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Surge In Construction Jobs Surprises Analysts

Synopsis:

Job openings in the U.S. unexpectedly surged to over 8 million in August, with the construction sector contributing significantly to the increase. This rise contrasts with third-party metrics showing a weakening employment trend, raising questions about the data's accuracy. Despite the increase in job openings, the number of hires declined, and the response rate for this data remains suspiciously low, suggesting a significant portion may be based on estimation.

The Details:

• Job Openings jumped by 329K to 8.04 million in August, beating the median estimate of 7.673 million.

• The surge in job openings was primarily in the construction sector, which had the largest monthly increase on record, despite concerns over a downturn in construction activity.

• Other notable contributors to the job openings rise were state and local government jobs, which saw an increase of 78,000 positions.

• Despite the increase in openings, hires fell by 99K to 5.317 million, near the lowest level since the COVID crash.

• The quits rate dropped to a four-year low of 3.084 million.

• The accuracy of this report is in doubt, as 70% of the data is estimated due to a historically low response rate of just 33%.

Why It Matters:

This spike in job openings, particularly in the construction sector, raises questions about the health of the labor market. With the Federal Reserve watching employment trends closely, this data could influence monetary policy, though skepticism around its accuracy suggests caution. Investors should be wary of potential market volatility stemming from unreliable labor data, especially in sectors sensitive to labor market dynamics like construction and real estate.

• State & Local Jobs: Added 78,000 new openings.

• Hires Decline: Dropped by 99K to 5.317 million.

• Data Skepticism: 70% of the reported job openings are estimated due to a low response rate.

Linking to Macro Themes:

The questionable rise in job openings reflects broader issues of data manipulation and governmental influence on economic metrics. This inconsistency underscores potential market distortions and highlights the difficulty of navigating investments based on unreliable government data.

Zerohedge

China Delivers Stimulus Sending Chinese Stocks Soaring

Synopsis:

China is unleashing a massive and multi-faceted stimulus package aimed at reversing its economic downturn, particularly in the property market. The stimulus measures include easing homebuying rules, direct fiscal spending, liquidity injections, and policy support to stabilize growth. These efforts have triggered sharp rallies in iron ore prices and Chinese property stocks, signaling renewed market optimism. However, questions remain about the sustainability of this rally and whether the stimulus can drive a robust recovery.

The Details:

Recent Measures:

• Homebuyer Rules Eased: Major cities, including Shanghai, Guangzhou, and Shenzhen, have loosened homebuyer restrictions:

  • Guangzhou removed all limits on property ownership.

  • Shanghai and Shenzhen expanded suburban home purchase eligibility and reduced down payments to 15% for first homes and 20% for second homes.

• Mortgage Relief: The PBOC directed banks to cut mortgage rates by at least 30bp below the loan prime rate (LPR) by October 31, with the potential to further lower rates by an average of 50bp.

• Property Developer Support: The PBOC and NFRA extended policy support for property developer loans until 2026.

• Large-Scale Fiscal Stimulus: China announced a $284 billion issuance of sovereign bonds for fiscal spending, aimed at stimulating infrastructure and other investments under the 14th Five-Year Plan.

• Monetary Easing: The central bank released RMB 1 trillion (approximately $142.5 billion) into the financial system through a 50bps cut in the Required Reserve Ratio (RRR).

• Consumer Spending Boost: A separate $42 billion stimulus package targets boosting consumer spending to combat sluggish demand.

Market Reactions:

• The stimulus announcements fueled a rally in iron ore prices, jumping from $90/ton to $108/ton, reflecting expectations of increased construction activity.

• Chinese property stocks soared, with a Bloomberg gauge jumping as much as 14%.

• The CSI 300 Index surged 16% in a week, while the MSCI China Index rose 22% within four days.

Analyst Perspectives:

• Goldman Sachs estimates that the PBOC's measures may boost real GDP by 40 basis points, but also warns of headwinds such as steel overcapacity and supply chain issues.

• Despite the market rally, Morgan Stanley and others note that restoring consumer confidence and turning around the property market could prove challenging, indicating skepticism toward a potential V-shaped recovery.

• The comprehensive and coordinated nature of the current stimulus package, which contrasts with past piecemeal efforts, suggests that China is aggressively tackling its economic slowdown.

Why It Matters:

China's stimulus marks one of the largest and most aggressive interventions in recent years, reflecting the government's urgent need to stabilize the economy amid a property market crisis. The $284 billion sovereign bond issuance and $142.5 billion liquidity injection signal Beijing's commitment to reviving growth, especially in sectors like real estate, infrastructure, and high-tech manufacturing. For investors, these measures present both short-term opportunities and long-term risks as the effectiveness of China’s strategy remains uncertain.

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The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.ll