Case for September Rate Cut Builds After Slower Jobs Data Jobs report shows the unemployment rate ticked up to 4.1%, indicating slack in what has been a strong labor market

The Labor Department reported on Friday that the U.S. added a solid 206,000 jobs last month, slightly beating expectations and continuing a remarkably strong run. But the unemployment rate ticked up to 4.1%, a sign of slack in a labor market that has already shown some hints of gradually slowing down.

There were other indications as well that the job market is continuing to cool. Average hourly earnings were up 3.9% in June from a year earlier, marking their smallest gain since 2021. The counts for both April and May were revised lower by a combined 111,000 jobs. The labor-force participation rate, the share of working-age people who were employed or seeking work, ticked up to 62.6%—an indication that more people entered the labor market. (…)

The jobs report seems to have affirmed investors’ view that the economy is slowing, but not in a drastic way that would prompt more aggressive rate cuts.(…)

For the Federal Reserve, Friday’s report provides further evidence that the labor market appears to have come into better balance. (…)

There likely wasn’t anything alarming enough in Friday’s payroll report to lead Fed officials to push for a July rate cut. But eventually, some Fed officials will say that the risks of a further weakening in the labor market aren’t desirable, even as others may argue that inflation still isn’t showing enough progress to cut rates.

While July may be too early for a rate cut, a mild inflation report next week could lead to Fed doves who are more worried about labor-market weakness to argue that it is time for the central bank to tee up a September rate cut.

One risk is that experience has shown the labor market can go from strong to weak in short order. While the unemployment rate of 4.1% is still historically low, it is up from 3.4% early last year.

The Sahm rule, a rule of thumb popularized by economist Claudia Sahm, says that if the average of the unemployment rate over three months rises a half-percentage point or more above the lowest the three-month average went over the previous year, the economy is in a recession. Over the past three months, the unemployment rate has averaged 4%—0.4 percentage point above the three-month average low of 3.6% over the past year. (…)

If consumers cut back too much, employers could respond by cutting staff, turning what has been a virtuous cycle of rising employment and rising spending into a vicious one.

Complicating the Fed’s job, continuing pandemic-related distortions and the recent wave of immigration have made interpreting labor-market signals more difficult.

Job growth over the past year has been driven by three sectors: Healthcare, government, and leisure and hospitality. Together, they have accounted for 1.7 million of the 2.7 million jobs the economy has added over the past year. Much of that outsize growth is a matter of catching up, since all three sectors were much slower to get back to their prepandemic job levels than other employers.

Employment in all three sectors still appears low relative to their prepandemic job-growth trends. But it is unclear at what level demand for workers will be satiated, and once it is, overall job growth could slow markedly. (…)

The labor market has been erratic on a monthly basis. This chart of stacked payroll contributions suggests a step down in growth rates during Q2…

…but this quarterly chart shows rather stable growth in the last 3 quarters:

If the FOMC is primarily intent to slow private employment, success seems to have peaked in Q4’23. The only recent slowdown in employment growth has been in governments:

This jibes with the findings of the recent services PMI surveys: the ISM, which includes governments, said last week that its “employment Index contracted for the sixth time in seven months and at a faster rate in June” whereas S&P Global’s survey, which “covers only private service sector companies” saw a fresh and “solid” increase in employment, “the sharpest since May 2023”.

Some pundits point out the steep rise in the unemployment rate in Q2, from 3.8% in March to 4.1% in June. In reality, unlike in previous recessions, this recent increase in the UR does not reflect waning demand for labor being mainly the result of labor supply (+375k) greatly exceeding new job creations (+62k).

The Bank of America Institute sees “No major sign of distress for unemployment yet”:

Since January 2024, the unemployment rate has risen from 3.7% to 4.0% in May. Is this rise a hint of labor market weakness or a blip? To gain insight into this, we use Bank of America data to look at the ‘Payroll Disruptions Rate,’ (PDR) which we use as a rough proxy for job losses. We define the rate as the proportion of customers who previously had 12 months of regular payroll payments in their accounts, followed by three months without a payment relative to the total number of customers with 12 consecutive months of pay.

