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The U.S. economy is set to start 2022 on uneven ground as the labor market recovers at a slower than expected pace.
The addition of 210,000 jobs to the U.S. labor force in November marked a slowdown from the previous month and the smallest gain since December of last year, according to the latest Bureau of Labor Statistics data. Although the unemployment rate fell from 4.6% to 4.2% in a move toward pre-pandemic levels, 3.45 million Americans remained unemployed—and nearly 70% of those people have quit the workforce.
“The jobs market has a long way to go before it has fully healed,” S&P Global Ratings Chief U.S. Economist Beth Ann Bovino said in a report this week. “The headline number job gains of just 210,000 in November was a disappointment. It was less than half of our 500,000 forecast and the 525,000 consensus forecast. If monthly job gains hold at that rate, the U.S. economy won't regain the jobs lost from the pandemic until sometime in the fourth quarter of 2025.”
S&P Global Economics anticipates that the U.S. economy is likely to grow by 5.5% this year, with GDP reaching a 37-year high, followed by growth of 3.9% in 2022. But a prolonged period of declining labor force participation could negatively affect productivity and growth in the future.
Businesses are raising wages to entice employees into new roles and stay committed to current positions, and workers are leaving their jobs at higher rates.
November saw Americans’ average hourly earnings swell by 0.3% from October to “astonishing” 4.8% growth on a year-over-year basis, but inflation is eating into households’ purchasing power, according to Dr. Bovino. Nevertheless, retail analysts told 451 Research, part of S&P Global Market Intelligence, that wage growth and holiday gatherings are likely to encourage shoppers to spend more over the holidays this year than in 2020 and counteract their concerns about inflation and COVID-19.
"Wages are up really for every tier but particularly for lower-income consumers,” Arun Sundaram, a senior equity research analyst at the investment research firm CFRA, told S&P Global Market Intelligence. “That should at least partially offset the fact that there are fewer stimulus checks in the system.”
A revolution of workers voluntarily leaving their jobs—largely in search of better pay, benefits, child care, and working conditions—has the potential to transform both the labor market and workers’ bargaining power, according to S&P Global Market Intelligence. In October, 4.2 million Americans left their jobs, according to the latest BLS data. This marked a nearly record high quit rate, despite being a month-over-month decrease of 205,000 people who left their places of employment from September.
"We may have seen an acceleration of the structural transformation of the economy," Gregory Daco, chief U.S. economist at Oxford Economics, told S&P Global Market Intelligence.
The changing labor market dynamics are mostly affecting low-wage workers and people employed within the retail sector.
"This is a paradigm shift … The real, significant issue here is at the lower-income end of the spectrum. They're tired, they want more money, and they want to be treated in a better way than they have been and they certainly were during COVID,” Aniket Shah, global head of environmental, social, and governance and sustainability research at the investment banking firm Jefferies Group, told S&P Global Market Intelligence. "We're not seeing huge amounts of turnover in high-end jobs, it's not [that] people making a gazillion dollars are going to reflect on aesthetics in the forest … This is really at the lower end of the spectrum of workers in terms of education and income."
Today is Friday, December 10, 2021, and here is today’s essential intelligence.
Uncertainty in the Global Economy
Global Insurance Markets: Alive And Kicking
Global insurers are well placed to manage potential challenges in 2022, with more than 85% of S&P Global Ratings’ rated entities on a stable outlook and benefiting from robust levels of risk-based capital. If the uptick in inflation in 2021-2022 proves not to be transitory, it could hurt insurers' profitability, chiefly those with longer-tail liabilities without the ability to adjust pricing and pass on the increased costs to policyholders.
—Read the full report from S&P Global Ratings
Russia Mulls Foreign Vessel Ban Along Northern Sea Route After Rescuing Several Ships
Since mid-November, Russian icebreakers Vaygach and Taymyr have been involved in rescue operations to escort vessels stuck in Arctic waters, including Finland's Kumpula, to the Kara Sea, due to ice forming two weeks earlier than seen in the previous seven years.
—Read the full article from S&P Global Platts
The Credit Cycle
Infrastructure Law Paves The Way For Transportation GARVEE Bonds' Federal Support And A Stable Sector View
On Nov. 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act, which federal agencies refer to as the Bipartisan Infrastructure Law. The act contains a five-year surface transportation reauthorization through 2026 that replaces the Fixing America's Surface Transportation Act, which expired on Dec. 3, 2021.
—Read the full report from S&P Global Ratings
Covered Bonds Outlook 2022: Performance Stable As Support Schemes Wind Down
Healthy job market recovery supports cover pool assets performance despite support schemes wind down. The wind-down of borrower support schemes appears well-synchronized with counteracting improvements in labor markets. S&P Global Ratings expects that the available credit enhancement should cushion any deterioration in cover pool collateral performance due to the removal of government support.
