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Weekly Economic Indicator
Welcome to this week’s edition of the Macro-spective 2023, where we are bring you a more focused view on the latest influential factors that impacted the Weekly Economic Indicator. Stay informed and ahead of the curve with our comprehensive analysis and additional insights to help you navigate the financial landscape with confidence. These categories will help to understand how real GDP has been effected over the past week
1. Initial Unemployment Insurance Claim
IUIC rose more than expected during the week July 30, 2023 to August 05, 2023
Initial claims for unemployment insurance were 248,000 seasonally adjusted in the week ending August 5, up from 227,000 in the week ending July 29. The four-week average was 231,000, up from 228,250 in the prior week. The Action Economics Forecast Survey had expected 230,000 new claims in the latest week.
Coal Industry Layoffs Hit Mill Creek, W. VA 🚨
239 coal miners in Mill Creek, West Virginia, are losing their jobs 😭 due to layoffs announced by United Coal Company LLC. The layoffs are expected to be permanent ❌, and they are one of the largest announced in the coal industry this week 😱.
The layoffs are the result of adverse market conditions 📉, according to a statement from United Coal Company. The company said that it had to idle production at its Morgan Camp and Starbridge Plant, both near Mill Creek 🏭.
The layoffs are expected to begin Friday 📅, the statement said. "Additional, staggered layoffs will occur as some employees will remain onsite through the end of the year as Carter Roag Coal Company winds down these operations."
The layoffs are a blow to the Mill Creek community, which is already struggling economically 😵. The coal industry has been a major employer in the area for decades, and the layoffs will leave many families without a source of income 🏘️.
The layoffs are also a sign of the challenges facing the coal industry as a whole 🏭. The industry has been struggling in recent years due to competition from natural gas and renewable energy sources 💡.
The layoffs in Mill Creek are a reminder that the coal industry is in decline 📉, and that the transition to a clean energy economy is having a real impact on workers and communities 👷♀️👷♂️.
https://www.theintermountain.com/news/local-news/2023/05/layoffs-announced-at-mill-creek-sites/
💥 Cano Health in Crisis: Exploring Sale, 700 Layoffs, and Some Market Exits 💥
Cano Health CANO 0.00%↑
Liquidity and Longevity 💦:
Cash Crunch 💸 - Cano Health has approximately $101 million in cash on hand, which is not enough to cover its operating costs for the next 12 months.
Layoffs 🪓 - The company is planning to lay off 700 employees, or 17% of its workforce.
Market Exits 🚪 - Cano Health is also planning to exit operations in California, New Mexico, Illinois, and Puerto Rico.
What does this mean for patients?
Patients in the affected markets may have to find new primary care providers, and they may experience delays in getting appointments.
What does this mean for the future of Cano Health?
It is unclear whether Cano Health will be able to find a buyer or survive on its own.
Here are some additional details from the company's financial results:
Net Loss 🗑️ - Cano Health reported a net loss of $270.7 million in the second quarter of 2023.
Revenue Growth 📈 - Revenue increased by 11% year-over-year to $766.7 million.
Membership Growth ↗️ - Membership grew by 35% year-over-year to 381,066.
Medicare Advantage 🏥 - The company's Medicare Advantage business was the primary driver of growth, with revenue increasing by 22% year-over-year.
The financial results are a sign of the challenges facing the primary care industry.
Competition ⚔️ - Primary care providers are facing increasing competition from retail clinics and telehealth providers.
Rising Costs 💰 - The industry is also facing rising costs, including the cost of prescription drugs and medical equipment.
Profitability 💴 - As a result, many primary care providers are struggling to remain profitable.
The future of Cano Health is uncertain.
The company is exploring a sale, but it is unclear whether it will be able to find a buyer.
If Cano Health is unable to find a buyer, it may be forced to file for bankruptcy.
The collapse of Cano Health would be a major setback for the primary care industry.
