curve continued to steepen.

Will tomorrow’s release of the JOLTs Job Openings continue its record streak for the number of job openings?  Last month there was 1.25 jobs for every person who did not have a job.

Earnings season commences this week. The theme may be logistical logjams, parts and labor shortages, margin compression, all of which have become materially worse since the summer’s reporting period.

To date CEOs have insisted revenue has not been forfeited but rather delayed until 2022 or 2023.  Will the narrative begin to change that companies need to add capacity but can’t add capacity because of supply chain crunches?

Wow!  It has been at least two generations that businesses have faced such dilemmas.

The economic calendar is comprised of various inflation statistics such as the CPI and PPI, the JOLTS Job Openings, retails sales, several manufacturing data points and the release of the Minutes from the recent FOMC meeting.

Last night the foreign markets were mixed.  London was up 0.33%, Paris down 0.25% and Frankfurt down 0.32%.  China was down 0.01%, Japan up 1.60%, and Hang Seng up 1.96%.

The Dow should open flat but the NASDAQ down about 0.75% on inflation concerns.  The bond market is closed today for  Columbus Day.

Oil is surging, up another 3% to over $81/barrel to the highest level since October 2014.  There is a sudden realization that stores are not available for the upcoming winter fearing that if there is even a “normal winter” there is a distinct probability of rolling service disruptions not only in Europe but also in the US.  Wow!  The potential political ramifications are huge.   And then there is the inflationary aspect, an environment that has been all but absent for the last 14-15 years.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.