Looking at our estimate of the PDR, we find the rate has averaged 0.9% in 2024 so far, in line with the 2019 average. In May 2024, we estimate the PDR at 0.8% – suggesting there is no sign here of a deterioration.

Recall that S&P Global’s June Composite PMI rose 3.5 points to 54.8 from April to June (+4.0 points to 55.3 for Services), prompting S&P to conclude that “the survey data point to GDP rising at an annualized 2.0% rate in the second quarter, with a 2.5% rate seen for June. Forward momentum is therefore gathering pace.”

Consumer data support continued economic momentum. Aggregate weekly payrolls are up 5.1% YoY in June (+4.4% MoM annualized) and 5.3% in Q2 (+5.0% QoQ annualized). PCE inflation well below 3.0% (+2.6% in May) put real payrolls up in the 2.0-2.5% range, in line with the last 12-month experience in real expenditures.

The Citigroup Economic Surprise Index is nearly as low as it gets with bond yields in normal reaction. If S&P Global PMI (not in the CESI unlike the ISM) proves accurate, surprises could turn positive this summer (chart from Ed Yardeni).

Canada Unemployment Rate Continues to Climb

The job market was effectively stalled in June, with 1,400 jobs lost for the month, allowing the unemployment rate to climb 0.2 percentage point to 6.4%, Statistics Canada reported Friday. The result undershot market expectations for the addition of a modest 25,000 jobs and a unemployment rate of 6.3%.

It is the second month this year that employment was virtually unchanged, even as continued high levels of immigration have expanded the working-age population. Employment has failed to keep pace with the growing labor force for more than a year, with the unemployment rate advancing 1.3 percentage points from the post-pandemic low in April 2023.

When calculated using U.S. Labor Department methodology, Canada’s unemployment rate climbed to 5.4% last month from 5.2% in May. In contract, the U.S. added a slightly more-than-expected 206,000 jobs in June while its jobless rate ticked up to 4.1%.

The jobs lost in June, though slight, were focused on full-time positions. And in a further sign of a soft labor market, hours worked fell 0.4% from May.

(…) Average hourly wages climbed 5.6% on a year earlier in June, quicker than the 5.2% rise the prior month and ahead of the 5.3% economists anticipated.

Given base-year effects when comparing wages a year ago contributed to the quickening in pay growth, some economists said the central bank should look through it. (…)

NBF:

(…) Since its all-time low in July 2022, the unemployment rate has thus risen by 1.6 pp, the biggest increase ever seen outside a recession. The rise would have been more pronounced had it not been for the fall in the participation rate. Job creation hasn’t kept pace with the population’s meteoric rise for some time now.

A stagnation in employment as observed in June, while the population is up by 100K, is a recessionary deviation. The weak job market is having a significant impact on individuals trying to enter the workforce. Statistics Canada reported in its release that students had the lowest employment rate since 1998. New immigrants are also struggling to enter the labour market, as their unemployment rate reached 12.7% in June on a 3-month moving average basis, for a total increase of 5.8 percentage points since its trough.

This is equivalent to the variation seen in the 2008-09 recession.

The acceleration in wages thus should not be a source of concern in terms of bringing inflation back down, as economic conditions affect salaries with a delay. What’s more, wage pressures are weighing on corporate profits, which fell sharply in Q1. It is thus likely that some firms will streamline their workforces over the coming months.

No less than 13 out of 15 sectors have seen a decline in output per employee between Q3 2022 and Q1 2024, with the goods sector showing far greater contractions than the services sector. It is thus not surprising that the goods sector has seen a contraction in employment since the start of the year.

As the restrictive monetary policy will continue to limit economic growth in the coming months, we expect the unemployment rate to maintain its upward trend towards 7% by the end of the year.

