ResearchThree Things (6/4)

Three Things (6/4)

Jun 5, 2024

Cooling job market

US job openings fell in April to the lowest level in over three years as available positions decreased to 8.06 million from 8.36 million in the month prior. The report is consistent with a gradual slowdown in the labor market as all eyes for investors center around the Fed's key inflation gauges. The decline helped lower the ratio of openings to unemployed people, another closely watched metric by the Federal Reserve, to 1.2 – the lowest level in since 2021.

The recent data tells us that the labor market is cooling, but it’s been gradual through slower hiring rather than outright job cuts. Fed officials are hoping that trend continues because the downstream impacts mean slowing demand and lower inflation. It’s a balancing act, though, as they need to slow down the job market just enough while trying to avoid putting millions of people out of work.

Dollar races forward

Contrary to investor expectations, the U.S. dollar has gotten a fresh wind this year, as bumpy inflation data has prompted investors to dial back bets on rate cuts. Although the greenback is still below the 2022 peak, dollars remain historically expensive on inflation-adjusted terms. A strong dollar usually causes issues for domestic manufacturers as their goods are more expensive compared to foreign peers.

Roughly half of trade invoices and three-quarters of nonbank debt are denominated in dollars, which means that emerging nations in particular—those that struggle to borrow in their own currencies—struggle whenever the U.S. currency is expensive. Thus, a fall in the dollar could be welcomed as a source for positive global growth. The dollar’s gains highlight U.S. exceptionalism but it has some negative downstream implications – it’s one piece of a broader mosaic that investors are continuing to try and grapple with.

Gap earnings beat

Databricks is acquiring Tabular, a data-management startup that helps companies use a variety of open-source data formats. The acquisition is a move that the company hopes will allow them to win artificial intelligence customers by making it easier for them to use their own data with AI. Databricks declined to specify how much it paid for Tabular, but said the price was between $1 billion and $2 billion.

For businesses, private data is needed to customize AI models to perform data analysis, summarization and other tasks. Without it, AI models are limited to what they have learned from their initial training on public data online, up to a certain point in time. Creating custom AI using private data is a fast growing market that will not only require the right resourcing but also the right security – if data is a commodity, large enterprises can’t entrust any old startup with one of their most valuable resources.


Disclosures

As of writing, Databricks is a 3.72% holding in the ARK Venture Fund.

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