2022 economic outlook: Important charts to watch and what they are telling us about the economy

[00:00:00] Speaker 1: we here at yahoo finance like most financial journalists love our charts and i'm sure you do too we got to tell you what are the most important charts that you want to watch next year to figure out the direction of the economy and the markets well for that we need a little help from an old friend sam roe is the editor of the tkr.co and um wrote up some of these charts and flagged some of these charts for us sam good to see you happy holidays let's take a look at the one of these that you flagged and that's job openings which joel or jolts in other words um this thing has gotten sort of unprecedented attention over the past couple years it never was the primary chart and [00:00:48] Sam Roe: it's just gained a lot of importance yeah no it it really has it's uh i i guess you know the the jolts the job openings and labor turnover survey which sort of lags the the official employment report by a month has gotten a lot of attention because it's captured all the turnover that's been going on um you know in the labor market since the beginning of the pandemic um you know a lot of the other metrics like quits rates and all this stuff has been getting a lot of attention but job openings you know is is just incredibly interesting i mean you know you think about the state of the economy right now and the stock market and earnings and um you do hear about a lot of positive things happening about how consumer spending is you know back to new record highs and gdps back to record levels but we have 11 million job openings and job openings you know an employer doesn't put up a job opening unless you know they're trying to fill some sort of unmet demand and so job openings is an incredibly bullish leading indicator in that you know there are a whole lot of businesses saying that we need more people to you know conduct business to manufacture goods to you know serve customers as they come into our store or diners when they come into our restaurants so um i think this is going to be a you know very important one to watch because as long as those job openings are high it's signaling to us that uh you know there's still a lot of demand that's being unmet in the economy sam i know you're also watching [00:02:22] Speaker 3: delivery times because really one of the stories of of this year has been supply chain problems [00:02:29] Sam Roe: yeah i i think um you know delivery times probably captures you know the supply chain issue you know most succinctly um and yeah they're all elevated like you know the the indicators are starting to turn lower a bit but they're still extremely elevated and one of the things that's really interesting about uh supplier delivery times is it has a pretty tight correlation like that specific chart that you know shows that elevated level um based off of manufacturing and purchasing manager surveys is it's very tightly correlated to inflation rates and so what that suggests is you know as supply chains improve and those delivery times get better um we could see some you know significant relief in the inflation rate [00:03:16] Speaker 1: so there are lots of different ways to sort of slice and dice that stuff right to try and figure out what's happening with the supply chain and the effect it's having on companies and one of your other charts is another side of that another nuance of that the inventories to sales ratio because we know that that inventories have been falling this is i i hadn't seen this particular chart though this is a [00:03:35] Sam Roe: cool one in terms of of looking at that ratio yeah inventory of sales is is just again it's another one of these uh um stories that you know i guess it's probably something that the consumer sees a little bit more when you go to the store and you know they don't have something in green so you buy it in navy or they you know uh the bulk size you know oatmeal isn't for sale so you buy the individual packets instead um yeah i mean this is all a result of um both a combination of tight supply chains as well as you know really strong demand from you know consumers and businesses um but you know what's really interesting about you know inventory levels and inventory to sales ratios is um you know even if even if you have a situation where you know the end demand is you know cools off a little bit um businesses stores warehouse you know all these you know entities that have deflated inventory levels are still going to need to restock these inventories because they just want to be better prepared for their customers when they do come through those doors so um the fact that inventories continue to be depressed is is just incredibly another one of these really sort of bullish looking leading indicators um because even if you know again even if that end demand cools um businesses still want to make sure that they have stuff in their stock rooms and you know for when that demand does does return this is making finance fun uh sam feels like [00:05:06] Speaker 3: we're revealing toys on live tv here i know you're also watching uh profit margins and to me uh listen i'm i'm surprised uh profit margins this year have remained so resilient i mean look at all the inflation we have seen labor cost of goods you name it yeah no this is probably you know one of the [00:05:25] Sam Roe: crazier stories of of the year and and you know you guys were just talking about you know uh what's been going on with the stock market and how it's been surging and you know behind stock prices is earnings and you know underlying those earnings is profit margins and when profit margin is strong all things being equal you know that earnings growth is going to be a lot more robust and so yeah it's it's really incredible especially especially with so many executives and businesses and you know trade group representatives and stuff you know all year has been screaming about inflation and how rising costs of goods and rising wages and all these things that are um you know pressuring costs uh uh uh you know ultimately didn't affect the profit margins because of you know they're you know there's a number of things going on with these companies you know they're figuring out how to