US Productivity Just Crashed By The Most Since 1947 As Labor Costs Explode
Hot on the heels of last week's 'Employment Cost Index' which Fed Chair Powell commented on (as worrisome), US Unit Labor Costs surged 11.6% in Q1...
Source: Bloomberg
And at the same time, business output declined by 2.30% QoQ SAAR
Source: Bloomberg
Both of which combine to drive US Productivity crashing 7.5% in Q1 - that is the biggest drop since 1947
Source: Bloomberg
As Bloomberg notes, while hourly compensation adjusted for productivity has grown in the past year, the first-quarter surge likely overstates the degree of wage pressures in the job market. The U.S. economy contracted last quarter for the first time since 2020, largely due to a wider trade deficit as companies imported more goods and services to support robust consumer demand. That slowdown drove down the government’s measure of productivity growth.
And while some might proclaim the surge in labor costs as a win for the average joe, we note that BLS reports that 'Real' compensation tumbled 5.5% in Q1.
Probably a good time to embark on 10 more rate-hikes this year.
Digital-Advertising Giants Are Coming Back to Earth After Pandemic Boom
Ad-revenue slowdown at Google, Meta and Amazon comes as consumer behaviors resume pre-Covid patterns
The supercharged advertising growth that some of the world’s largest technology companies reported during the pandemic is decelerating.
A round of tech earnings last week made it starkly clear that the Covid-led surge in digital advertising has begun to ease. The slowdown was caused by a confluence of events, including inflation fears, supply-chain shortages, the war in Ukraine, a gradual return to normalcy two years into the pandemic, the continued rise of TikTok and Apple Inc.’s AAPL 4.10% recent privacy changes.
“We have not seen a collective set of headwinds for advertisers like this since the early 1980s,” said Michael Nathanson, an analyst at MoffettNathanson.
The three largest digital-advertising players in the U.S.—Google parent Alphabet Inc., GOOG 3.76% Facebook parent Meta Platforms Inc. FB 5.37% and Amazon.com Inc. AMZN 1.35% —last week said ad revenue in the first three months of 2022 grew by 22%, 6.1% and 23%, respectively, from a year earlier—down sharply from the 50%-plus increases they experienced at some point last year. Facebook’s overall revenue growth was the slowest it ever posted since going public in 2012.
“Digital is holding on to its gains, but is not growing as quickly as it grew during the pandemic,” Mark Read, the chief executive of the world’s largest ad-holding company, WPP PLC, said in an interview last week.
The Big Three’s rapid growth during the pandemic further cemented their dominance of the advertising market. The year 2020 marked the first time Google, Facebook and Amazon AMZN 1.35% collected the majority of all ad spending in the U.S.
Representatives for Google, Meta and Amazon had no comment.
In the early days of the pandemic, consumers spent more time on computer screens and did more shopping online, but their behaviors are returning to more normal patterns as Covid-19 fears wane.
“After the start of Covid, the acceleration of e-commerce led to outsized revenue growth, but we’re now seeing that trend back off,” Meta CEO Mark Zuckerberg said during a call with analysts last week to discuss first-quarter results.
Global digital ad spending is expected to grow by 13% this year, excluding political ad dollars, a significant slowdown from the 30% leap it took last year, according to WPP unit GroupM, one of the world’s largest ad buyers. Digital advertising has been growing at a much faster pace than advertising on other platforms—from TV to newspapers—and is expected to account for 67% of total global ad spending this year, GroupM said.
“Once you are two-thirds of the industry, it’s really hard to grow,” said Brian Wieser, GroupM’s global president of business intelligence.
Both Meta and Alphabet cited the war in Ukraine as one of the contributors to the revenue slowdown. The war had “an outsize impact on YouTube ads relative to the rest of Google,” Alphabet Chief Financial Officer Ruth Porat said during the company’s earnings call last week. The company said it saw a related reduction in spending primarily by brand advertisers in Europe. Meta said the war caused a reduction in ad demand, both within Europe and outside the region.
On Wednesday, Meta announced a sharp slowdown in hiring.
The slower growth comes at a particularly vulnerable moment for the digital-ad business, which is trying to cope with the fallout from mobile ad-tracking changes that Apple introduced last year that make it harder for advertisers to target consumers and measure the efficacy of their ads.
The change has hobbled the digital-advertising model and continues to be a pain point, causing many small and e-commerce companies to diversify their spending across a larger swath of players. Last quarter, Meta warned that the changes would cost the company some $10 billion in 2022.
Players in digital advertising are also facing increased competition from TikTok, the wildly popular app best known for short viral videos that is owned by Chinese company ByteDance Ltd.
TikTok’s global ad revenues are expected to triple this year to $11.6 billion—helping it surpass the combined sales of rivals Twitter Inc. and Snap Inc., according to Insider Intelligence. The research firm expects Twitter and Snapchat to generate $5.58 billion and $4.86 billion, respectively, in ad revenue this year.
Google and Meta are rushing to ramp up their TikTok-like offerings. Both companies talked up their nascent short-video services—Shorts and Reels—during their first-quarter calls with analysts.
