Daily Update: June 21, 2021

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The U.S. job market is improving, with the number of initial unemployment claims continuing to fall and more jobs being posted now than prior to the pandemic. But many potential employees are still hesitant to return to the workforce due to concerns about the coronavirus, the loss of expanded unemployment benefits, and limited childcare options.

This convergence paints a portrait of the changing dynamics of the U.S. job market.

Initial unemployment claims have sustained a decline of an average 26,000 per week since May and 9,000 total during the first week of June—from the 800,000 claims that held for nine months from August 2020 through April 2021—due to stronger labor demand from the more labor-intensive service sector and other businesses at large, according to S&P Global Ratings Chief U.S. Economist Beth Ann Bovino. Recent S&P Global Economics research illustrated how U.S. businesses want more help: the number of daily job postings on the employment website Indeed is up 27% higher from pre-pandemic levels as of May 28, and the Conference Board noted that more Americans in May believed jobs are plentiful than those who believed jobs are hard to get.

Despite improving conditions, U.S. business owners have claimed to have millions of job openings with few workers willing to fill them and overall employment in the U.S. remains millions of jobs below pre-pandemic levels. To combat the unprecedented tight labor market, many companies have begun offering higher wages for lower-income workers demanding stronger socioeconomic conditions. Similarly, higher-income workers employed throughout the coronavirus crisis have battled burnout and are demanding more flexibility from their employers and workplaces.

“There is no one reason workers haven't yet come back to the labor market in droves. The economy reopened very quickly as the pandemic winded down, and it is taking some time for workers who permanently lost their previous jobs to settle on new ones (skills and location mismatch perhaps); some have child care and elderly care duties; and others likely still have health concerns. Reservation wages are higher than before for these reasons, as well as for lower-wage workers who are supported by the extra unemployment insurance booster amounting to little above $15 per hour,” Dr. Bovino said in a recent report detailing the long road ahead to a full employment recovery. “Labor demand is outstripping supply and holding back capacity utilization … While we expect further substantial gains in the jobs market this summer, labor shortages will likely be a constant theme this year and a constraint to U.S. GDP as businesses return to normal.”

Labor supply constraints may dissipate in the coming months, but the pandemic's impact on wages may become permanent, according to Shannon Seery, an economist for Wells Fargo's Corporate and Investment Bank, who told S&P Global Market Intelligence in an interview that "in some ways, the tide is already turning in the direction of higher wages," and the recent increase in the minimum wage required for a worker to take a new job "comes down to the current disconnect between the demand for and supply of labor.”

Today is Monday, June 21, 2021, and here is today’s essential intelligence.

The Credit Cycle

S&P Global Ratings Raises Short-Term Oil and Gas Price Assumptions on Improving Market Conditions

S&P Global Ratings raised its West Texas Intermediate (WTI) and Brent crude oil price assumptions for 2021, as well its Henry Hub, Alberta Energy Co. (AECO) and Title Transfer Facility (TTF) natural gas price assumptions for 2021 and 2022. These revisions are effective immediately.

—Read the full report from S&P Global Ratings

Better Credit Available to Low-Carbon Oil, Gas Companies – S&P Global Ratings

The transition to low-carbon and zero-carbon energy in North America has gained momentum among investors and is likely influencing oil and gas companies' access to capital and its cost, a panel of S&P Global Ratings analysts said.

—Read the full article from S&P Global Market Intelligence

Emerging Markets Appeal to U.S. Investors as Taper Tantrum Fears Ease

Yield-starved American investors are turning to emerging-market assets as the Federal Reserve's continued commitment to bond-buying and low rates reduces the risk of repeating the 2013 "taper tantrum" exodus of capital from stocks and bonds in developing economies.

—Read the full article from S&P Global Market Intelligence

Market Dynamics

Introducing the S&P Transportation Select Industry FMC Capped Index

The Transportation industry group¹ provides transportation infrastructure as well as services to move people or goods. To track the industry group’s performance, S&P Dow Jones Indices offers the S&P Transportation Select Industry Index, S&P Transportation Select Industry FMC Index, and the Dow Jones Transportation Average.

—Read the full article from S&P Dow Jones Indices

Examining the Performance and Sector Diversification of the S&P BSE SENSEX 50

The S&P BSE SENSEX 50 is designed to measure the performance of the top 50 largest and most liquid companies in India. The index constituents are weighted based on their float-adjusted market cap and must have a minimum annualized trading value of INR 10 billion. The S&P BSE SENSEX 50 is a highly diversified index, and its 50 constituents provide exposure to all 10 major sectors: Utilities, Telecommunication Services, Information Technology, Industrials, Healthcare, Fast-Moving Consumer Goods (FMCG), Finance, Energy, Consumer Discretionary, and Basic Materials.

—Read the full article from S&P Dow Jones Indices

Shell Agrees to Pay $1 Million In Fines Over Junior Trader's Allegedly Manipulative Trading

Oversights in its compliance program and lax supervision of a junior trader will cost Shell Energy North America $1 million in combined penalties and disgorged profits, according to a Federal Energy Regulatory Commission order approving a settlement resolving natural gas market manipulation charges.

—Read the full article from S&P Global Platts

Banking Industry Under Pressure

UAE's New Capital Rule Could Trigger Further Bank M&A In 'Overbanked' Market

A new capital rule for banks incorporated in the United Arab Emirates will likely add pressure on smaller banks and may drive further consolidation in a market seen as overbanked, say analysts.

