Putin Has Gas…
… and he’s not selling it to Europe.
But first, the numbers for an interesting trifecta:
New jobs are down. Employers added 315,000 new jobs in August, down from 526,000 in July. So, not as many new jobs.
Labor force participation jumped to 62.4%, up from 62.1%. More people want to work than the month before. Sounds like their money is running out.
Wage increases decreased. They did not go up as much as July. Sounds like there may be a little competition for jobs.
As far as the fed is concerned, this is all good news, showing that the economy is continuing to slow, which is their objective. That’s why they raise interest rates.
And yes, rates will continue going up at the Fed’s next meeting this month. The only question is: 0.5% or 0.75%?
Summarized:
Your business loan interest costs will keep increasing as rates go up. That’s Thing #1.
Thing #2:
New jobs are scarcer than the month before, narrowing the choices for potential employees. Not by much, but it was to start somewhere.
More people entered the job market; that means you have more people going after fewer jobs.
With wage increases decreasing, that mean the power of the job seeker is not as strong as it was a month ago.
The big companies are reducing their workforce.
Summed up: Hiring will become easier as jobs start to go away, and the power of the job seekers starts to diminish. At some point, this will benefit the small business owner.
Let’s go back and review the impact of the Russia/Ukraine War.
Combined, Russia and Ukraine produce a significant amount of commodities for the world: Steel, Wheat, Gas/Oil etc.
The war has impacted the prices of all of these commodities.
We knew that, because that is what was posted in the March 14 Russell Report. Pop Quiz to follow.
Russia produces 12.9% of total world production of oil.
They also supply the European Union with 40% of their gas with a good portion to Germany.
Putin has decided to stop all gas sales to Europe. Yep, STOP. Not reduce, but stop.
Gas in Europe is used in power plants to generate electricity and to heat homes.
To quote Jon Snow, “Winter is coming”. And when it gets to Europe, there are going to be problems with a natural gas shortage to heat homes, and Putin is one of the White Walkers.
ArcelorMittal SA (I’ve never heard of it either) is one of the world’s largest steelmakers. It is reducing European production capacity and has stated it will close two steel plants in Germany because electricity costs are too high.
Wait, if your costs are too high, it becomes uneconomical to run an operation? Does Sacramento know that? … sorry, I digress.
Yes, there will be a trickle-down effect.
And this affects me how…?
If you are a manufacturer of anything with steel, be it restaurant equipment, computer cabinets, cars (although I doubt GM and Ford are reading my Report), car accessories, bike accessories etc. etc., your manufacturing costs could be going back up. Not that it isn’t high already.
Plan what you are going to do if steel prices go back up or you import steel products from Germany or the EU.
Pass on the cost to buyers?
Eat the cost?
Hedge the cost of steel in the financial markets?
Find alternative materials/suppliers?
I don’t know either but I suggest you have a plan. You’ll sleep better.
Bits and pieces for 2023 – something else to fit into your plan.
Things we know:
Shipping costs will go down. Retailers have more inventory than they can handle – quite literally – and the economy is expected to soften.
Insurance is going up – don’t need to be Carnac the Magnificent to see that happening.
Payroll taxes will be rising as the wage base cap for payroll taxes increases to $156,000.
At the rate things are going, that will be minimum wage soon enough.
Time to start forming your forecasts and plans for next year. Seriously.
Winter is coming. It’s time to plan for it.
See previous Russell Reports here. To be added to the distribution list, just email me at adam@ss4bllc.com.