—Read the full report from S&P Global Ratings
Market Dynamics
Transition to Net Zero with the S&P PACT Indices (S&P Paris-Aligned & Climate Transition Indices)
Backed by evidence from the UN Intergovernmental Panel on Climate Change, ambition has grown to limit global temperature rise to 1.5°C since pre-industrial levels, reaching net zero by 2050. Currently, 70% of global CO2 emissions are covered by net zero targets. To date, climate-conscious investors have largely focused on reducing relative portfolio carbon exposure; however, a combination of new forward-looking datasets and index innovation is emerging.
—Read the full article from S&P Dow Jones Indices
Banking Industry Under Pressure
French Banks Eye Record Profits In FY'21 Amid Fresh COVID-19 Turbulence
France's largest banks have rebounded impressively from the disruption caused by the COVID-19 pandemic and are on course to post stellar full-year results, analysts said. Strong investment banking performance throughout the year has helped boost the revenue and profits of the country's biggest lenders, including BNP Paribas SA, Crédit Agricole SA, and Société Générale SA, while a sustained recovery in French retail banking since the second quarter and lower costs of risk have also contributed.
—Read the full article from S&P Global Market Intelligence
Global Systemic Importance Set To Rise For China Banks, Fall For Japan Lenders
China's top four banks are likely to increase their global systemic importance, while Japan's megabanks are set to see their global influence decline in coming years as their overseas strategies diverge. Chinese banks are set to become more connected with the world's financial system in the medium term, driven by cross-border investment flows and offshore use of the Chinese yuan, analysts said.
—Read the full article from S&P Global Market Intelligence
Technology & Media
Look Out 'B-'low: Cautious Eye On Lower-Rated U.S. Tech Credits
S&P Global Ratings expects good technology industry growth prospects over the next couple of years and healthy market conditions to keep a lid on downgrades in the near-term. Significant market liquidity has allowed unfettered access for companies of all credit quality pile on debt to fund dividends, mergers, and acquisitions.
—Read the full report from S&P Global Ratings
E-Commerce Retailers' Hiring Spree Shows Robots Not Ready For Many Human Tasks
An accelerated move to automation during the pandemic prompted many e-commerce retailers to rethink business processes and retool jobs in critical areas such as final assembly, last-mile delivery, and customer service, retail experts say. Even so, the industry is still in dire need of more human workers.
—Read the full article from S&P Global Market Intelligence
Instagram Chief's Testimony May Kickstart New Legislation To Protect Kids Online
Instagram LLC head Adam Mosseri's Dec. 8 Senate testimony may spur lawmakers to expand existing child protection laws or adopt broader legislation against social media business models, experts say. The hearing comes after leaked documents from Facebook whistleblower Frances Haugen highlighted how Instagram-parent Meta Platforms Inc. knew the platform worsened the mental and physical health of some of its users, notably teenage girls.
—Read the full article from S&P Global Market Intelligence
What We Learned From Instagram Exec Adam Mosseri's Testimony
Lawmakers on both sides of the aisle took a tough stance with Instagram LLC head Adam Mosseri, who testified before the Subcommittee on Consumer Protection, Product Safety, and Data Security on Dec. 8. While no major legislation was announced immediately, one thing seemed clear: there is bipartisan agreement that more oversight of social media is needed, particularly for platforms that extend services to child users.
—Read the full article from S&P Global Market Intelligence
Listen: Next In Tech | Episode 43: A Cloud Native Primer
The term “cloud native” is important, but wildly overused. What does it really mean and what are the important aspects that organizations need to understand? Analysts Jean Atelsek and Jay Lyman join host Eric Hanselman to explore the ideas that cloud native embodies.
—Listen and subscribe to Next in Tech, a podcast from S&P Global Market Intelligence
ESG in the Time of COVID-19
Unpacking Europe’s Hydrogen Road Map
Hydrogen has received unprecedented policy support over the past year, with nations worldwide racing to publish national hydrogen decarbonization strategies. No region has been more engaged in this effort than the European Union. The EU has provided a hydrogen strategy for its member states and many other states in the region have created similar road maps.
—Read the full article from S&P Global Platts
2021 GRESB Scores Show Improvement In Sustainability Efforts By U.S. REITs
The recently released 2021 Global Real Estate Sustainability Benchmark, or GRESB, scores showed an overall improvement in ESG efforts by U.S. equity real estate investment trusts. GRESB scores capture information on ESG performance and sustainability best practices for real estate companies, covering more than 1,200 property companies, REITs, funds, and property developers worldwide.
