In today’s Steady Investor, we look at key investing themes that we believe are currently impacting the market, such as:
- The U.S. economy shows exceptional growth
- China escalates trade tensions
- October labor report reveals mixed signals
Productivity Growth in the U.S. Sees Steady Increase – Job growth has slowed in the U.S. over the past several months, while economic growth has picked up. A key feature explaining how this divergence is possible is rising productivity. In 2024, quarterly productivity has grown by at least 2% year-over-year, with productivity gains notched over the past five quarters. As seen in the chart below, the steady gains in productivity are consistently higher than what’s been experienced in the previous decade, excluding the immediate post-pandemic rebound—when low productivity jobs like food service were slow to come back online.
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The productivity gains in the U.S. are notable for their contrast to other developed economies like Europe and Canada, where productivity has grown by less than 1% on average over the last decade. Productivity gains are crucial for driving healthy long-run economic growth, because the productive capacity of the economy can expand without too much overheating in the labor market. By some accounts, rising productivity in the U.S. has happened out of necessity, as companies face a tight talent pool and have turned to other measures—like investment in technology—to get more productive output out of each worker.
China Bans the Export of Rare Earth Metals to the U.S. – Many investors and market watchers were alarmed this week when China announced it was outright banning the export of rare earth metals gallium, germanium, antimony, and superhard materials to the U.S. These metals are essential components of semiconductors, satellites, night-vision goggles, and other high-tech, often military applications. China is the world’s top supplier of these metals, which had some investors concerned about short- and long-term implications. But a closer look at the issue reveals some key insights. For one, the U.S. has not imported any gallium and germanium in 2024, and the business community has indicated that ample supplies exist in inventory, with alternative sources available to explore as well. China’s move appears to be more posturing than anything else, in response to the Biden Administration’s decision to place more export controls on high-bandwidth memory chips.3
What the Latest U.S. Jobs Report Tells Us About Potential Fed Policy – The Labor Department delivered the latest JOLTS (Job Openings and Labor Turnover Survey) report last week, which showed further loosening in the labor market. Job openings increased by 372,000 from September, bringing the total for October to 7.74 million. A higher level of job openings tends to ease pressure on wage growth, which can factor as a positive for inflation data. The ratio of job openings as a percent of the total labor force increased from 4.4% to 4.6%. All told, there is about one open job for every unemployed American, which as seen on the chart below is a balance last achieved in 2018.4
Job Openings (blue line) and Unemployment Level, Persons (green dotted line)
In our view, this data points to a normalization in the labor market, which reinforces the idea that the Fed can focus almost universally on inflation data in determining the path of rates.
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- Plus, more strategies to help you protect your retirement assets
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Disclosure
2 ZIM may amend or rescind the guide “How Solid Is Your Retirement Strategy?” for any reason and at ZIM’s discretion.
3 Yahoo Finance. December 3, 2024. https://www.yahoo.com/news/china-targets-critical-metals-tit-102821740.html
4 CNBC. November 3, 2024. https://www.cnbc.com/2024/12/03/job-openings-jumped-and-hiring-slumped-in-october-key-labor-report-for-the-fed-shows.html
5 Fred Economic Data. December 3, 2024.
6 ZIM may amend or rescind the guide “How Solid Is Your Retirement Strategy?” for any reason and at ZIM’s discretion.
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