Twitter and its $4.5 billion ad business could be vulnerable in the wake of Elon Musk’s $44 billion pending takeover of the San Francisco-based company, ad buyers said. Some brands could ditch the service if Mr. Musk’s push to make Twitter a more open platform causes the amount of misinformation and other controversial content to rise, ad buyers said.
Twitter has reached out to some advertisers to reassure them that the company is committed to brand safety, according to an email seen by The Wall Street Journal. The email was earlier reported by the Financial Times.
A Twitter representative had no additional comment.
Ellison, Binance and Sequoia back Musk’s $44bn bid for Twitter
Tesla chief raises $7bn from new investors for takeover of social media platform
Elon Musk has revealed that he has raised $7.14bn of funding for his $44bn buyout of Twitter, from investors including Oracle co-founder Larry Ellison, crypto exchange Binance and asset management firms Fidelity, Brookfield and Sequoia Capital.
With the new financing commitments, Musk will cut the margin loan he has taken with a group of lenders by half to $6.25bn and increase the equity commitment to $27.25bn. The remainder of the purchase price will be paid with debt raised from global banks.
The biggest new backing for his purchase comes from Ellison, who is contributing $1bn. Venture capital firm Sequoia is providing $800mn, while Dubai-based tech investment firm VyCapital is giving $700mn. Binance is providing $500mn.
Saudi Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud, already an investor in Twitter, will roll 35mn shares into the bid vehicle, which at the offer price equates to a $1.9bn stake.
Musk also revealed also working to bring in additional equity investors, including billionaire Twitter cofounder Jack Dorsey by giving existing shareholders an option to contribute their shares to the buyout.
He added in the filing that any further contributions may replace portions of the financing commitments previously arranged.
Early premarket gappers
- Gapping up:
- SRPT +14.7%, ALB +14.5%, TXG +12.4%, BKNG +9.8%, AXGN +9%, NGVT +8.6%, STAA +8.4%, NVST +8.4%, BAND +8.3%, RUN +8.1%, FTNT +7.4%, EPAM +7.3%, LPG +6.9%, MNTV +6.8%, FLMN +6.6%, UDMY +6.2%, ONEM +6%, TRIP +5.9%, SIMO +5.8%, DGII +5.5%, RYN +5.3%, TGB +5.3%, ATHA +5%, PETQ +5%, PAY +5%, EVH +5%, GFL +5%, IIPR +4.9%, GXO +4.8%, WHD +4.8%, SGFY +4.7%, ECPG +4.6%, GBT +4.2%, WD +4.2%, STOR +4%, ACEL +4%, ARGX +4%, NUVA +3.9%, SHO +3.8%, RSI +3.8%, LOCO +3.5%, ICFI +3.3%, RCII +3.3%, WCC +3.3%, DBVT +3%, ACAD +3%, QDEL +3%, EPR +2.9%, VSTO +2.9%, LSI +2.5%, SILK +2.4%, RGLD +2.3%, SRI +2.2%, MTG +2.2%, GKOS +2.1%, DIOD +1.9%, TWLO +1.8%, CDE +1.8%, TMST +1.7%, KLIC +1.5%, NFE +1.4%, PCOR +1.3%, ET +1.2%, SHEL +1.2%, MYRG +1.1%, CHK +1.1%, OTEX +1.1%, UGI +1.1%, QNST +1%, RLJ +1%, THRY +1%, CF +1%
- Gapping down:
- SFM -13.6%, VMEO -12.1%, ETSY -11.3%, EMKR -10%, CLR -8.9%, WOLF -8.9%, MGNI -8.6%, VICI -8.6%, SBSW -8.6%, PING -8.3%, DOCN -8.2%, EBAY -7.4%, CXW -7.1%, AVID -6.9%, FSLY -6.8%, LPI -6.3%, TPC -6.1%, OGE -5.3%, EVA -5.2%, ASPN -5%, LOPE -5%, RPD -5%, TTMI -5%, BV -5%, PDCE -4.9%, QRVO -4.8%, SKLZ -4.8%, INSG -4.6%, DOYU -4.4%, UPLD -4.4%, ALGT -4.4%, NSA -4.2%, LGND -4.2%, GIL -4.1%, CTSH -4.1%, VLRS -3.8%, NUS -3.8%, IRBT -3.6%, GPOR -3.5%, LNC -3.5%, RGR -3.4%, NIO -3.2%, CNP -3.1%, ORCC -3.1%, CDEV -3.1%, CDAY -3%, WLL -2.9%, BEKE -2.8%, GDDY -2.6%, LI -2.5%, QLYS -2.5%, SUM -2.4%, OCDX -2.3%, JAZZ -2.2%, JD -2.1%, MDU -2.1%, LGIH -1.8%, MMS -1.8%, FSR -1.8%, ZTO -1.6%, TWO -1.6%, STLA -1.6%, HUYA -1.4%, DCP -1.4%, ATO -1.3%, TTEK -1.3%, VIPS -1.2%, FATE -1.1%, ALL -1%