—Read the full article from S&P Global Market Intelligence
Property, Construction Giants Push Steelmakers To Decarbonize
A consortium of European construction and property giants is pushing steel producers to lay out more aggressive plans to cut their carbon emissions. Under the SteelZero initiative, formed in December 2020 by climate consultancy The Climate Group and ResponsibleSteel, a standards setting nonprofit, 15 companies have committed to procuring, specifying, or stocking 100% net-zero steel by 2050 at the latest.
—Read the full article from S&P Global Market Intelligence
ESG Reporting In Mining Industry The 'Wild West'
Mining lags other sectors in reporting on its environmental, social, and governance goals as companies struggle with the lack of a single industry reporting standard. Half of the mining companies assessed by Transition Pathway Initiative have set emission reduction targets, compared to about 75.7% of companies in other sectors.
—Read the full article from S&P Global Market Intelligence
Germany's New Government To Speed Up Transition Via 'Fit For 65' Decarbonization Plan
Germany's new coalition government under Chancellor Olaf Scholz plans to speed up Germany's energy transition to achieve a 65% cut in CO2 emissions by 2030 on 1990 levels. S&P Global Platts reporters provide context for a country that is Europe's biggest importer of oil, gas, and coal and biggest producer of electricity.
—Read the full article from S&P Global Platts
Did COP26 Deliver?
The 2021 UN Climate Change Conference concluded with the signing of the Glasgow Pact, which agreed to “keep 1.5°C alive.” Some of the agreements made include strengthening 2030 emissions reduction targets, annually revising these targets, and a “phase-down” of coal. However, post-COP26, many felt an air of deflation.
—Read the full article from S&P Dow Jones Indices
Listen: Take Notes - Electric Vehicles Charging Ahead In European Abs Transactions
Credit analyst Doug Paterson joins Take Notes this week to discuss the rise of electric vehicles (EVs) in European auto ABS transactions as the transition to EVs from internal combustion ones is expected to accelerate. The latest episode of the podcast discusses some of the drivers behind the transition, price depreciation of EVs and how it affects the S&P Global Ratings analysis of auto ABS deals, and the share of EVs in securitized pools increasing and the possibility of a "green" auto deal.
—Listen and subscribe to Take Notes, a podcast from S&P Global Ratings
The Future of Energy & Commodities
OPEC+ Lifts Crude Output By 500,000 B/D In November Amid Omicron Uncertainty
OPEC and its allies boosted crude oil production by 500,000 b/d in November, with 80% of the increase attributed to five members—Saudi Arabia, Russia, Iraq, Kazakhstan, and Nigeria—according to the latest S&P Global Platts survey. OPEC's 13 countries pumped 27.85 million b/d, up 300,000 b/d from October, while Russia and eight other partners produced 13.86 million b/d, up 200,000 b/d, the survey found.
—Read the full article from S&P Global Platts
Trafigura's Oil Trades Surge As Market Recovery Underpins Record Year
Trafigura saw its oil and gas trading volumes jump 25% during its financial year to Sept. 30 as recovering demand as the pandemic retreats fueled record earnings at one of the world's biggest independent commodity traders. The Singapore-based trader said it is also upbeat that oil prices and trading volumes will continue to rise in 2022.
—Read the full article from S&P Global Platts
Need For Investment Is Critical For Oil, Gas Industry: World Petroleum Congress Panelists
More investment is needed in the upstream oil and gas sector not only to sustain production as global demand grows, but to drive the transition to cleaner energies, conference panelists said Dec. 7. Oil and gas investment declined in 2020 and 2021 because of the pandemic, which is a "recipe for more volatility," Joseph McMonigle, secretary-general for the International Energy Forum, said.
—Read the full article from S&P Global Platts
Industry Appears Ripe For A New Consolidation Round In Next Few Years: Pioneer CEO
The upstream sector may be ripe for a new round of consolidation within three to five years after several large corporate mergers in late 2020 and earlier this year, because many E&P operators remain highly leveraged, a prominent oil company CEO said Dec. 7.
—Read the full article from S&P Global Platts
U.S. EIA Slashes Early 2022 Gas Price Forecast Citing Fall Storage Build Pickup
The U.S. Energy Information Administration Dec. 7 lowered its estimates for U.S. natural gas prices in early 2022, following storage injections this fall that outpaced the prior five-year average. EIA lowered its forecast for Q4 Henry Hub natural gas spot prices 52 cents to $5.02/MMBtu. The Q1 forecast also fell 66 cents from the previous month's estimates to $4.58/MMBtu.
—Read the full article from S&P Global Platts
Written and compiled by Molly Mintz.