Fact Pack! Supercore Inflation Slows
By Hightower Las Vegas and RCG Economics on July 7, 2023
The supercore inflation measure slowed in May but remains elevated on a year-over-year basis:
As of May 2023
Jobs
Total nonfarm payroll employment increased by 209,000 in June, and the national unemployment rate changed little at 3.6 percent, per the U.S. Bureau of Labor Statistics. Employment continued to trend up in government, health care, social assistance, and construction.
- The number of unemployed persons, at 6.0 million, changed little. The headline unemployment rate has ranged from 3.4 percent to 3.7 percent since March 2022.
- The number of long-term unemployed (those jobless for 27 weeks or more), at 1.1 million, changed little in June and accounted for 18.5 percent of the total unemployed.
- The number of persons employed part time for economic reasons increased by 452,000 to 4.2 million in June, partially reflecting an increase in the number of persons whose hours were cut due to slack work or business conditions.
- The number of persons not in the labor force who currently want a job was 5.4 million in June, little changed from the prior month.
Average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents, or 0.4 percent, to $33.58. Over the past 12 months, average hourly earnings have increased by 4.4 percent.
Visualizing 1 Billion Square Feet of Empty Office Space
In April, one of the largest office owners in the country, Brookfield, defaulted on a $161 million loan covering 12 office buildings, most located in the Washington, D.C. market. Other major office space owners have suffered similar fate, and many are at risk of defaulting.
Economist and Fact Pack co-publisher John Restrepo:
“Remote work trends, which began in the pandemic and continued into the present day, mean that many occupiers of office space are downsizing — mostly to cut costs.”
Case and point: Earlier this year, Salesforce walked away from a 30-story tower in downtown San Francisco spanning 104,000 square feet. The below graphic shows nearly 1 billion square feet of empty office space in the U.S. based on data from JLL:
As of March 2023
Below are the “top’ 20 cities ranked by total square feet of office vacancy as of Q1 2023, per Visual Capitalist. Figures include central business districts and suburban areas.
New York has roughly 76 million square feet of empty office space. If this were stacked as a single office building, it would stretch 7 miles into the atmosphere. In 2019, the office sector accounted for about a third of all jobs in the city.
In a close second, Washington, D.C. had a 21 percent vacancy rate — 8 percent higher than what is typically considered economically healthy.
Across 54 markets in the dataset, San Francisco has the highest vacancy rate at more than 26 percent. Prior to the pandemic, vacancy rates were about 4 percent.
What does this mean for the banks holding notes? Fact Pack co-publisher and wealth management advisor Mike PeQueen:
“A recent Federal Reserve “stress test” revealed that a 40 percent decline in commercial property values for the nation’s big banks could result in a $65 billion loss on their collective commercial loan portfolios. The good news amid those alarming numbers is that many big banks have healthy capital reserves because of federal requirements put in place after the global financial crisis.
Smaller banks are a different story. Many have higher loan concentrations and less oversight on reserve requirements. If these loan portfolios should deteriorate, many banks may face a downgrade in ratings — and higher credit losses.”
Rent Rankings
The 2023 Best Cities for Renters Report is out, ranking almost 140 cities based on 20 metrics broken down into three categories: cost of living & housing, local economy and quality of. Las Vegas was the 77th best city for renters in 2023. Here’s why:
- Half of rental apartments here are high-end, offering an array of amenities and short commute time (just 18 hours per year).
- Renters have easy access to diverse natural amenities in and around the city.
- Las Vegas experienced whopping 4 percent increase in job opportunities and benefits from a dynamic business environment.
Highlights from the report:
- South Carolina’s Charleston was the first choice for renters to live in 2023, followed by Plano, TX, and Scottsdale, AZ.
- Miami, Seattle, Dallas and San Francisco made the top 50, standing out for their local economies.
- Reno was ranked 26th:
Las Vegas Home Prices
Las Vegas Valley home prices appear to be stabilizing to start the summer, per a report released Thursday by the Las Vegas REALTORS®. The median price of existing single-family homes sold in Southern Nevada through its Multiple Listing Service (MLS) during June was $440,990. That’s down 0.3 percent from May and down 8.1 percent from $480,000 in June of 2022. L
The median price of local condos and townhomes sold in June was $275,000, as it was in May. That’s down 1.8 percent from $280,000 in June of 2022 and below the all-time record condo and townhome price of $285,000, set in May 2022.
By the end of June, LVR reported 3,680 single-family homes listed for sale without any sort of offer. That’s up 1.0 percent from May, but down 36.0 percent from the same time last year.
Meanwhile, fewer homes are changing hands. LVR reported a total of 2,939 existing local homes, condos and townhomes sold in June. Compared to June 2022, sales were down 14.1 percent for homes and down 12.2 percent for condos and townhomes.
Losses
The collective Las Vegas Strip house was up by about $1 billion in 2022:
As of December 2022
Nominee Bottleneck
How hard has it been for Congress to confirm Biden’s executive branch nominees? New data provided by the Partnership for Public Service and reported by Semafor shows the president’s picks have faced nearly 200 cloture votes — more than Clinton, Obama, and Trump dealt with during their entire presidencies. Political appointees are waiting an average of 163 days to be confirmed — on par with Trump’s numbers but far longer than nominees of other prior presidents.
Savings
Most Americans don’t have the savings needed for managing short-term emergencies and building long-term wealth. According to a rolling representative online survey among U.S. adults by YouGov, 27 percent of Americans had some savings below $1,000 as of May 2023, while 12 percent said they had no savings at all.
- 18 percent said their savings were at least $1000 but less than $10,000.
- 11 percent said they had $10,000 to $49,999 in savings.
- 17 percent said they had more than $50,000 saved.
The survey also found that U.S. women were much less likely to have substantial savings, while married Americans were most likely to have big savings in the U.S., with 10 percent of them having put away $100,000 or more, compared to just 6 percent of widowed, 4 percent of partnered and 3 percent of single Americans.
In the OECD, Americans saved the 7th highest amounts of money but had only the 15th highest savings rate in 2020 — showing that Americans, who have the highest disposable incomes in the OECD, are not saving as much of them as people in other developed nations despite the opportunity to do so.
As of May 2023
Oil v. Metals
The global economy relies on a variety of commodities — and none come anywhere close to the massive scale of the oil market. In addition to being the primary energy source for transportation, oil is a key raw material for plastics, fertilizers, cosmetics, and medicine. As a result, the global physical oil market is astronomical in size and has a significant economic and geopolitical influence, with a few countries dominating global oil production.
The below Visual Capitalist infographic puts crude oil’s market size into perspective by comparing it to the 10 largest metal markets combined:
As of 7/7/2023
Agricultural Work
Informal employment — jobs for which workers are not protected by labor laws — accounts for more than 90 percent of agricultural jobs worldwide, according to data by the International Labour Organization.
As of 2019
Heat
The planet topped all heat records earlier this week:
July 3 and 4 were the world’s two hottest days on record. The global average surface temperature on Tuesday was 62.92 degrees Fahrenheit, the highest in records going back to the late 19th century. The previous record was set in August 2016. Last month was the hottest June so far recorded.
On the Horizon
Mike is traveling and off the grid this week. A peek at next week’s MarketWatch calendar:
