Rent Reversal

Median rent fell 0.4% Y-o-Y in March to $1,937, the first decline since 3/20. Rents are 19.9% higher than they were in 3/20. The biggest decline was in Austin, where rents fell 11% to $2,104, followed by Chicago where they fell 9% to $2,206. Rents rose the most in Raleigh, up 17% to $2,080, followed by Cleveland where they rose 15% to $1,530. NY’s median rent is tops at $4,022.

Oil Output

Starting 5/1/23, OPEC will reduce oil production by about 1.1 million bbl/day. What is most interesting is that OPEC already cut production by two million bbl/day back in 10/22, yet prices kept falling. The key question is, with this cut, will demand finally exceed supply? If so, prices will rise, inflation will worsen slightly, the Fed’s job will be made more difficult, and recession odds will somewhat increase.

Private Peace

The median airplane traveler would pay an extra 5%-10% for an adult-only flight that’s up to three hours in duration. For a six-hour flight, it’s 10%-20%. When asked how much extra they would pay to sit in a child-free zone, the response is 1%-5%. Among passengers who already pay for an upgraded seat, the amount they would pay is usually double the median. 

Earnings Estimate

At present, worker quit rates are running at about 2.6%/month, which results in average hourly wage growth of about 4.5%/annum. At that rate, and assuming inflation elsewhere becomes quiescent, inflation will run at about 3.5%/year, one-and-a-half points above the Fed’s desired rate. To get inflation down to 2%/year, will require average hourly wage growth to decline to 3%/year and to get that quite rates must fall further to 2.2%/month.

March Moves

The March Y-o-Y Core CPI reading of 5.6%, up from 5.5% gives the Fed permission to raise Fed fund by 25bps on 5-3-23. But the hikes end there. Banking is struggling. System-wide deposits collapsed at a 30% annualized rate in March, resulting in outstanding credit contracting 3.4%. And while equities are holding up, cyclical sectors like real estate, banks, transportation, and consumer discretionary, are collectively 32% off their peaks.

Maybe May

Net March job growth was 236,000, the smallest increase since 12/19, except for -268,000 in 12/20. This, along with rising first-time unemployment claims, reduced job openings, and the decline in the work week, point to a softening but still strong labor market. Job creation remains double trend growth. Fortunately, the labor force participation rate rose, and wage growth continues to decline. I suspect Powell raises rates one last time in May.

PC Production

PC shipments by the top five PC makers plummeted from 72 million in 19Q4 to 55 million in 20Q1. Sales then jumped and averaged 85 million from 20Q3 through 21Q4. They have since declined and in 23Q1 were just 57 million, slightly below their 19Q1 level. Generalizing, this means it probably takes about three years for manufacturing firms hit by Covid and its attendant complications to roughly return to normal.

Oreo Outcomes

To improve the odds of getting the interior Oreo cream to glom onto both the top and bottom biscuit when twisted, researchers at MIT used a rheometer to squish and twist the biscuits in opposite directions. After over 1,000 attempts using different flavors, twisting speeds, and amounts of pressure, they found the cream is stronger than sticky and thus sticks to one side 80% of the time!

Technology Transitions

While generative artificial intelligence (think ChatGPT) may eliminate white collar jobs, unlike previous technological breakthroughs which came for blue collar jobs, the fear of large job losses is ludicrous. Electricity, telephones, the internet, and other innovations have never reduced the demand for labor and this tech breakthrough won’t either. By 2033 there will be abundant jobs with newfangled titles like Generative AI Coordinator, or VP of AI Sales.

Earnings Estimate

At present, worker quit rates are running at about 2.6%/month, which results in average hourly wage growth of about 4.5%/annum. At that rate, and assuming inflation elsewhere becomes quiescent, inflation will run at about 3.5%/year, one-and-a-half points above the Fed’s desired rate. To get inflation down to 2%/year, will require average hourly wage growth to decline to 3%/year and to get that quite rates must fall further to 2.2%/month.

Technology Transitions

While generative artificial intelligence (think ChatGPT) may eliminate white collar jobs, unlike previous technological breakthroughs which came for blue collar jobs, the fear of large job losses is ludicrous. Electricity, telephones, the internet, and other innovations have never reduced the demand for labor and this tech breakthrough won’t either. By 2033 there will be abundant jobs with newfangled titles like Generative AI Coordinator, or VP of AI Sales

Nothing New

Prior to Covid, the percentage of new products and services was about 18.5%. Due to Covid, supply-chain breakdowns, inflation, rising interest rates, bulging inventories, and changing work patterns, the percentage of new goods and services fell to 16% in 2022, a decline of about 14%. This is probably why sales were weak this past holiday season and why firms are on the hunt for novelty.

Less Lending

In 22Q3, 22Q4, and 23Q1, the percentage of banks tightening lending standards for residential mortgages was low and flat at about 2%. Auto loans are a different story. After also holding at 2% in 22Q3 and 22Q4, the percentage tightening jumped to 18% in 23Q1. As for credit cards, 19% were tightening lending standards in 22Q4 and that percentage is now 28%. This will weigh on consumers’ ability to spend.

Passport Percentage

In 1992 three million U.S. passports were issued, and 18 million Americans, 7% of the population, had one. In 2006, 12 million were issued, and 70 million persons had a passport, 23% of the population. In 2019, 21 million passports were issued, but in 2020 just 12 million were. In 2022, however, a record 22 million were issued, 152 million were in existence, and 46% of the population had one.

Ethics Estimates

The most ethical and honest profession is nursing. 29% of American consider them to be very highly honest and ethical and 50% consider them highly ethical and honest. Doctors follow at 17% and 45%, and pharmacists at 14% and 44%. At the other end, telemarketers are the worst at 1% and 4%, then members of Congress at 1% and 7%, and car salespeople at 1% and 8%.