EARNINGS WATCH

A Bumper US Earnings Season Is Key for Stocks to Scale New Highs

Analysts’ upgrades to profit estimates have outnumbered downgrades going into the second-quarter reporting period, according to a Citigroup Inc. index. At the same time, expectations for 12-month forward earnings stand at an all-time high, data compiled by Bloomberg show.

“Given the lofty implied growth expectations, markets likely need to see raises coupled with solid execution-driven beats to sustain recent gains or push higher from here,” Citigroup strategist Scott Chronert wrote in a note. “The concern is while fundamental trends are positive and consensus estimates are attainable, valuations suggest the buy-side will demand more.”

The second-quarter season begins in earnest on July 12, when JPMorgan Chase & Co. reports results. It will follow a rally of about 35% in the S&P 500 Index since its October low, with the benchmark notching record highs more than 30 times this year, fueled by the buzz around artificial intelligence and bets on lower Federal Reserve interest rates. (…)

In fact, the Q2 earnings season has already started with early reporters per LSEG/IBES:

19 companies in the S&P 500 Index have reported earnings for Q2 2024. Of these companies, 84.2% reported earnings above analyst expectations and 15.8% reported earnings below analyst expectations. In a typical quarter (since 1994), 67% of companies beat estimates and 20% miss estimates. Over the past four quarters, 79% of companies beat the estimates and 16% missed estimates.

In aggregate, companies are reporting earnings that are 4.1% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.2% and the average surprise factor over the prior four quarters of 7.3%.

Of these companies, 47.4% reported revenue above analyst expectations and 52.6% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 62% of companies beat the estimates and 38% missed estimates.

In aggregate, companies are reporting revenues that are 0.4% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.3% and the average surprise factor over the prior four quarters of 1.2%.

The estimated earnings growth rate for the S&P 500 for 24Q2 is 10.1%. If the energy sector is excluded, the growth rate declines to 10.0%.

The estimated revenue growth rate for the S&P 500 for 24Q2 is 4.1%. If the energy sector is excluded, the growth rate declines to 3.9%.

The estimated earnings growth rate for the S&P 500 for 24Q3 is 8.4%. If the energy sector is excluded, the growth rate improves to 9.3%.

Trailing EPS are now $231.16, up 6.6% YoY. Full year 2024: $243.81e. Forward EPS: $261.39e (+13.7% YoY). Full year 2025: $278.48e.

TECHNICALS WATCH

• The 13-34week EMA is extended but still positive:

• Stock market trading volumes are surging outside the regular hours (pre-market and after-market trades) — this may be a combination of increased retail and offshore participation in the market… and to both ends arguably a symptom of further band-wagoning into US Large Growth stocks. (Callum Thomas)

Source:  @Barchart

• Americans are playing the stock market in record numbers, with almost three in five investing in stocks, according to a Charles Schwab survey released in June. Members of Generation Z start investing when they’re 19, on average, compared with 32 for Gen X and 35 for baby boomers, according to the survey. Sports betting has also exploded, with Americans wagering more than $220 billion in the past five years, according to the American Gaming Association. “Trading has become interchangeable with the same kind of online betting that we’re seeing for games and in the sports world. It’s part of a gambling zeitgeist,” says Peter Atwater, an economics professor at William & Mary.

(Bloomberg)

• SPX to VIX Ratio:  An interesting way of looking at rising stocks and stable/low volatility is the S&P 500 vs CBOE VIX ratio — this indicator is looking stretched and at levels where it tends to pullback from the upper trend channel line. (C. Thomas)

Source:  @i3_invest

U.S. PMIs: Two surveys, two different readings

Once again, the ISM PMI survey paints a very different picture than S&P Global’s, particularly on the important service sector. As usual, media and analysts focused on the weak ISM reading. Here’s the Bloomberg headline on July 3rd: US Services Activity Contracts at Fastest Pace in Four Years. No mention of the S&P Global survey out the same morning.

