Labor market statistics summary for May shows mixed results
According to the U.S. Bureau of Labor Statistics, the unemployment rate in May declined by 0.3% to 5.8% while total nonfarm payroll employment rose by 559k. Nonfarm payroll employment is still down by roughly 5%, or 7.6 million, versus the pre-pandemic level from February of 2020. Reflecting the ongoing return to in-person learning and normal retail business hours/operations, job gains were most notable across the leisure and hospitality sector (+292k), public & private education (+144k), and health care & social assistance (+46k). Initial jobless claims for the week ended June 5 totaled 376k, marking a sixth consecutive week of downward initial filings and the fewest weekly new unemployment claims since March of 2020. Despite the improvement in jobless claims, labor shortages appear persistently widespread as the total number of individuals still claiming unemployment benefits remains elevated at 15.3 million during the week ended May 22, a decline of fewer than 100k from the week prior. According to the NFIB’s monthly jobs report in May, a record-high 48% of small business owners reported unfilled job openings during the month. Compared to April’s reading, the labor force participation rate was little changed at 61.6% where it has remained relatively constant dating back to June of 2020.
Companies looking to cryptocurrencies to diversify balance sheets find that accounting rules make it a very punishing choice
Tesla was hot news this year when it announced it would be keeping over $1 billion of its balance sheet in Bitcoin, but accounting rules can lead to large impairment charges for the cryptocurrency. Under GAAP, cryptocurrencies are not accounted for like normal currencies even if the company is holding them in their treasury function. Companies must test indefinite-lived assets like Bitcoin and stocks for impairment at least annually; when the value of these assets goes below carrying value, the company must take a charge and cannot increase the value on the balance sheet until the asset is sold. Most investors know how volatile Bitcoin and other cryptos can be which is why many companies have no plans to hold the asset on their balance sheets. With Tesla likely to take an impairment charge on their Bitcoin holdings this quarter, it is a good reminder of the importance of a skilled credit research team that can dig deep into company financials to find potential red flags.