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Perhaps These Two Should Talk?

CAMS Weekly View from the Corner – Week ending 6/11/21

June 14, 2021

This past week the official inflation numbers exploded and now consistently surpass the Federal Reserve’s well recognized “2% inflation target” of which they have emphasized for many years as their general guidepost. For reference the Consumer Price Index (CPI) came in at 5% registering 3 ½ times its December 2020 reading. In recent decades analysts have drilled into the CPI and have ferreted out what is known as core CPI which is taking the CPI and stripping out Food and Energy costs being they are typically more volatile. (As an aside, within the analytical ranks, this core CPI is sometimes humorously referenced as what inflation looks like when you strip out inflation.) The core CPI came in at 3.8% registering 2 ½ times its December 2020 reading. For the first half of 2021 both have far exceeded their 2020 starting levels as well as the FED’s 2% target. Employment Landscape In our previous edition we delved into the general employment landscape. Within it we shared, at that time, the most recent Job Openings and Labor Turnover (JOLTS) report published by the Bureau of Labor Statistics (BLS) which was reflecting historic levels of unfilled job openings. This past week JOLTS was updated and now reflects an additional 1.2 million unfilled job openings. With this, we now see a total of 9.3 million jobs available and unfilled. The chart below depicts the amazing trend rate.

As we were coming around the bend and wrapping up 2020 we saw a consistent downtrend in the number of people who the BLS had labeled as unemployed. The high water mark was attained in April of 2020 whereby this category registered 23 million people. Up through year end 2020 this number consistently trended down and finished the year in the area of 10 million people. It has since stalled at these general levels. The chart below depicts our description.

Click For Larger View: Within the aforementioned JOLTS report we also get a Labor Turnover view within the employment market. This is known as the Quit Rate and when this rate rises it reflects strong labor market conditions as people are more emboldened to leave their current employment for the proverbial greener pastures. Similar to our first chart of unfilled job openings the Quite Rate is now posting clear records since inception of this data. The chart below tells the story.

Taking all of the above together we see we have 9.3 million unfilled job openings via the most recent JOLTS report while the most recent employment report informs us we have 9.3 million officially unemployed people. Perhaps these two groups should talk and solve each other’s problem? More to the heart of the problem policymakers need to stop the incentives to remain unemployed so this employment market can get to some equilibrium and in so doing would go a long way in aiding the inflation issue with a more productive and functioning supply chain. Until and if this happens expect more of all of the above in our immediate future.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis


H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP). This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”. A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.

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