— Manhattan Apartment Rents Hit New High; Jobless Claims Rise More Than Expected; JPMorgan MDs Ordered to Commute Five Days; March U.S. PPI Falls Below Forecasts; iPhone Output Surges in India; CRE Financing Tightens; U.S. Stocks May Keep Sliding in 2023
1. Manhattan Apartment Rents Hit New High
A report released today by brokerage Douglas Elliman Real Estate shows that the median monthly rent for Manhattan apartments reached a new record of $4,175 in March, surpassing the previous high set in July by $25 and rising 13% year-over-year.
Jonathan Miller, president of appraisal firm Miller Samuel, noted that landlords realized they could successfully raise rents, as the actual signed rents were only 0.7% below the asking price, a sharp contrast to the 5% discount seen in February for new leases.
July and August typically mark the peak season for apartment leases, and rent records may continue to be broken unless large-scale layoffs or a recession intervene.
The number of new leases signed in March rose 15% year-over-year, indicating that more tenants are choosing not to renew their existing leases.
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2. Jobless Claims Rise More Than Expected
Data released today by the U.S. Department of Labor shows that for the week ending April 8, initial jobless claims rose by 11,000 to 239,000, marking the first increase in three weeks and signaling weakness in the labor market.
The median forecast by Bloomberg economists was 235,000.
For the week ending April 1, continuing claims for those receiving unemployment benefits for more than one week fell to 1.81 million, an index that reflects the difficulty of finding new jobs.
Cooling in the labor market is one of the Federal Reserve’s top priorities.
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3. JPMorgan MDs Ordered to Commute Five Days
This week, JPMorgan Chase & Co.’s operating committee stated in a letter to employees that senior leaders play a vital role in maintaining the firm’s operations and culture, and are obligated to lead by example by being in the office, meeting with clients, and providing coaching and feedback to their teams.
As a result, all Managing Directors are now required to be on-site five days a week.
As the pandemic recedes, Wall Street firms have begun revising their hybrid work policies. Retail banking employees at JPMorgan must report to the office daily, while other staff may work from home up to two days a week unless they obtain executive approval.
JPMorgan is building a new headquarters on Park Avenue, a 60-story tower that will house 14,000 employees and include yoga, cycling, meditation spaces, and ample outdoor areas.
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4. March U.S. PPI Falls Below Forecasts
According to the latest data from the U.S. Bureau of Labor Statistics, the Producer Price Index (PPI) fell 0.5% month-over-month in March, far below analysts’ expectations and marking the biggest drop since the start of the pandemic.
Compared to a year ago, the PPI rose 2.7%, the smallest increase in two years.
Excluding volatile food and energy, core PPI fell 0.1% month-over-month and rose 3.4% year-over-year.
About 80% of the drop in PPI was driven by declining gasoline prices, but with OPEC+ recently announcing production cuts, this downward trend may not continue.
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5. iPhone Output Surges in India
Sources reveal that in fiscal year 2022, Apple Inc. produced $7 billion worth of iPhones in India, accounting for 7% of total global iPhone output. In 2021, India’s share was just 1%.
To mitigate geopolitical risks, Apple has been working to reduce its dependence on Chinese manufacturer Foxconn.
Last year, lockdowns in Zhengzhou—the “iPhone City”—severely disrupted Apple’s supply chain. Meanwhile, India has introduced a range of incentives to encourage Apple to expand local production.
In fall 2023, Apple plans to begin iPhone production simultaneously in China and India. At the current pace of expansion, India may produce 25% of all iPhones by 2025.
Even before the shutdown of the Zhengzhou facility, Apple had already recognized the importance of supply chain diversification.
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6. CRE Financing Tightens
Recently, defaults in commercial real estate debt have become increasingly frequent, and both traditional major banks and the entire bond market are intentionally steering clear of commercial real estate.
Regional banks, which provide 70% of loans to commercial real estate, are now facing heightened risks following the collapse of several banks and have subsequently scaled back the issuance of commercial property-related loans.
For property owners, one of the key sources of funding outside of banks is the commercial mortgage-backed securities (CMBS) market. However, according to Bloomberg data, the issuance volume of CMBS has plunged 82% year-over-year.
The only entities currently able to fill part of the funding gap are private credit firms that charge higher interest rates. Alexander Popov, Head of Illiquid Credit Strategies at Carlyle Group, said that Carlyle has invested $1.5 billion each in multifamily housing and entertainment property sectors, where many attractive investment opportunities are emerging.
In 2023, a large volume of office properties will require refinancing, and regional banks may not have the funds to meet the demand.
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7. U.S. Stocks May Keep Sliding in 2023
Strategists at Bank of America stated that U.S. companies are about to enter a very disappointing earnings season and are likely to issue very pessimistic outlooks. The rest of 2023 may see further deterioration.
Bank of America’s data shows that since June of last year, earnings per share (EPS) for the S&P 500 index have fallen by 13% to $220, and this year’s EPS could potentially dip below $200.
Analysts noted that in today’s harsh market environment, companies are very likely to reduce stock buybacks and capital expenditures.
This year’s stock market gains have been largely driven by the tech sector, as investors believe tech firms have stronger balance sheets. But analysts warn that upcoming tech earnings reports could disappoint, and stock prices may not hold up.
The EPS downtrend for the S&P 500 this year is steeper than the historical average.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.