While navigating these changes, I’m expecting Cano Health to maintain a vigilant eye on liquidity. The recent negotiation of the 2023 Side-Car Amendment has provided a strategic buffer, enabling a more focused financial management approach. 🔐
This might require a separate analysis & post if I am able to find the time but the 🐇🎩rabbit hole😵💫 grew quite deep asa I dug. What immediately came to mind was how 💰Benjamin Graham 👴 would view the tangible assets of Cano Health.
Here is a breakdown of how he would have adjusted the tangible book value of Cano Health's 🏥 assets to reflect their estimated liquidation value:
💰 Cash and cash equivalents: Graham would have valued these assets at 💯% of their book value. This is because cash is the most 💰 liquid asset.
💲 Accounts receivable: Graham would have valued these assets at 8️⃣0️⃣% of their book value. This is because accounts receivable are still considered to be somewhat liquid.
📦 Inventory: Graham would have valued these assets at 6️⃣6️⃣.6️⃣% of their book value. This is because inventory is less liquid than accounts receivable.
🏭 Property and equipment: Graham would have valued these assets at 1️⃣5️⃣% of their book value. This is because property and equipment is the least liquid asset.
In total, Benjamin Graham would have valued Cano Health's assets at 💰$809 million, which is significantly lower than the company's tangible asset book value of 💰$2.4 billion. This may seem that Cano Health's assets are undervalued and that the company may be a good investment for liquidation value investors.
However, it is important to note that this analysis is just a starting point. Benjamin Graham would have also considered other factors, such as the company's liabilities, its future earnings potential, and the economic climate, before making a final investment decision.
Here is a table that summarizes how Benjamin Graham would have adjusted the book value of Cano Health's assets to reflect their estimated liquidation value:
https://www.fiercehealthcare.com/providers/primary-care-business-cano-health-exploring-sale-its-cash-dwindles-plans-exit-several
https://investors.canohealth.com/news/news-details/2023/Cano-Health-Announces-Financial-Results-for-the-Second-Quarter-2023/default.aspx
Other larger layoffs:
Rapid7, a cybersecurity company, announced that it would be laying off 470 employees, or about 18% of its workforce 😭. The layoffs are part of a cost-cutting effort by the company as it faces a slowdown in growth 📉.
Klaussner Furniture Industries Inc., a furniture company, announced that it would be laying off 800 employees, or about 30% of its workforce 😵💫. The layoffs are part of a restructuring effort by the company as it faces financial challenges 💸.
In addition to these three companies, there were a number of other smaller companies that announced layoffs this past week. These include:
Astra, a space exploration company, laid off 25% of its workforce 💥.
Credit Suisse, a financial services company, laid off 80% of its investment banking jobs in Hong Kong 🇭🇰.
JioMart, an online shopping platform, laid off over 1,000 employees 😳.
The layoffs in these companies are a sign of the economic challenges that are facing many businesses today 🏦. The Federal Reserve is raising interest rates in an effort to combat inflation 📈, and this is leading to higher borrowing costs for businesses 💸. In addition, the war in Ukraine is causing economic uncertainty and disrupting supply chains 🚚. These factors are making it difficult for businesses to grow and invest 📈, and as a result, they are laying off employees 😭.
It is likely that we will see more layoffs in the coming months as businesses continue to grapple with the economic challenges 🏦.
2. Continuing Unemployment Insurance Claims
Continued Jobless Claims Decline, Fed😡Not Happy
The number of Americans continuing to file for unemployment benefits declined in the week ending July 29, according to the U.S. Department of Labor. Continuing claims totaled 1.684 million, down 8,000 from the previous week. The decline was larger than economists had expected📉, and it suggests that the labor market is tightening.
This is not what the 😡 Federal Reserve wants to see 👀. The Fed has been 📈 hiking interest rates to battle inflation, and Fed Chairman Jerome Powell has cited the need for a 🌫️ looser labor market as a sign to 🛑 pause this path of monetary policy. A looser labor market means that more people are 🤒 unemployed, which would put ⬇️ downward pressure on wages and inflation. However, the decline in continuing claims suggests that the labor market is not getting 🌫️ looser, which could 🤯 complicate the Fed's efforts to bring inflation under control.
