This Week’s Economic Update, July 26, 2021

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The highlight of my year is typically the college football season.  Getting Street & Smith’s run down of all the conferences and the schools is always entertaining.  Watching the games on Saturday when the weather may not be great is a treat.  Young, hungry athletes doing their best for the team as well as the exuberant student crowds on hand make the sport one of the most exciting. 

Over the past few years the conferences have been consolidating.  The Big Ten is now actually the Big 14 and could be more as we watch the Big 12 head possibly to the Little 8.  Oklahoma and Texas are reaching out to the SEC to join them.  If the Big 12 loses these to powerhouse contenders, it is possible that Iowa State, Kansas and Kansas State could hook up with the Big 10.   While there has been no test as how large a conference can get and still be healthy, the SEC and Big 10 might already be there with 14 teams.  To keep schools interested and competitive you need to have a small enough division so you do not have perennial losers who never have a chance at a bowl game.  On the flip side, the Big 12 might be too small’ leaving them to have to quickly dismantle so schools can get a share of the television contract funds.  Personally, having Alabama and Oklahoma in the same conference with Florida might just dilute the national championship playoffs.  It could just be the SEC National Championship.

Do not read too much into the higher-than-expected new jobless numbers that were released on Thursday.  Two factors are driving the numbers.  The first is that four states had outsized increases in the jobless numbers last week.  The states were Texas, Michigan, Kentucky and Missouri.  Three of these states are recording resurgent cases of COVID which is resulting in cut backs in economic activity producing staff cuts. The one state that was not COVID impacted was Michigan.  Of course, the supply chain issues in the automotive sector is what impacted their numbers.  As the COVID surge subsides and the supply chain begins to catch up for auto production, the numbers will get much better.

Ships are once again piling up in ports.  In particular, trade with China is booming.  In spite of the tariffs, trade is now back to 2016 levels with China with no indication of subsiding.  Production in China is going strong, filling up more ships head to our shores.  The ports in the US are still not back to pre-pandemic levels due to staff shortages and a new spike in California.  As the US economy continues to re-open and expand, unloading the waiting ships, not only in our western ports but also those on the eastern seaboard is critical.  As I reported last week, the demand for many products is softening slightly.  It could be that we see a glut of inventory and declining prices later this year.

North American oil rigs continue to recover.  We are now approaching 500 working rigs.  While still well below pre-pandemic levels, the increase is allowing for more supply. Demand is also on the up swing as more people are returning to the commute as well as traveling this Summer.  Gas prices near $3.00 a gallon may be with us for a while.  The new production is not yet keeping pace with the demand.

Take Care, have a great week.



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