This week gave us a great jobs report, evidence that the data center build out is full steam ahead, and a few other signs of ongoing—dare we say hot—growth.
Hot growth can cause overheating, though, and this week also gave us a new year+ high in mortgage rates, rising treasury yields, and a few reasons to think that inflation is going to pick up over the coming months.
Missed our posts earlier this week? You can read about why this economy makes everyone sad, the data center boom, and today’s jobs report.
Monday
Oil Stuff
Both gas and diesel prices fell slightly during the week ending Monday 8/31, but oil prices rose pretty sharply starting on Tuesday, and these prices will keep rising next week. According to GasBuddy, diesel prices hit an all-time high on Thursday.
Big picture, the Strait of Hormuz is still effectively closed, we’re still bombing Iran, and the outlook for oil prices remains less than great.
Nationalizing (Another Country’s) Oil
The U.S. and Venezuela reached an agreement that gives the U.S. a 35% equity stake in a company that now has 100-year concessions to 65 billion barrels of proven oil reserves. Put simply, the U.S. gets extensive governance rights and guaranteed access to at least 20% of production at cost.
Note that proven reserves—an estimate with reasonable certainty of how much oil can be extracted from a field—are not the same as strategic reserves, which are existing, tucked away oil supplies.
The White House has framed this as a way to refill the Strategic Petroleum Reserves, with the replenishment starting as soon as November. Unfortunately, Venezuelan heavy crude really isn’t compatible with the SPR, so this could go one of three ways:
It won’t be used to refill the SPR.
We can technically put the heavy crude in there, but it will cause problems down the road.
We can trade heavy crude barrels for the medium sour that typically goes in the SPR.
Big picture, this won’t really affect oil prices in the short term—note that oil prices have risen since this announcement.
Tuesday
Job Opening & Labor Turnover Survey (JOLTS)
Hiring slowed in July, but so did layoff activity and quits. Job openings held pretty steady. It remains a nice time to have a job and a bad time to need one.
ISM Manufacturing PMI
Manufacturing activity expanded for the 8th straight month in August, according to this survey of industry purchasing managers. That’s the good news.
The bad news is that the survey suggests goods prices are going up, and they’re going to start going up fast. As always, the respondent comments are the most informative part of this, and they’re not particularly upbeat this month.