ISM: Services PMI at 48.8%

In June, the Services PMI^® registered 48.8 percent, 5 percentage points lower than May’s figure of 53.8 percent. The reading in June was a reversal compared to May and the second in contraction territory in the last three months. (…) The Business Activity Index registered 49.6 percent in June, which is 11.6 percentage points lower than the 61.2 percent recorded in May and the first month of contraction since May 2020.

The New Orders Index contracted in June for the first time since December 2022; the figure of 47.3 percent is 6.8 percentage points lower than the May reading of 54.1 percent. (…)

The Employment Index contracted for the sixth time in seven months and at a faster rate in June; the reading of 46.1 percent is a 1-percentage point decrease compared to the 47.1 percent recorded in May.

The Prices Index registered 56.3 percent in June, a 1.8-percentage point decrease from May’s reading of 58.1 percent. (…) The Backlog of Orders Index contracted in June for the first time since March, registering 44 percent, a 6.8-percentage point decrease compared to the May reading of 50.8 percent. (…)

Though the Services PMI^® contracted for the second time in three months, that was preceded by 15 consecutive months of growth, a contraction in December 2022 and 30 months of expansion before that. That indicates sustained growth for the sector, as the PMI^® has not recorded back-to-back months in contraction since April and May 2020.

The decrease in the composite index in June is a result of notably lower business activity, a contraction in new orders for the second time since May 2020 and continued contraction in employment. Survey respondents report that in general, business is flat or lower, and although inflation is easing, some commodities have significantly higher costs. Panelists indicate that slower supplier delivery performance is due primarily to transportation challenges, not increases in demand.

Business Activity                  New Orders

 

• Smoothing through the monthly noise with a 3-month average, this is the lowest the ISM Services index has been outside of recessions since the late 1990s. We have typically been in a recession once the smoothed index crosses persistently below 52, where it has been since April 2024. (@Econ_Parker)

S&P Global: New orders expand at fastest pace for a year

The seasonally adjusted S&P Global US Services PMI® Business Activity Index increased for the second consecutive month in June, posting 55.3 following a reading of 54.8 in May. Activity in the sector has now risen in each of the past 17 months, with the latest expansion the most pronounced since April 2022.

Some firms reported that an increase in customer numbers had helped them to be able to secure greater volumes of new orders and thus raise business activity. (…)

Total new business expanded for the second month running, and at a solid pace that was the fastest for a year. The rise in overall new orders was recorded in spite of further weakness in new business from abroad, which decreased for the fifth consecutive month. Lower demand from Europe was mentioned by some respondents.

Higher new orders resulted in a fresh increase in employment in the sector, ending a two-month sequence of reduction. Moreover, the rate of job creation was solid and the sharpest since May 2023.

(…) Outstanding business increased slightly, the first accumulation in five months.

The rate of input cost inflation softened in June, but remained marked and was faster than the pre-pandemic average. More than 18% of respondents signalled a rise in input prices, which they primarily linked to increases in staff pay.

In response to higher operating costs, particularly those related to labor, service providers increased their own selling prices again. Charges have risen continuously on a monthly basis since June 2020. The latest increase was solid, albeit slightly softer than recorded in May.

Business confidence picked up for the second month running, hitting a five-month high and coming in only just below the series average. The recent increase in new orders and hopes that this will continue over the year ahead supported optimism, while there were also expectations that interest rates will start to come down. Some firms predicted that a hesitancy among certain clients to commit to new projects would end once the election period comes to an end, further supporting growth.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“US service sector companies reported an encouragingly solid end to the second quarter, with output rising at the fastest rate for over two years. Both new order inflows and hiring have also accelerated, the latter buoyed by firms taking on more workers in response to rising backlogs of work.

“With additional – albeit more muted – support coming from the manufacturing sector, the survey data point to GDP rising at an annualized 2.0% rate in the second quarter, with a 2.5% rate seen for June. Forward momentum is therefore gathering pace.