The decline in continuing claims is the latest sign that the labor market is tightening. In recent months, job openings have far exceeded the number of people unemployed, and wages have been rising at a 🚀 rapid pace. This is putting ⬆️ upward pressure on inflation, which is why the Fed is raising interest rates.
However, the Fed is walking a tightrope. If it raises interest rates too much, it could risk tipping the economy into a recession. But if it doesn't raise rates enough, inflation could spiral out of control🔥.
The next few months will be 💥critical💥 for the Fed. It will need to carefully monitor the labor market and inflation to see if it is on the right track. If the labor market continues to tighten, the Fed may need to raise interest rates even more aggressively.
Here are some key takeaways from the data:
Continuing jobless claims fell by 8,000 to 1.684 million in the week ending July 29.
The decline was not enough to meet economists' expectations of 1.7 million.
The Fed is looking for signs that the labor market is cooling, as it raises interest rates to combat inflation.
The latest jobless claims data suggests that the labor market is still tight, but it may be starting to loosen slightly.
The Fed may need to see more evidence of a looser labor market before it pauses its rate hikes.
2. Raw steel production
The U.S. weekly domestic raw steel output totalled 1.727 million net tons(NT). The domestic mill capability utilization rate stood at 75.9%. It must be noted that the production had totalled only 1.720 million NT at a higher capacity utilization rate of 78.0% during the corresponding week a year before.
U.S. Steel Production Up Slightly in Latest Week, But Still Below Capacity
U.S. steel production increased slightly in the week ending August 5, 2023, according to the American Iron and Steel Institute (AISI). Production totaled 1.727 million net tons (NT), up 0.4% from the same week a year ago.However, production remains below capacity, as steel mills continue to face challenges from rising energy costs and supply chain disruptions.
The year-to-date production of steel in the U.S. through August 5, 2023 was 52.870 million NT is down 2.2% from the same period in 2022. The capacity utilization rate was 75.9%, down from 78.0% a year ago and 76.9% the previous week.
The decline in production was driven by lower output in the Great Lakes region, which fell 1.7% to 549,000 NT. Production in the Southern region was the leading producer of steel in the latest week despite being flat at 752,000 NT, while output in the Midwest rose 2.3% to 225,000 NT. Production in the Northeast and Western regions was unchanged at 133,000 NT and 68,000 NT, respectively.
The weak production numbers are a sign that the slowdown in the U.S. steel industry and its capacity rate continue to face challenges. Rising energy costs and supply chain disruptions have made it more expensive and difficult for steel mills to operate🔥 🚧. As a result, some mills have been forced to reduce production or even close.
The outlook for the U.S. steel industry remains 🤔 uncertain. The global economy is slowing down 📉, which could lead to lower demand for steel 🏗️. However, the U.S. infrastructure bill could provide some support for the industry 🚧.
As a result of the slowdown in production, steel prices have been rising 📈. The price of hot-rolled coil, a key benchmark steel product, has increased by more than 50% in the past year 🤯. This has put pressure on manufacturers and construction firms, who are facing higher costs for steel products 🏗️.
It is unclear when U.S. steel production will rebound❓. The war in Ukraine is likely to continue to disrupt global steel markets for the foreseeable future 💥. However, if demand for steel picks up in the coming months, U.S. steelmakers could ramp up production and help to alleviate the current supply shortage 🙏.
As of August 10:
• Hot roll steel prices were $812/ton, down $73/ton since last month and up $100/ton YTD
• Cold roll steel prices were $1,042/ton, down $62/ton since last month and up $107/ton YTD
What are futures prices saying about the price of steel for the remainder of 2023? In the clip below, Nick Webb, Ryerson's director of risk management, commodity hedging, gives us his take:
What Does This Mean for Investors?