squeeze more productivity out of you know the few people that they have working for them i mean you know again we just talked about job openings right they're still figuring out how to you know deliver goods even though you know they're they're sort of stretched for capacity so they're getting more you know operating efficiency out of out of their existing businesses as demand returns but the other thing that you know is just one of the more triggering upsetting things that that people hear about is companies have pricing power that they are raising prices and they're passing these increased costs off to their customers and the customers are taking it um and you know uh we've we've you know read all the stuff about you know higher incomes and uh rising wages obviously excess savings and then you know corporate cash piles and stuff um yeah um the you know customers businesses consumers um you know they're gonna be really upset about you know how much the price of what they're what they're buying has gone up buying has gone up but they're buying it anyways and that that's something that's come through in retail sales data it came through in today's consumer spending data um yeah it's it's just incredible and you know corporations are are very smart about this they are aware of you know what's going on with their customers and so they're raising prices and you know the sales are holding up and so they're going to keep doing that until um you know they get some actual pushback it's interesting you mentioned all the different [00:07:52] Speaker 1: constituents that have sort of been noticing that congress has been noticing it too we've gotten a little bit of political rhetoric around that also but the thing is as i look at that profit margins chart you can't help but think it's gonna keep expanding next year i mean we keep we've been talking about peak profit margins right we talked about that earlier this year but if if component prices if inflation on the wholesale level actually starts to go down which there are plenty of predictions that it will at some point and these companies don't cut their prices those profit margins are only going to expand right [00:08:25] Sam Roe: well i i think i think the way so um there was uh you know this is something that's been coming up with a lot of um you know the strategist you know 2022 outlook notes that you know everything from relief on the supply chains um you know uh you know jobs being filled you know all these things that you know become a little bit more disinflationary and you know of course we're also talking about you know um tapering qe at an accelerated rate and and the fed uh raising interest rates potentially next year um all these things are there's a lot of uh um you know forces that seem that that look like they're going to bring some relief to to cost pressures um but i'm not quite sure that that necessarily means that profit margins are going to you know continue to expand or hold up um it's possible that you know if costs do start to come down then you know businesses you know as they look to you know uh steal market share from their competitors might get more competitive when it comes to pricing so that they can just get a bigger share of the market so um yeah i think profit margins ends up becoming a wild card but um i i think what you what what's going on with elevated profit margins right now is probably you know companies um you know trying to you know be a little bit cautious even though it means you know potentially foregoing on stealing market share from their competitors you know sam [00:09:55] Speaker 3: you're up 24 7 pretty much studying markets and and stocks what's what's the biggest thing you learned uh about markets this year or just reminded uh about markets um you know i i think i think probably the [00:10:09] Sam Roe: the most interesting i mean there i think there were two things that really you know kind of jumped out this year um and uh uh uh bank of america strategist uh savita sub romanian you know had this really nice quote you know a couple weeks ago and she said that uh something along the lines of it's dangerous to wager against corporate america so just like we were talking about with you know profit margin profit margin pricing power and you know all these different things where there's this huge acceleration and earnings growth is that businesses will figure out a way to conduct businesses business and grow and you know enhance shareholder value so so that that's one thing that i think was a good lesson for everybody and the second thing is that you know consumers are just relentless when it comes to consumption right like again even if it's you know there might be inflation there's you know a pandemic out there there's you know um i i think you know particularly when we saw the the delta variant you know um earlier in the fall um and you know this was an incredibly you know dangerous variant of covid but during that period we saw not only did we see retail sales continue to grow but they grew at uh rates that that you know far exceeded economists expectations and you know all that goes to show is that you know people you know regardless of the dangers of of of what's going on out there you know they're going to try to figure out a way to live their life and and consume and uh experience those experiences because i i don't know what what it is maybe uh there's a yolo or life is short back there but um yeah don't underestimate you know businesses ability to adapt and don't estimate underestimate consumers [00:11:58] Speaker 1: uh sort of uh hunger to to consume maybe they can pick up a sweet vintage dr no poster too i'm i'm feeling a little inspired by your decor sam sam roe and sam did i say is it you say ticker.co yes [00:12:15] Sam Roe: i said it wrong didn't i you know i don't think there's really a wrong way to say it but um lately i've been pronouncing it as ticker it started it started as t-k-e-r but now it's ticker okay ticker [00:12:30] Speaker 1: editor of ticker um sam roe it is always such a pleasure beauty repping that beautiful swag this morning um from ticker.co uh our our own our one-time own sam roe oh you'll always be our own sam roe thanks so much for joining us this morning and happy holidays sam