Finance

People line up as they wait for the JobNewsUSA.com South Florida Job Fair to open at the Amerant Bank Arena on June 26, 2024, in Sunrise, Florida. 
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There’s a lot of debate about how much signal to take from the 818,000 downward revisions to U.S. payrolls — the largest since 2009. Is it signaling recession?
A few facts worth considering:

By the time the 2009 revisions came out (824,000 jobs were overstated), the National Bureau of Economic Research had already declared a recession six months earlier.
Jobless claims, a contemporaneous data source, had surged north of 650,000, and the insured unemployment rate had peaked at 5% that very month.
GDP as reported at the time had already been negative for four straight quarters. (It would subsequently be revised higher in the two of those quarters, one of which was revised higher to show growth, rather than contraction. But the economic weakness was broadly evident in the GDP numbers and ISMs and lots of other data.)

The current revisions cover the period from April 2023 to March, so we don’t know whether current numbers are higher or lower. It may well be that the models used by the Bureau of Labor Statistics are overstating economic strength at a time of gathering weakness. While there are signs of softening in the labor market and the economy, of which this could well be further evidence, here’s how those same indicators from 2009 are behaving now:

No recession has been declared.
The 4-week moving average of jobless claims at 235,000 is unchanged from a year ago. The insured unemployment rate at 1.2% has been unchanged since March 2023. Both are a fraction of what they were during the 2009 recession.
Reported GDP has been positive for eight straight quarters. It would have been positive for longer if not for a quirk in the data for two quarters in early 2022.

As a signal of deep weakness in the economy, this big revision is, for now, an outlier compared to the contemporaneous data. As a signal that job growth has been overstated by an average of 68,000 per month during the revision period, it is more or less accurate.
But that just brings average employment growth down to 174,000 from 242,000. How the BLS parcels out that weakness over the course of the 12-month period will help determine if the revisions were concentrated more toward the end of the period, meaning they have more relevance to the current situation.
If that is the case, it is possible the Fed might not have raised rates quite so high. If the weakness continued past the period of revisions, it is possible Fed policy might be easier now. That is especially true if, as some economists expect, productivity numbers are raised higher because the same level of GDP appears to have occurred with less work.
But the inflation numbers are what they are, and the Fed was responding more to those during the period in question (and now) than jobs data.

So, the revisions might modestly raise the chance of a 50 basis-point rate reduction in September for a Fed already inclined to cut in September. From a risk management standpoint, the data might add to concern that the labor market is weakening faster than previously thought. In the cutting process, the Fed will follow growth and jobs data more closely, just as it monitored inflation data more closely in the hiking process. But the Fed is likely to put more weight on the current jobless claims, business surveys, and GDP data rather than the backward looking revisions. It’s worth noting that, in the past 21 years, the revisions have only been in the same direction 43% of the time. That is, 57% of  the time, a negative revisions is followed the next year by a positive one and vice versa.
The data agencies make mistakes, sometimes big ones. They come back and correct them often, even when it’s three months before an election.
In fact, economists at Goldman Sachs said later Wednesday that they think the BLS may have overstated the revisions by as much as half a million. Unauthorized immigrants who now are not in the unemployment system but were listed initially as employed amounted for some of the discrepancy, along with a general tendency for the initial revision to be overstated, according to the Wall Street firm.
The jobs data could be subject to noise from immigrant hiring and can be volatile. But there is a vast suite of macroeconomic data that, if the economy were tanking like in 2009, would be showing signs of it. At the moment, that is not the case. More

“The vast majority” of participants at the July 30-31 meeting “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the summary stated.
Markets are fully pricing in a September cut, which would be the first since the emergency easing in the early days of the Covid crisis.

Federal Reserve officials at their July meeting moved closer to a long-awaited interest rate reduction, but stopped short while indicating that a September cut had grown increasingly probable, minutes released Wednesday showed.
“The vast majority” of participants at the July 30-31 meeting “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the summary said.

Markets are fully pricing in a September cut, which would be the first since the emergency easing in the early days of the Covid crisis.
While all voters on the rate-setting Federal Open Market Committee voted to hold benchmark rates steady, there was an inclination among an unspecified number of officials to start easing at the July meeting rather than waiting until September.
The document stated that “several [meeting participants] observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision.”
One basis point is 0.01 percentage point, so a 25 basis point reduction would be equivalent to a quarter percentage point.
In the parlance the Fed uses in its minutes, which do not mention names nor specify how many policymakers felt a certain way, “several” is a relatively small number.

