The Boock Report

By

Inventories and Job Openings

United States

After a major drag was seen in Q1 from inventory drawdowns, April saw a .4% drop in wholesale inventories while today’s May figure was up by .4%. The inventory gain in May was all in durable goods, in particular ‘computers’ which rose 2.9% m/o/m and 12.5% y/o/y (for the sake of the loved semi space, hopefully this is being met by final demand because sales of ‘computers’ were up by 7.9% and have been running below inventory gains for months). Auto inventories were up by .7% m/o/m and 3.2% y/o/y. Overall sales fell for the 3rd straight month and that led to a one tenth pickup in the inventory to sales ratio to 1.29, matching the highest level since November (not saying much as its been between 1.28-1.29 since then). Bottom line, this number is never market moving as its only about 25% of business inventories but we must continue to watch the auto component and maybe the tech space with the large discrepancy between inventory and sales in this category.

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The number of job openings in May totaled 5.67mm, almost 300k less than expected and down from 5.97mm in April. These are still historically high numbers but as seen in the chart, we might be reaching a plateau in this cycle.

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Positively, hirings did pick up and the hiring rate was 3.7% vs 3.5% in April and 3.6% in March. It matches the best since March 2016. Also good was the jump in quitters (take this job and shove it) and the quit rate went back to 2.2% after falling to 2.1% in April. Within industries, job openings fell broadly with ironically ‘retail trade’ showing a sharp increase (likely internet retailing related). Bottom line, this number is somewhat dated and is also never market moving. While the demand for jobs seems to be flattening out, we know the real issue has been the supply of labor. If productivity is going to remain punk, a faster rate of working age population growth is needed for faster GDP growth and it just ain’t happening.