—Read the full article from S&P Global Market Intelligence

Warning of Risk to Recovery, EU Banks Clash With Regulators Over Capital Rules

New regulations, particularly the final Basel III capital rules, may hamper banks' ability to finance Europe's post-pandemic recovery and support investments in the green economy transition, according to BNP Paribas SA Chairman Jean Lemierre and Deutsche Bank AG CEO Christian Sewing.

—Read the full article from S&P Global Market Intelligence

Slovak Banks, Resilient to Pandemic, Remain Tested by Low Rates, Credit Risk

Slovak banks' profits declined by roughly a quarter in 2020, but local lenders will remain resilient even if the economic situation worsens, the country's central bank said in its latest financial stability report.

—Read the full article from S&P Global Market Intelligence

China's New Shadow Banking Rules Signal Fresh Push to Clamp Down Systemic Risk

China's latest rules on so-called cash wealth management products, or cash WMPs, signal renewed efforts by regulators to reduce risk in the shadow banking system, a major funding source for weak or highly leveraged companies that are unable to secure loans from traditional banks.

—Read the full article from S&P Global Market Intelligence

Brazil's Banking System Braces for New ESG Regulation

In 2014, the state of São Paulo, Brazil's most populous region and one of Latin America's most heavily urbanized areas, experienced a historic drought for more than two years.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

Ore. City Revives Natural Gas Ban Risk for Northwest Natural

A city council meeting in Eugene, Ore., produced mixed results for Northwest Natural Holding Co., as lawmakers moved to resolve a dispute with the gas utility operator, but signaled they would soon consider restricting gas use and infrastructure expansion.

—Read the full article from S&P Global Market Intelligence

Path to Net-Zero: Investor Pressure on Oil, Gas Operators to Cut Emissions Rises

The financial community has turned up the heat on the oil and gas sector, pressing the industry to cut its greenhouse gas emissions. And companies in the space are responding.

—Read the full article from S&P Global Market Intelligence

Energy, Investor Groups Clash Ahead of SEC Climate-Risk Rulemaking

Investor groups and environmental advocates say mandatory corporate climate risk disclosures with uniform metrics are critical for shareholders and economic stability. That position is at odds with the one advocated by energy industry players, many of which are asking for flexibility, liability protections — or no new guidelines at all.

—Read the full article from S&P Global Market Intelligence

Advancing Sustainable Lithium Extraction Could Help U.S. Compete, Experts Say

As the U.S. and other countries sprint to decarbonize the automotive sector through the widespread deployment of electric vehicles, the demand for lithium, a soft alkali metal used in several types of EV batteries, is expected to skyrocket. Continued investment in sustainable lithium recovery technologies will be key to the U.S. securing a better foothold in battery supply chains, according to industry experts.

—Read the full article from S&P Global Market Intelligence

Spotlight: U.S. Department of Energy Joins Initiative to Lower Hydrogen Cost

Cost declines are seen as being critical to meaningful penetration of low carbon hydrogen – and this has been leading to ever more ambitious long term targets. In a March 11 Future Energy Outlooks Special Report, S&P Global Platts Analytics discussed challenging industry targets of renewable hydrogen cost of Eur1.50/kg by 2030 in Southern Europe – noting the need for consistently low power prices and a sharp reduction in electrolyzer capital cost. 

—Read the full article from S&P Global Platts

Extreme Weather Challenges California Grid as Goal Remains Decarbonization

As extreme summer weather tests the California power grid, opportunities for reliability alongside deep decarbonization and achieving 100% renewable power remain, state regulators said June 16.

—Read the full article from S&P Global Platts

The Future of Energy & Commodities

European Refiners Face Margin Headwinds Over Lagging Jet, Gasoil Recovery

European refiners are facing further downward pressure on margins in the near term as middle-distillate cracks continue to suffer from the pandemic-hit aviation sector and congested global supply lines dent diesel and gasoil demand, according to analysts and refining industry players.

—Read the full article from S&P Global Platts

Easing COVID-19 Emergency A Boost for Japan's Summer Gasoline Demand

Japan's easing of COVID-19 emergency restrictions will boost the gasoline demand in July, when the country kickstarts the summer driving season, but the expected transport restriction for the Tokyo Olympics sent mixed signals for the fuel demand.

—Read the full article from S&P Global Platts

Feature: Singapore Bunker Market Volumes Remain Resilient Despite Hurdles

The world's largest bunkering port of Singapore has demonstrated its resilience amid tough market conditions emanating largely from the global coronavirus pandemic, with May bunker sales rising year on year, industry sources told S&P Global Platts.

—Read the full article from S&P Global Platts

Economically Ailing Iran Votes on New Leader to Tackle JCPOA, Court Oil Investment

Iranians will head to the polls June 18 to select a president who will face the challenges of clinching a nuclear deal to lift sanctions and reviving the country's oil and gas sector -- along with its ailing economy.

—Read the full article from S&P Global Platts

INTERVIEW: Metal Tariff Removal Would Undermine U.S., EU Efforts on Global Overcapacity: AISI

The recent joint statement from the US and EU shows that the governments share concerns regarding their domestic metals industries that must be cooperatively addressed, such as global excess capacity, but a removal of the US' steel and aluminum tariffs on the EU would run counter to such initiatives, American Iron and Steel Institute CEO Kevin Dempsey said June 16.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.