However, the summary made clear that officials were confident about the direction of inflation and are ready to start easing policy if the data continues to cooperate.
The sentiment was twofold: Inflation markers had shown price pressures easing considerably, while some members noted concerns over the labor market as well as the struggles that households, particularly those at the lower end of the income spectrum, were having in the current environment.
“With regard to the outlook for inflation, participants judged that recent data had increased their confidence that inflation was moving sustainably toward 2 percent,” the minutes stated. “Almost all participants observed that the factors that had contributed to recent disinflation would likely continue to put downward pressure on inflation in coming months.”
On the labor market, “many” officials noted that “reported payroll gains might be overstated.”
Earlier Wednesday, the Bureau of Labor Statistics reported, in a preliminary revision of the nonfarm payroll numbers from April 2023 through March 2024, that gains may have been overstated by more than 800,000.
“A majority of participants remarked that the risks to the employment goal had increased, and many participants noted that the risks to the inflation goal had decreased,” the minutes said. “Some participants noted the risk that a further gradual easing in labor market conditions could transition to a more serious deterioration.”
In its post-meeting statement, the committee noted that job gains had moderated and that inflation also had “eased.” However, it chose to hold the line on its benchmark funds rate, which is currently targeted in a 5.25%-5.50% range, its highest in 23 years.
Markets rose the day of the Fed meeting but cratered in following sessions on worries that the central bank was moving too slowly in easing monetary policy.
The day after the meeting, the Labor Department reported an unexpected spike in unemployment claims, while a separate indicator showed the manufacturing sector contracted more than expected. Things got worse when the nonfarm payrolls report for July showed job creation of just 114,000 and another tick up in the unemployment rate to 4.3%.
Calls grew for the Fed to cut quickly, with some even suggesting that the central bank do an intermeeting move to head off worries that the economy was sinking fast.
However, the panic was short-lived. Subsequent data releases showed jobless claims drifting back down to normal historical levels while inflation indicators showed price pressures easing. Retail sales data also was better than expected, assuaging worries of consumer pressure.
More recent indicators, though, have pointed to stresses in the labor market, and traders largely expect the Fed to begin cutting rates in September.

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Algerina Perna | Baltimore Sun | MCT | Getty Images

The explosion of online sports betting is taking a toll on personal finances, particularly among those who are financially distressed.
That’s the conclusion of a recent paper, “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households.” The authors found that sports betting has exploded since the Supreme Court overturned a federal law prohibiting it in 2018. Since then, 38 states have legalized it and it has become a growth industry, generating more than $120 billion in total bets and $11 billion in revenue in 2023 alone.

That has put considerable sums into state coffers, but it has come at a notable personal expense to gamblers and their families. Those who participate tend to invest less and have higher debt levels.
“Our results show that not only does sports betting lead to increased betting activity, but it also leads to higher credit card balances, less available credit, a reduction in net investments, and an increase in lottery play,” the authors concluded.
The authors noted these negative effects were particularly noticeable among “financially constrained households.” That term was not defined, but the implication is that this group typically has lower savings, lower cash levels to cover expenses, higher debt levels and lower net worth.

Investing takes a hit

The authors used a quarterly panel of 230,171 households in states that have legalized gambling. About 7.7% of the households made online sports bets, with a household average of $1,100 a year.
Not surprisingly, people who gamble on sports have less money to invest, particularly in the stock market. The authors found a large decrease in net deposits to traditional brokerage accounts. “Two to three years after betting becomes legal, there is a noticeable drop in net investment relative to states where betting is not yet legal,” the report said.

The authors estimate that legalization reduces net investments by bettors by nearly 14%, and that every dollar spent on sports betting reduces net investment by $2.13.

More debt, overdrawn bank accounts

But the implications are much broader.
“The increase in betting and consumption drives an increase in financial instability in terms of decreased credit availability, increased credit card debt, and a higher incidence rate of overdrawing bank accounts,” the authors said.
This is particularly true for financially constrained households. The higher credit card debt indicates that these households are not just shifting funds from one type of entertainment to another (for example, shifting money from betting on lotteries to betting on sports). Instead, they are “becoming more indebted to fund an addictive losing proposition.”
Again, lower-income households suffer disproportionately. The bottom one-third of households by income had the largest increase in spending on sports gambling relative to income.

Bettors vs. nonbettors

There were notable differences between the characteristics of bettors and nonbettors.
Both groups had similar incomes, but bettors displayed riskier behavior. They were more than twice as likely as nonbettors to have ever invested in crypto or ever overdrawn their bank account. They were four times more likely to have played online poker or purchased lottery tickets.
These results are consistent with several prior studies. One 2009 study concluded gambling‐related activity is greater among low‐income investors, who tend to excessively bet on state lotteries and also are overweight risky, lottery‐type stocks.

