The Navy’s Autonomous Swarm

The U.S. Navy recently demonstrated its Autonomous Swarm project, a fleet of unmanned vessels designed to overwhelm an adversary.

As a large ship moved through the water, a helicopter overhead spotted an unidentified boat approaching and sent a warning to a small fleet of escort boats. Some were armed with loudspeakers, others with flashing lights, another with a .50 caliber machine gun.

Once the fleet zeroed in on the threatening vessel with radar and infrared sensors, some of the escort boats broke away and quickly encircled it. They flashed lights and blasted warnings through loudspeakers. Threat resolved.

All of the escort boats were unmanned—and yet they moved together as a group, thanks to what’s known as “swarm intelligence.”

Rising Interest Rates And Commercial Real Estate

Commercial Real Estate

While rising rates do translate into higher borrowing costs and often higher capitalization rates, which can lead to lower asset values, the notion that rising rates are categorically bad for real estate equities is somewhat overstated, and often incorrect. Rising rates tied to an improving economy, which is what we are seeing today in the U.S., can actually provide a constructive backdrop for the asset class. An improving economy typically means landlords benefit from better operating fundamentals – lower vacancy rates, higher lease rates and better acquisition/development yields.

There are numerous past periods when rates rose on the back of an improving economy and real estate performed well. In fact, during the five periods of rate increases since 2000, the MSCI U.S. REIT Index averaged a 1.2% return over the three months following the initial rate increase and a 14.7% return over the ensuing 12 months (outpacing the S&P 500 Index by more than 200 basis points).

Global Evolution a Game Changer for Real Estate
Patrick Brophy, Janus Capital Group

Industrial Production Grows In September

U.S. industrial production increased 1.0% in September after having decreased 0.2% in August. At 105.1% of its 2007 average, total industrial production in September was 4.3% above its level of a year earlier.

IP Change

Industrial Production

The output of manufacturing increased 0.5% in September, production at mines increased 1.8%, and output of utilities rose 3.9%.

Capacity utilization for total industry decreased in September to 79.3%. That is 0.8% below its long-run (1972–2013) average.

Capacity Utilization

Weekly Initial Jobless Claims Drop To 264k

Initial jobless claims for the week ending October 11 were a seasonally adjusted 264k, down from the prior week’s revised reading of 287k. Not seasonally adjusted, jobless claims for the week were 272k.

Jobless Claims

Individual states that had changes in claims of more than 1k (not seasonally adjusted):

States

The 4-week moving average of initial jobless claims was 284k.

Jobless Claims 4W

The number of unemployment insurance recipients, or continuing claims, for regular state programs was 2.389 million, up from the previous week’s revised reading of 2.382 million.

Unemployment Insurance Recipients

The insured unemployment rate, which is the number of unemployment insurance recipients as a share of covered employment, was 1.80%, unchanged from the week prior.

Insured Unemployment Rate

90.54% of all U.S. jobs are covered by state unemployment insurance programs.

Covered Employment

Of the 9.262 million Americans currently unemployed, 25.79% receive unemployment insurance.

UI Recipients Share

Jobless claims and the unemployment rate:

Labor Market

Treasury Runs Budget Surplus Of $105.8 Billion In September

The federal government ran a budget surplus of $105.8 billion during the month of September. This compares with a $75.1 billion surplus in September of 2013.

Treasury Monthly

Receipts for the month totaled $351.7 billion, up from $301.4 billion a year earlier. Total outlays were $245.9 billion from $226.43 billion a year earlier.

The rolling 12-month U.S. government budget deficit through September was $484.4 billion, an improvement from $515.1 billion in August. The rolling 12-month budget balance as a percentage of gross domestic product is -2.80%.

Budget Balance

Weekly Initial Jobless Claims At 287k

Initial jobless claims for the week ending October 4 were a seasonally adjusted 287k, down from the prior week’s revised reading of 288k. Not seasonally adjusted, jobless claims for the week were 258k.

Claims

Individual states that had changes in claims of more than 1k (not seasonally adjusted):

States

The 4-week moving average of initial jobless claims was 288k.

Claims 4W

The number of unemployment insurance recipients, or continuing claims, for regular state programs was 2.381 million, down from the previous week’s revised reading of 2.402 million.

UI Recipients

The insured unemployment rate, which is the number of unemployment insurance recipients as a share of covered employment, was 1.80%, lower than the 1.82% the week prior.

IU Rate

90.14% of all U.S. jobs are covered by state unemployment insurance programs.

Covered

Of the 9.262 million Americans currently unemployed, 25.71% receive unemployment insurance.

UI Share

Jobless claims and the unemployment rate:

Labor Market

U.S. Hiring Dips, Job Openings Soar

U.S. job openings increased in August to 4.835 million from 4.605 million in July. Hires decreased to 4.640 million from 4.934 million.

Hires and Openings

The number of unemployed workers per job opening increased to 1.98 from 2.10.

Workers per opening

There were 4.440 million separations in August. Quits decreased to 2.473 million from 2.547 million, layoffs and discharges decreased to 1.580 million from 1.726 million, and other separations increased to 0.387 million from 0.356 million.

Separations

The ratio of quits to layoffs and discharges increased to 1.57 from 1.48, which is a positive sign and indicates people are more comfortable leaving their jobs.

Ratio of Quits

Subtracting total separations from hires, net labor turnover for the month is suggested to be an increase of 200k jobs.

Hires and Separations

That 200k is slightly higher than the 180k nonfarm payrolls added as reported in the employment situation release.

Net Turnover

Variation

The Beveridge Curve shows the relationship between the unemployment rate and the job openings rate (job openings as a percentage of the total employed plus job openings).

Beveridge Curve