Unemployment numbers came out this morning and surprise, surprise! Nearly 6.5 million people dropped off the pandemic relief dole. In total there were over 6.2 million fewer unemployment recipients on a week over week basis. As a reminder, the data is a few weeks behind our current situation. This data is from September 11.
This ran counter to what the major news headlines decided to print…
While initial claims did rise, this rise is due to seasonal adjustments. Non-seasonally adjusted (NSA) figures show a +8k claim drop.
In energy news, China has sounded the alarm.
China is seeing the error of destroying their carbon economy before their green economy gets off the ground. They are also noticing the rampant inflation that is carrying these energy prices to extremes. China has already experienced rolling blackouts and the people are getting restless.
There is nothing a top level communist is more afraid of than a revolt of the people. This is why everything will go out the window to keep the lights on in China. They will be buying coal in massive quantities and storing it for long-term use.
The thermal data also includes natural gas and oil but coal dominates this field in China. Coal is making a comeback and the associated miners are going to have tremendous looking earnings reports. This will really pique investor interest.
John Kemp at Reuters reported on this two days ago. You can find his article here. He breaks down the coal shortage that is taking place in China. He has been reporting on Chinese energy issues all year.
Finally I want to get to that giant sucking sound you are hearing.
The Fed’s reverse repo is at it again. The amount of demand it is seeing is at unprecedented levels.
Some of the most recent rise can be explained by the quarter ending and banks needing to swap cash for collateral. My worry is that there is a problem that is being swept under the rug. I believe the real problem is money market accounts. The guys that manage these are starved for yield and the RRP facility is their last resort. Prior to real interest rates being negative, these managers could park money in short-term treasuries. Now that these lose money, they have to find a new source of income. Can the Fed continue to play this game? They do hold all the cards and print all the money but at some point a mistake is going to be made. This mistake is going to cascade into a lot of heartache and pain. I’m curious if John Williams still feels that the facility is “working as expected”.