In a pickle

The authors note the quandary for policymakers. By continuing to legalize and expand activities such as sports gambling — where the vast majority lose money — the government is sending conflicting signals.
On one hand, the government attitude is: These are adults, they have a right to spend their money any way they want to. And we need the money.
But governments have other priorities they are promoting, including encouraging saving money for retirement, that are clearly in conflict with promoting gambling.
“As legalized sports betting gains traction, it potentially undermines government efforts aimed at promoting savings through tax incentives and financial literacy programs,” the authors concluded.
“Policymakers should consider how the allure of betting might divert funds from savings and investment accounts, particularly for constrained households, which can affect household financial stability and long-term wealth accumulation.”

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Be more productive. That is how ChatGPT, a generative-artificial-intelligence tool from OpenAI, sells itself to workers. But despite industry hopes that the technology will boost productivity across the workforce, not everyone is on board. According to two recent studies, women use ChatGPT between 16 and 20 percentage points less than their male peers, even when they are employed in the same jobs or read the same subject. More

China’s latest export controls have caused some in the critical minerals industry to worry that Beijing will leverage its global supply chain dominance in unprecedented ways.
“Three months ago, there’s [no] way anyone would have thought they would have done this. It’s quite confrontational in that regard,” said Lewis Black, CEO of Canada-based Almonty Industries.
China will put export controls on tungsten by the end of the year, if not in the next month or two, Christopher Ecclestone, principal and mining strategist at Hallgarten & Company, predicted.

Pictured are are crystals of the antimony ore stibnite (antimony sulphide). 
Universalimagesgroup | Universal Images Group | Getty Images

BEIJING — China’s latest export controls has rattled insiders of the critical minerals industry, and some are concerned that Beijing will leverage its global supply chain dominance in unprecedented ways.
China’s Ministry of Commerce announced Thursday that export controls on antimony would take effect Sept. 15. Antimony is used in bullets, nuclear weapons production and lead-acid batteries. It can also strengthen other metals.

“Three months ago, there’s no way [any] one would have thought they would have done this. It’s quite confrontational in that regard,” Lewis Black, CEO of Canada-based Almonty Industries, said in a phone interview. The company has said it’s spending at least $125 million to reopen a tungsten mine in South Korea later this year.
Tungsten is nearly as hard as a diamond, and used in weapons, semiconductors and industrial cutting machines. Both tungsten and antimony are on the U.S. critical minerals list, and less than 10 elements away from each other on the periodic table.
“My sector is now thinking this is getting much closer to home than graphite,” Black said, referring to China’s previous export controls. Last year, Beijing, the world’s largest graphite producer, said it would enforce export permits for the crucial battery material amid scrutiny from foreign countries worried about its dominance.

“I can’t explain this move and I think that’s what rattled a lot of people in this sector, my customers, and they don’t have a plan B, which China is very aware of. There hasn’t been one for 30 years,” he said.
“There’s always been an equilibrium … they were never weaponized because they could create this snowball of escalation,” he said.

China accounted for 48% of global antimony mine production in 2023, while the U.S. did not mine any marketable antimony, according to the U.S. Geological Survey’s latest annual report. The U.S. has not commercially mined tungsten since 2015, and China dominates global tungsten supply, the report said.
“I think it’s the start of some export restrictions in a number of rare earths, minerals,” Tony Adcock, executive chair of Tungsten Metals Group, said in a phone interview. He said he found it hard to believe that China would just restrict antimony.
“The way that the [Chinese Commerce Ministry] statement was written, we’ve extrapolated that to tungsten and other rare earths. It may not happen,” Adcock said, noting that “tungsten is probably the highest economic importance.”
China’s Ministry of Commerce did not respond to a request for comment.

Tungsten’s military importance

The U.S. has sought to restrict China’s access to high-end semiconductors, following which Beijing announced export controls on germanium and gallium, two metals used in chipmaking.
While tungsten is also used to make semiconductors, the metal, like antimony, is used in defense production.