“There is some nervousness creeping in regarding the post-election business environment, but for now at least confidence about the outlook for the coming year remains elevated by recent standards and supportive of businesses investing in expansion.

“Some of this optimism relates to ongoing convictions that interest rates will start to fall before the end of the year. In this respect, a further cooling of price pressures in the survey – notably in the services sector – adds to signs that inflation should trend lower in the coming months to open the door further for rate cuts.”

S&P Global provided a detailed comparison of the two surveys last March.

On services PMIs, S&P Global notes that:

the S&P Global survey for services covers only private service sector companies (which is comparable with all other services PMI data produced internationally), whereas the ISM non-manufacturing survey (now also called the ISM Services PMI) includes everything outside of manufacturing (i.e. construction, education, government services, energy as well as all other services). Note that this prevents international comparability of the ISM Services PMI survey data with other Services PMI survey data.

Thus, while in theory the ISM data cover 100% of GDP, the S&P Global surveys cover around 70% (or 80% of total private sector GDP).

Since 2010, the S&P Global services PMI has exhibited a correlation of 51% with comparable GDP, but this rises to 65% if the GDP data are smoothed using a two-quarter moving average to remove some of the GDP data volatility.

(…) the ISM non-manufacturing index only exhibits a correlation of 46% with a comparable measure of GDP, which merely rises to 51% if the GDP data are smoothed using a two-quarter average.

Powell Talks Up Progress, Putting Rate Cuts Back Into View The central bank is trying to pull off a soft landing in which inflation slows without a serious downturn

Federal Reserve Chair Jerome Powell said he was pleased with how inflation had resumed a downtrend following a rebound at the start of the year but said it was too soon to say whether the central bank might be able to lower interest rates by the end of the summer, as investors increasingly anticipate.

“We’ve made a lot of progress,” Powell said Tuesday on a panel with other central bankers at a conference in Portugal. After serious shortages two years ago that sent wages up sharply, the labor market has “seen a pretty substantial move toward better balance,” he said.

The Fed leader’s remarks underscored a sense of cautious optimism that had faded after disappointing inflation readings in April. He alternately said the economy had made “significant progress,” “real progress” and “quite a bit of progress” toward cooler inflation with stable growth.

But he maintained his circumspect approach toward lowering rates, which suggested a rate cut at the central bank’s meeting later this month remains unlikely. (…)

Powell deflected worries Tuesday about firmer services inflation by suggesting that some components, such as housing, reflected lagged price increases that might not reflect current supply-and-demand dynamics.

Instead, Powell focused his attention on labor-market conditions and wages, which have slowed gradually in a way that has clearly satisfied Fed leaders. “You can see the labor market is cooling off, appropriately so, and we’re watching it very carefully,” he said. Powell repeated his view that a sudden deterioration in employment growth could spur a faster turn to rate cuts.

Some pundits assert that the Fed put is back. Fed Chair Jerome Powell and Chicago Fed President Austan Goolsbee both said in Sintra last week that they are worried that the Fed might cause job losses if monetary policy stays too tight for too long.

Job Openings Unexpectedly Rise in May

The latest job openings and labor turnover summary (JOLTS) report showed that job openings unexpectedly rose in May for the first time in three months. Vacancies increased to 8.140 million in May from April’s downwardly revised level of 7.919 million. The latest reading was above the expected 7.960 million vacancies. (…)

In May, there were 6.649 million unemployed workers and 8.140 million job openings. This equates to 1.22 jobs available per unemployed worker in May, unchanged from April. This is the lowest ratio level since June 2021.

Job postings on Indeed stopped declining in June (through June 28):

S&P Global Canada Services PMI: Business activity falls in June as demand falters

Canada’s service sector economy returned to contraction territory during June following modest growth in May. A lack of incoming new business weighed on sector performance, whilst confidence in the future fell to one of the lowest levels for two years. Employment growth was however sustained, and there was some positive news on the price front as cost inflation sank to its lowest level since February 2021. (…)

Weighing on service sector activity was a first reduction in incoming new business volumes since March. Companies commented on insufficient market demand, which they tended to associate with broader softness in economic conditions. Foreign demand remained notably weak, with sales to foreign clients down again and to the greatest degree since February.