The slowdown in U.S. steel production is a ⚠️ negative development for investors in the steel industry. The higher costs and supply chain disruptions are likely to 💸 weigh on profits for steelmakers in the near term. However, if demand for steel ⬆️ picks up, steel prices could rise further, which could 💰 benefit steelmakers in the long term.
Investors who are interested in the steel industry should keep an eye on the 🏭 capacity utilization rate and the 💰 price of steel. If the capacity utilization rate continues to decline, it could lead to lower prices for steel, which could 💸 hurt the profits of steel companies. However, if the capacity utilization rate increases and the price of steel rises, it could 💰 benefit steel companies.
In addition, if the 🌎 global economy can continue to grow and the 💥 war in Ukraine potentially ends, steel demand could ⬆️ rebound, all in all benefiting steelmakers. However, if the global economy slows down or the war in Ukraine drags on, steel demand could remain weak, which could 💸 hurt steelmakers.
The US Economy Is Headed for a Recession
The US economy is in trouble. The Conference Board Leading Economic Index (LEI) has been declining for fifteen months, and it's now down 4.2% over the past six months. This is a sign that a recession is on the horizon.
The LEI is a leading indicator of economic activity, meaning that it tends to decline before the economy enters a recession. The fact that the LEI has been declining for so long is a strong indication that a recession is coming.
The LEI is made up of ten different economic indicators, including stock prices, interest rates, housing starts, and consumer expectations. The decline in the LEI in June was driven by a number of factors, including:
Gloomier consumer expectations: Consumer confidence has been declining in recent months, as Americans become more worried about inflation and the economy.
Weaker new orders: Businesses have been ordering fewer goods in recent months, as they become more cautious about the future of the economy.
An increased number of initial claims for unemployment: More people are filing for unemployment benefits, a sign that the labor market is weakening.
A reduction in housing construction: Housing starts have been declining in recent months, as the cost of building a home has become more expensive.
The LEI's decline is consistent with the forecast of The Conference Board that the US economy is likely to be in recession from Q3 2023 to Q1 2024. Elevated prices, tighter monetary policy, harder-to-get credit, and reduced government spending are all factors that are likely to dampen economic growth in the coming months.
So, what does this mean for you? It means that it's time to start thinking about how to protect your investments. Here are a few things you can do:
**Consider selling stocks in cyclical industries that are sensitive to economic growth, such as consumer discretionary and industrials.
**Buy stocks in defensive industries that are less sensitive to economic growth, such as utilities and healthcare.
Hold cash in case you need to make a big purchase or if the market takes a big dip.
Here are some specific sectors to watch in the coming recession:
Consumer discretionary: This sector includes businesses that sell non-essential goods and services, such as retailers, restaurants, and entertainment companies. These businesses are likely to be hit hard by the recession, as consumers cut back on spending.
Financials: This sector includes banks, insurance companies, and other financial institutions. These businesses are also likely to be affected by the recession, as they may experience defaults on loans and other financial losses.
Energy: This sector includes oil and gas companies. These businesses may benefit from the recession, as higher energy prices can lead to higher profits. However, they are also vulnerable to price volatility, which could hurt their earnings.
Healthcare: This sector includes hospitals, pharmaceutical companies, and other healthcare providers. This sector is relatively recession-proof, as people still need healthcare services even during tough economic times.
The economy is slowing down. The Conference Board Leading Economic Index (LEI) has been declining for fifteen months, and it's now down 4.2% over the past six months. This is a sign that a recession is on the horizon.
Consumers are feeling the pinch. Consumer confidence is at its lowest level in decades, and people are spending less money. This is bad news for businesses that rely on consumer spending.
Businesses are starting to feel the pain. Orders are down, and businesses are starting to lay off workers. This is a sign that the economy is in trouble.
The recession is coming. The Conference Board forecasts that the US economy is likely to be in recession from Q3 2023 to Q1 2024. This is bad news for everyone, but it's especially bad news for investors.
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