Tuesday's Markets Update (October 3, 2023)

04 Oct 2023 by rate3

On Tuesday, a better-than-expected JOLTS report led to the Nasdaq tanking in a broad sell-off, as investors worried about rising interest rates. The consumer discretionary, financials, real estate, and technology sectors led the decline. Megacap growth stocks were also under pressure, with Microsoft, Amazon, and Tesla losing ground. Airbnb fell 6.5% after a downgrade, while HP gained 1.7% after a double upgrade. BTC (~27.3K) and ETH (~1.64K) closed the day in red. Other news: Crypto supporter McHenry (age: 49) replaced McCarthy (58) in the House of Representatives.

Details

Job openings rose by 690,000 in August 2023, reaching 9.61 million, beating market expectations and showing a strong labor market despite rising interest rates. Openings increased in all sectors and regions, with the biggest gains in professional and business services, finance and insurance, and state and local government education.

Comment

Although, officially, job market looks strong many critics of the government's jobs statistics point out several key areas of concern:

Underemployment and Labor Force Participation: One major criticism is that official unemployment figures may not accurately reflect the true state of the job market. Critics argue that the official unemployment rate can be misleading because it does not account for discouraged workers who have given up looking for jobs or those who are involuntarily working part-time when they desire full-time employment. This leads to a concern that the unemployment rate may underestimate the extent of underemployment.
Use of U-6 Measure: Critics often point to the U-6 measure, which includes not only the officially unemployed but also discouraged workers and those working part-time for economic reasons. They argue that this broader measure provides a more accurate picture of labor market health but receives less attention than the official unemployment rate. As of August 2023, the U-6 unemployment rate in the United States was 7.2% while the "official" (U-3) unemployment rate was 3.8% for the same period.
FYI: Here's a breakdown of the naming convention for unemployment measures:

U-1: This is the narrowest measure of unemployment, representing the percentage of the labor force unemployed for 15 weeks or longer.
U-2: This measures job losers and those who have completed temporary jobs.
U-3: This is the official unemployment rate, which represents the percentage of people who are actively seeking employment and are currently without a job.
U-4: This includes U-3 and adds discouraged workers, those who have given up looking for work because they believe no jobs are available.
U-5: This includes U-4 and adds other "marginally attached" workers who would like to work and have looked for work in the past 12 months but are not currently looking.
U-6: This is the broadest measure and includes U-5 plus those who are working part-time for economic reasons, often referred to as "involuntary part-time workers." These are individuals who would prefer full-time employment but are working part-time due to economic conditions or because they can't find full-time work.
Seasonal Adjustments and Data Revisions: Some critics raise concerns about the seasonal adjustments made to jobs data, suggesting that these adjustments may lead to inaccurate readings during certain months. Additionally, revisions to jobs data can occur, which can alter previously reported figures and make it challenging to assess the real-time state of the job market.
Underreporting or Misclassification: There have been claims that the government underreports or misclassifies certain categories of workers, such as gig economy workers or independent contractors. This can affect the accuracy of labor market assessments.
Geographic Disparities: Critics also highlight regional disparities in employment opportunities and wages. While certain urban areas may experience robust job growth, rural areas may struggle with job losses and limited economic prospects.
Political Manipulation: Critics suggest that government administrations may manipulate jobs data for political purposes.
The IBD/TIPP Economic Optimism Index plummeted to 12-year low in October 2023 (36.3), amid growing concerns about the impact of rising interest rates.

Comment

The IBD/TIPP Economic Optimism Index is a measure of economic sentiment and confidence. It was created in 1998 by Investor's Business Daily (IBD) in partnership with TechnoMetrica Market Intelligence - a market research and polling firm - and it provides insights into public perceptions about the economy.

The index is based on a nationwide survey of around 900 adults, conducted via telephone. Respondents are asked a series of questions related to their outlook on the economy, personal financial situation, and job prospects. The answers to these questions are used to calculate the index.

The index comprises three main components: the Six-Month Economic Outlook, the Personal Financial Outlook, and the Confidence in Federal Economic Policies. These components are combined to generate the overall index score.

The reliability of the Index in predicting recessions is limited. It is primarily a measure of public sentiment and perception, and it is not designed to predict recessions or economic downturns with a high degree of accuracy. It provides insights into how people feel about the economy at a given moment, but it does not incorporate economic indicators, such as GDP growth, unemployment rates, or leading economic indicators, that are typically used to forecast recessions.

Crypto

Rep. Patrick McHenry (49), known for his support of cryptocurrencies, takes the helm in the U.S. House of Representatives temporarily, as the House finalizes digital-asset regulations. McHenry's leadership role as the temporary replacement for Speaker Kevin McCarthy (58), amid the search for a permanent successor, is expected to benefit the advancement of crypto-related bills he has been actively working on since last year.

Comment

Please, do not tell me that age is not a decisive factor in how politicians treat crypto. Almost everyone above 60 is against crypto, while almost everyone below 50 is pro-crypto. Hence, it is not a political issue, a national security issue, a fraud/not fraud issue, or a Howey test issue. Not at all. It is an issue of how old, inactive, and lazy your brain is in accepting new unfamiliar things, or an issue of how you want to promote your personal political / financial interests over the interests of the absolute majority of people.