China Services Sector Gauge Shows Slowdown in Activity Growth The survey pointed to a worsening employment situation in the services sector

The Caixin services purchasing managers index dropped to 51.2 in June from 54.0 in May, its lowest level since October 2023, Caixin Media Co. and S&P Global said Wednesday.

The index stayed in expansion territory for an 18th straight month, indicating that China’s service economy continued to grow into the end of the second quarter, albeit at a slower pace. (…)

Business activity and total new orders grew for the 18th month in a row but both at a slower pace in June, while the gauge for new orders hit a four-month low, according to Caixin. Meanwhile, new export orders grew for the 10th straight month thanks to strong external demand driven by robust tourism spending, said Caixin.

The private survey pointed to a worsening employment situation in the services sector, with businesses continuing to express strong motivation to r duce payrolls and an unwillingness to fill vacant positions. The subindex for employment stayed in the contraction for the fourth time in five months, according to Caixin. (…)

Prices were also under pressure in June, the data showed. Input costs and prices charged by service providers both declined from May, indicating limited inflationary pressure, Wang said.

China’s official nonmanufacturing PMI, which covers both service and construction activity, declined to 50.5 in June from 51.1 in May. The subindex tracking service activity fell to 50.2 in June compared with 50.5 in May, while the construction subindex fell to 52.3 from 54.4, according to official data.

But if you were out fishing like me, you missed this:

China’s manufacturing sector expanded at a more pronounced pace midway into 2024. Production growth was the fastest rate in two years, underpinned by rising new orders. (…)

Manufacturing output expanded at the quickest pace in two years, with firms in the consumer segment once again recording especially sharp output growth in June. (…)

The rise in new work intakes nevertheless led to a fourth successive month of backlog accumulation. (…)

The rate of input price inflation climbed to the highest in two years, and spurred firms to lift selling prices for the first time in six months. The increase in average selling prices was the fastest in eight months and broad-based by industrial group. Export charge inflation also rose to a two-and-a-half year high.

S&P Global’s survey also differs from China’s official PMI as The Daily Shot illustrates:

  

Rising manufacturing costs pose new threat in fight against global inflation

The June PMI data were characterised by cooling service sector price trends but a revival of upward inflation momentum in manufacturing, the latter thereby presenting a rising threat to the global fight against stubborn global consumer inflation. (…)

Manufacturing sector input costs showed the largest monthly rise for 16 months in June, the rate of inflation having trended higher since the middle of last year. Higher costs were passed on to customers resulting in the largest rise in average prices charged for goods since March 2023.

Accelerating growth of manufacturing input costs can be largely traced to reports of higher raw material prices and rising wage costs, with supply chain pressures – in contrast – remaining subdued.

(…) the recent upturn in manufacturing orders, which rose for a fifth successive month in June, has led to reports of some demand-pull price pressures developing. (…)

SENTIMENT WATCH

BlackRock, BNP See Plenty of AI Fuel Left to Drive Equity Rally

(…) “We expect AI to be a key theme for the second half,” said Wei Li, global chief investment strategist at the BlackRock Investment Institute. “It’s been a concentrated rally and that’s a feature of the AI transformation rather than a bug in the market. Concentration by itself is not a reason for us to be concerned.”

The S&P 500 Index has surged over 40% since the end of 2022, with the tech behemoths — predominantly winners of the AI theme — driving more than 60% of the advance. Although for some market forecasters the meteoric rally has evoked memories of the dot-com bubble, most say it’s been backed by a robust profit outlook. (…)

The majority of more than a dozen investors interviewed by Bloomberg expect global stocks to gain as much as 9% over the next six months, with the US most likely to outperform. Against this backdrop, most said they would buy into equities even at these lofty levels. (…)

A Goldman Sachs Group Inc. basket tracking AI stocks trades at about 32 times forward earnings, much higher than the S&P 500’s multiple of 21, according to data compiled by Bloomberg News.

