- Who’s impacted? And what jobs are booming?
- Companies are starting to tighten their belts in management and senior-level positions
- Crude oil bounced after hitting their low
Dear Reader,
After months of historic post-pandemic growth, we’re starting to see layoffs as the job market begins to slow.
The interesting aspect of this is there’s more demand for service-related jobs than ever before.
If you look around, restaurants and hair salons are struggling to find workers.
And yet, Amazon, McDonald’s, Facebook, and Shopify (just to name a few) have announced layoffs in the past month.
According to data released by the Department of Labor, “First-time claims for unemployment benefits rose to 245,000 for the week ended April 15, above expectations of 240,000”
“March’s shift in momentum indicates that could be changing. Around 89,703 layoffs were announced in March, a 15% gain from February”, according to a report from global outplacement firm Challenger, Gray & Christmas.
With more management and leadership level employees losing their jobs, we’re seeing the fastest slowdown in wage growth for higher income households.
Hiring increased over the past few years, and now with the economy slowing down, stores and businesses are seeing a decline in sales.
Companies Are Starting to Tighten Their Belts
That’s why these larger companies are starting to tighten their belts.
If you think about it, how many $50,000 a year jobs do you have to cut to make up one $150,000 a year job?
Companies are valuing smart workers who don’t break the bank, and getting rid of higher level positions that don’t contribute as much to the bottom line.
This is exactly what happened during the financial crisis. It’s only going to get worse and it’s why wage growth is going to come down.
It’s also why more companies are starting to hire more 1099 workers, compared to W2 employees.
If you hire an employee, there’s benefits, unemployment insurance, FICA, and a handful of other costs that come with it. You’re not just paying the person’s salary.
And during the good times, companies give employees all these benefits because they can afford to. Yet when the good times end, they’re stuck will bill as their profitability decreases.
Crude Oil Bounced After Hitting Their Low Point
Switching gears, the crude markets bounced after hitting the technical low we pointed out last week.
On the Brent side, $72 was our low point with an expectation of a hard bounce to $75.
We believe crude is going to move back into a trading range of about $73-$76 as the narrative keeps bouncing between OPEC+ supply and global economic slowdowns.
As concerns swirled (again) around regional banks, the economic fears were pulled forward sending crude straight down.
Even with the uncertainty, we don’t see much shift to our views of the U.S. completions market.
This is one of your typical “moving days” as broad assets reposition for a bigger push post-Memorial Day.
There is usually seasonal bounce as we get to the end of May and move into June, but you have to get the equipment in position prior to that move.
We expect dry gas activity to remain depressed, but oily basins will attract more activity as we head into the summer.
China bought a record amount of U.S. crude in March and given the elevated OSPs from Saudi – we don’t see a huge shift in Asian buying in the near term.
Over the longer term, there will be pressure in Asian buying as economic run cuts come into play in June.
The crude price deck will remain supportive of U.S. activity, and there will remain support in NGL purchases from the U.S.
This keeps our current average range in the 285-295 range ahead of Memorial Day, with a bump up to about 300 as we progress through June.
The Saudi’s disappointed the market with only a cut of $.25 to Asian light crude.
The expectation was for a cut of about $.50, which they didn’t deliver to the market.
They even increased prices into the Mediterranean and Europe, while maintaining near record pricing.
This type of pricing isn’t going to entice anyone to pick up additional cargoes or anything above term volumes.
When it comes to Chinese demand, crude flows are already above 2019 levels and yet we still have a record amount of crude on the water and very elevated floating storage.
So even with China absorbing a ton of crude, we haven’t seen a spike in physical crude prices or clearing floating cargoes.
Thanks for reading,
Freedom Financial News