“China has a declining tungsten production, but tungsten is absolutely vital, far more than antimony, in military applications,” said Christopher Ecclestone, principal and mining strategist at Hallgarten & Company.
He expects China will put export controls on tungsten by the end of the year, if not in the next month or two.
“During a situation where there’s a bit of a race to secure metals in case there is some sort of flare up in tensions, frankly we talk about South China Sea or Taiwan, you want to have as much tungsten as you can,” Ecclestone said. “But you also want people on the other side to have as least tungsten as you can engineer.”
The U.S. is already keen to reduce its reliance on China for tungsten.
Starting in 2026, the U.S. REEShore Act prohibits the use of Chinese tungsten in military equipment. That refers to the Restoring Essential Energy and Security Holdings Onshore for Rare Earths Act of 2022.
The House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party in June announced a new working group on the U.S. critical minerals policy.
Ecclestone said that last week, the niche market of antimony trading noticed that the U.S. price for buying the metal from Rotterdam was exponentially higher than the price for delivery out of Shanghai. That’s after antimony prices kept rising even after pandemic-related shipping disruptions ended, he said.
“There’s a suspicion that the Pentagon has been re-stuffing its reserves of certain metals, and most notably antimony because it needs antimony for munitions,” said Ecclestone, who founded the mining strategy firm in 2003.
The U.S. Department of Defense did not immediately respond to a request for comment.
China is acting more in retaliation “against what it views as an intrusion into its national interests,” Markus Herrmann Chen, co-founder and managing director of China Macro Group, said in an email.
He pointed out that China’s Third Plenum meeting of policymakers in July “put forward a completely new policy goal of better coordinating the entire minerals value chain, likely reflecting the further heightened supply importance of ‘strategic mineral resources’ for both business and geoeconomic interests.”

Emerging alternatives

As China seeks to ensure its national security, companies in the U.S. and elsewhere are looking to tap a nascent opportunity.
“Energy Fuels has been the largest supplier of uranium oxide to the U.S. for several years supporting domestic nuclear energy production,” Mark Chalmers, president and CEO of Colorado-based Energy Fuels, said in a statement. He said the company is creating a U.S. rare earths product line.
“We recognized that our 40-year expertise working in naturally radioactive materials give us a competitive advantage to duplicate China’s success separating multiple [rare earth elements] from low-cost and plentiful monazite,” Chalmers said, referring to a mineral from which the desired metals can be extracted.
It remains unclear whether China will follow through with a blanket implementation of the latest export controls.
“They don’t want to acknowledge that this could escalate,” Black said. “But I don’t think China wants this to escalate either. The last thing you want to create is another boogey man [at] the beginning of a U.S. election. Let’s see in a week whether this is really a policy or not.”
Correction: This story has been updated with the correct name of the executive chair of Tungsten Metals Group. More

Walmart said to CNBC the decision to sell its stake will allow the company to “focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities.”
Walmart entered into a strategic alliance with the Chinese company in June 2016.
In its 2023 annual report, JD.com reported that Walmart owns 9.4% of ordinary shares in the company as of March 31, holding just over 289 million shares.

Signage at JD.com’s warehouse in Shanghai, China, on Mar. 9, 2022. The U.S. Securities and Exchange Commission on Wednesday added over 80 firms to its list of entities facing possible expulsion from American exchanges, which include China’s JD.com, Pinduoduo, Bilibili, and NetEase.
Qilai Shen | Bloomberg | Getty Images

Shares of Chinese e-commerce giant JD.com plunged 10% on Wednesday in Hong Kong after U.S. retailer Walmart confirmed it will sell its stake in the Chinese firm.

Stock chart icon

Walmart told CNBC the decision to sell its stake will allow the company to “focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities.”

The company said “JD has been a valued partner to us over the past 8 years, and we are committed to a continued commercial relationship with them.”
The stock was the largest loser on Hong Kong’s Hang Seng index. The U.S.-listed shares fell 9.5% in after-hours trading.
Walmart entered into a strategic alliance with the Chinese company in June 2016, with the U.S. retailer taking a 5% stake in JD.com back then.
In its 2023 annual report, JD.com reported that Walmart owns 9.4% of ordinary shares in the company as of March 31, holding just over 289 million shares.
JD.com did not have a comment when contacted by CNBC.
— CNBC’s Evelyn Cheng contributed to this report. More

It is easy enough to understand what is motivating Kamala Harris’s economic strategy. Poll after poll demonstrates that many Americans consider the cost of living to be their main concern heading into the election in November, and Ms Harris starts on the back foot, having served as vice-president during a time when inflation soared to a four-decade high. Rather than gloss over this ugly reality, she is trying to confront it. “Lower costs for American families” is the centrepiece of her economic agenda, a message she is likely to deliver again on August 22nd, in a speech to the Democratic National Convention. More

Electric vehicles generally cost more upfront than gasoline-powered cars.
But EVs may cost less over their lifetimes relative to traditional cars due largely to lower prices for refueling and maintenance.
Which is cheaper over the long term depends on geography and other factors.