Over the next couple of years, if AI firms excluding Nvidia “don’t show they can monetize the AI opportunity by seeing those earnings upgrades turning more positive, then you could have a potential down pressure on share prices,” said Zehrid Osmani, a Martin Currie fund manager. “Our view is to stick with companies that visibly are able to monetize” and are seeing earnings upgrades, he said.

Still, investors are broadly in agreement that the AI benefit to profits will continue supporting the market, coupled with looming interest rate cuts and a solid economy. (…)

FYI:

The top 10 companies in the S&P 500 make up 35% of the market cap but only 23% of earnings. This divergence has never been bigger, suggesting that the market is record bullish on future earnings for the top 10 companies in the index. In other words, the problem for the S&P 500 today is not only the high concentration but also the record-high bullishness on future earnings from a small group of companies.

Source: Bloomberg, Apollo Chief Economist

Meanwhile: The percentage of S&P 500 members beating the index is extraordinarily low. (The Daily Shot)

Source: @WillieDelwiche

Ed Yardeni:

(…) But at some point, too much capital can end even the best of parties. There are hundreds of small companies that have raised billions of dollars from venture capitalists hoping to discover the next ChatGPT. Investors have poured $330 billion into 26,000 AI startups over the past three years, which is two-thirds more than was spent funding 20,350 startups from 2018-20, according to an April 29 NYT article citing PitchBook data. Likewise, generative AI deals attracted $21.8 billion last year, up fivefold from 2022, according to CB Insights data in an April 29 WSJ article.

Many AI newcomers have yet to turn a profit. The NYT highlighted a number of companies that were running out of funds (…).

Fortunately, most of these companies haven’t borrowed debt in the capital markets, so a repeat of the telecom bust is unlikely. But if AI startups run out of cash, their suppliers could find AI-related revenues dry up quickly. (…)

At Nvidia’s annual meeting last week, Huang noted that the company’s business was about to expand into the robotics and the sovereign AI businesses. “The next wave of AI is set to automate the $50 trillion in heavy industries” with robotics factories that “will orchestrate robots that build robots that build products that are robotic,” the Investopedia article stated. The robotics industry already has many large, established companies, like Fanuc and Boston Dynamics, that are automated and using AI to improve their robots’ capabilities.

Not to be outdone, ChatGPT CEO Sam Altman at the Aspen Institute Ideas Festival compared the rise of AI to the discovery of agriculture and the invention of industrial-era machines. He claimed that AI will dramatically increase productivity and help global GDP grow 7% annually to double within 10 years. While we concur with Altman that AI will enhance productivity and boost economic growth, doubling the size of the world economy in a decade is quite a claim.

Wall Street Bids Adieu to Its Biggest Bear JPMorgan’s Marko Kolanovic had a knack for making aggressive calls, but now the analyst is out after missing a roaring bull market

FYI: How to drive costs down in the USA :

The next generation of EVs will be cheaper to build, [Ford Motor CEO Jim] Farley told Axios last Friday after speaking at the Aspen Ideas Festival in Colorado.

• That’s in part because of EV incentives in the Inflation Reduction Act (IRA), plus other government policies.
• For example, the Biden administration has imposed 100% tariffs on Chinese EVs and moved to crack down on technology that could track U.S. drivers — all part of a broader effort to block low-cost Chinese EVs from coming to the U.S.

Ford is the second-largest EV brand in the U.S. — although well behind Tesla — thanks to the popularity of its Mustang Mach-E, F-150 Lightning pickup and E-Transit commercial van.

• But EVs are still a money-losing proposition for Ford, which expects to lose a whopping $5.5 billion on them this year.