>>> Up
* Elis Raised to Overweight at JPMorgan; PT 17 euros
* INWIT Raised to Overweight at Barclays; PT 13 euros (+)
* Maersk Raised to Buy at Nordea; PT 26,000 kroner (+)
* NP3 Fastigheter Raised to Hold at Handelsbanken
* NP3 Fastigheter Raised to Buy at Kepler Cheuvreux; PT 294 kronor (+)
* Ocado Raised to Hold at HSBC; PT 1,000 pence
* Orbis SE Raised to Buy at GSC Research; PT 9.30 euros (+)
* Stillfront Raised to Hold at SEB Equities; PT 20 kronor
>>> Down
* Bahnhof Cut to Hold at Handelsbanken
* HUTCHMED China ADRs Cut to Hold at Deutsche Bank; PT $20
* InPost Cut to Accumulate at Erste Group; PT 8.20 euros
* Kahoot Cut to Hold at Nordea
* Moderna PT Cut to $199 from $217 at Morgan Stanley
* Pandora Cut to Hold at Nordea
* Traton Cut to Hold at SEB Equities; PT 18.37 euros
>>> Initiation
* Gresham House Rated New Corporate at Edison Investment Research
* Siegfried Rated New Sell at Stifel; PT 503 Swiss francs
>>> Call
* Bernstein Strategists See Dollar Strength as Positive for Europe (+)
* BMW Posted Solid 1Q Margin Beat, Guidance Confirmed: Jefferies (+)
* U.S. Utility Bills Could Jump 40% on Energy Rally, Barclays Says
* Coinbase Price Target Cut at Mizuho on ‘Meager’ Trading Volume
* Glanbia’s Strong Start to Year Brings ‘Comfort,’ Goodbody Says 9+)
* Lanxess 1Q Beat Driven by Specialty Additives: Jefferies (+)
* Legrand Has Strong 1Q Beat, Consensus Could Move Up, Citi Says
* Next’s Maintained Guidance Should Provide Reassurance: Jefferies (+)
* Zalando Outlook Reflects ‘Increasingly Volatile’ Market: RBC (+)
DAX:
- Airbus (AIR TH) +5%
- Airbus 1Q ‘Solid’, A320 Rate Ramp Up Key Highlight: Street Wrap
- HelloFresh (HFG TH) +3.8%
- Delivery Hero (DHER TH) +3.4%
- SAP (SAP TH) +3%
- Infineon (IFX TH) +2.9%
- Deutsche Telekom (DTE TH) +1.7%
- Daimler Truck (DTG TH) +1.5%
- RWE (RWE TH) +1.3%
- European Energy Prices Jump as EU Proposes Banning Russian Oil
- Zalando (ZAL TH) -0.7%
- Zalando Sees FY GMV Low End of +16% to +23%, Saw +16% to +23%
MDAX:
- Lanxess (LXS TH) +4.2%
- Lanxess Sees 2Q Adjusted Ebitda EU280M to EU350M, Est. EU304.2M
- Commerzbank (CBK TH) +3%
- Lufthansa (LHA TH) +2.8%
- Lufthansa Boosts Capacity as Demand Gains; Cost Outlook Unclear
- Uniper (UN01 TH) +2.6%
- Nordic Nuclear Output Gains to 62% With 8 Units Online (Table)
- ProSieben (PSM TH) +2.6%
- Evonik (EVK TH) +1.3%
- K+S (SDF TH) +1.3%
- RTL (RRTL TH) +1%
- Telefonica Deutschland (O2D TH) +0.7%
- Aixtron (AIXA TH) -0.5%
- Aixtron 1Q Ebit Misses Estimates
SDAX:
- PVA TePla (TPE TH) +4.3%
- PVA TePla notes strong start into the year
- GFT (GFT TH) +3.8%
- MorphoSys (MOR TH) +3.6%
- MorphoSys 1Q Revenue Misses Estimates
- SGL (SGL TH) +3.3%
- Deutz (DEZ TH) +3.1%
- Deutz 1Q Revenue Beats Estimates
- Schaeffler (SHA TH) +1.4%
- BayWa (BYW6 TH) +1.3%
- BayWa 1Q Ebit EU144.9M
- Wacker Neuson (WAC TH) +1.2%
- Airbus (AIR TH) +5.1%
- Airbus 1Q ‘Solid’, A320 Rate Ramp Up Key Highlight: Street Wrap
- SocGen (SGE TH) +4%
- SocGen Gets Boost From Higher Rates as Russia Hit Looms (1)
- HelloFresh (HFG TH) +3.9%
- ASML (ASME TH) +3.8%
- Delivery Hero (DHER TH) +3.4%
- ArcelorMittal (ARRD TH) +3.4%
- ArcelorMittal 1Q Ebitda Beats Estimates
- Enel (ENL TH) +3.3%
- Lanxess (LXS TH) +3.2%
- Stellantis (8TI TH) +3.1%
- Stellantis First-Quarter Sales Rise on New Models, FX Boost
- Vestas (VWSB TH) +3%
- BAE (BSP TH) -0.7%
- BAE Says Performance is in Line With Expectations