David Paul Morris/Bloomberg via Getty Images

Electric vehicles may save consumers money over the long term relative to traditional gasoline-powered cars.
While EVs still tend to cost more upfront to purchase, recurring charges for fuel and maintenance are generally cheaper — adding up to a total lifetime cost that can be lower than that of a gas vehicle, experts said.

However, whether or not EVs beat gasoline cars on total cost depends on factors such as EV model, where the buyer lives and how they charge the battery, research shows.
EVs are expected to more easily reach cost parity with gasoline cars as battery prices continue to fall, experts said.

Some EV prices ‘starting to break even’ with gas models

The average consumer paid about $56,000 to buy a new EV in June 2024, relative to $49,000 for a gas-powered vehicle, according to Kelley Blue Book.
That financial gap is narrowing, however.
Carmakers have been cutting EV prices, and the federal government also offers a tax credit up to $7,500 to qualifying buyers of new EVs. Consumers can opt to receive that tax break as an upfront discount on the car.

States and utilities may also offer tax breaks to defray the cost of the vehicle purchase or charging infrastructure.

“The expectation is EVs will continue to get cheaper, largely driven by [lower] battery costs,” said Maxwell Woody, a researcher at the University of Michigan’s Center for Sustainable Systems who co-authored a recent study on EV and gasoline car costs.
Relative to gas car prices, some smaller EVs “are already starting to break even, even without the incentives,” Woody said.
But most people still pay an EV premium, said Chris Harto, senior transportation and energy policy analyst at Consumer Reports.
For buyers, “it’s really a question of, what’s the [long-term] payback on that extra cost?” Harto said.

Why EVs may win out in the long run

Owning an EV saves the typical driver $6,000 to $12,000 over the life of the vehicle, relative to a comparable gas-powered model, according to a Consumer Reports study published in 2023.
“If anything, the [total] savings might be a little bit better today,” Harto said.
EVs are less likely to need repair and maintenance, partly because they have fewer moving parts than cars with conventional fuel engines, according to the U.S. Department of Energy.
It’s also “significantly cheaper” to refuel an EV due to its higher energy efficiency and generally lower electricity prices relative to gasoline, Woody said.
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The Consumer Reports study examined six popular EVs that qualified for a federal tax credit, Harto said. Tax breaks from states, municipalities or utilities weren’t included.
Similarly, a 2024 J.D. Power study found EVs beat their gas-powered counterparts on total cost over a five-year ownership period in all states except Maine and West Virginia.
EV buyers in Colorado, Illinois, Nevada and New Jersey would save more than $8,000 over that period, according to the analysis, published in Automotive News last month.

Why geography matters

The J.D. Power analysis highlights a key caveat: The relative financial benefits derived from an EV depend heavily on case-by-case factors like a driver’s geographical location.
For example, the total lifetime cost of a midsize electric SUV with a 300-mile range can vary by $52,000 — or nearly 40% — depending on location, according to the University of Michigan study.
Such disparities are largely due to regional differences in prices for electricity and gasoline, Woody said.
“In places like Texas with particularly low gas prices, it’s harder for an EV to break even,” Woody said.

Additionally, EVs generally make more financial sense for those who recharge their batteries at home, Woody said. Public charging generally costs more, he said.
This is especially true in areas where EV owners can take advantage of lower residential electricity prices during off-peak hours, like overnight charging, Woody said.
“If you don’t have access to home charging, it’s going to be really hard to save money with an EV,” he said.
Home charging access reduces the lifetime cost of a 300-mile midsize SUV by roughly $10,000, on average, and up to $26,000, according to the University of Michigan study.

“Cities that are particularly friendly for [EVs] have several things in common, including a low cost of electricity (or at least time-of-use pricing that includes an option with low prices), high gasoline prices, moderate climates, and direct purchase incentives,” according to the study, which analyzed costs in 14 different U.S. cities.
Overall, small and low-range EVs (with about 200 miles) had a less expensive total cost of ownership than similarly sized gas vehicles across all cities, even without tax incentives, the study found.
Likewise, longer-range EVs with a roughly 300-mile range, especially for smaller vehicles like compact cars and midsize sedans, “can be comparable” without incentives. However, the longest-range models — about 400 miles — generally aren’t yet cost-competitive with gasoline vehicles, even with subsidies, it found.

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