Weekly Brief: U.S. Payroll, CBDCs, Google CPUs

"Old processor's die" by Ioan Sameli is licensed under CC BY-SA 2.0

U.S. Non-Farm Payroll

The U.S. non-farm payroll saw a sharp decline in the month of August. Total nonfarm payroll employment rose by a meager 235,000 in August, while the unemployment rate declined by 0.2% to 5.2%.

This monthly tracker conducted by the Bureau of Labor Statistics surveys private and public employers regarding employee payroll. To put things into perspective, the year-to-date monthly job growth has averaged 586,000, while consensus estimates for August were at 733,000; the 235,000 newly added payroll was a massive miss on expectations. Although demand for labor continues to outpace worker’s willingness to return to the job market, a slowdown in hiring in all sectors was nonetheless obvious as employers pulled back on hiring over concerns of the Delta variant’s chronic effect on the economy. With that being said, hiring in the U.S. has undoubtedly made substantial progress since the start of the pandemic.

The August payroll data was at the center of attention for investors not only because it reflected which sectors of the economy are on track to return to pre-pandemic levels, it also serves as an important criterion for the Federal Reserve’s reversal of its current ultra-accommodative monetary easing policy. This is because the Federal Reserve is committed to providing stability and security in the job market, and a gradual return to pre-pandemic hiring levels would satisfy this purpose, leading it to cut back on injecting money into the market. Although the August data signaled an unexpected pitfall in hiring, which might lead the Federal Reserve to push back its official taper timeline by a slightly later date, it nevertheless is on schedule to proceed to declare a reduction in asset purchases towards the end of this year.

Central Bank Digital Currencies (CBDCs)

What are CBDCs?

CBDC is essentially a form of digital currency that falls under the Central Bank. Therefore, it allows anyone in the private sector – may it be businesses or individuals – to have a digital wallet that is managed and issued by the Central Bank.

This form of centralized digital currency will inevitably make the role of commercial banks redundant because it enables policymakers to bypass the commercial banking system and directly advocate monetary policies towards individuals.

Examples of CBDC projects:

Who	Project
Bank of Canada	Project Jasper - is a collaborative research initiative between the public and private sectors to understand how DLT could transform the wholsesale payments system.
Banque de France, European Central Bank (ECB)	​Are quite open for experiments together with the ECB and other central banks of the Eurosystem, in particular with regard to a wholesale CBDC.
​Central Bank Group	The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank and the Swiss National Bank, together with the Bank for International Settlements (BIS), have created a group to share experiences as they assess the potential cases for central bank digital currency (CBDC) in their home jurisdictions.
Central Bank of Brazil	Project Salt - is exploring DLT for an interbank payments contingency and resiliency system as well as a decentralized information exchange platform (Project PIER).
​Central Bank of Iceland	Rafkróna - is exploring
Central Bank of the Bahamas	Sand Dollar - was introduced on 27.12.2019 with the intent of accelerating payments system reform, admitting new categories of financial services providers and using the digital payments infrastructure to make the supply of traditional banking services accessible to all segments of the population. Most of the benefits of introducing a digital currency are still unquantifiable. However, they may include a potential suppression of economic costs associated with cash usage, and benefits to the Government from improved expenditure and tax administration systems.
Central Bank of Tunisia	E-Dinar - is used to study the opportunities and risks inherent in these new technologies, particularly in terms of cyber security and financial stability.
​ECB, Bank of Japan	Project Stella - explores whether DLT / Blockchain technology can improve domestic interbank payments and settlements and facilitate rapid interbank trading and settlement of securities for cash.
German Central Bank	​BLOCKBASTER prototype and other efforts are exploring DLT for multiple purposes including for improving efficiency and reducing risk in interbank securities settlement processes.
Monetary Authority of Singapore	​Project Ubin - is a collaborative project with the banking sector, exploring the use of DLT for clearing and settlement of payments and securities, as well as new methods of conducting cross-border payments using CBDCs.
Peoples Bank of China	​Digital Currency Electronic Payment (DCEP) - is proposed a two tier system, centrally issued, backed 1:1 by fiat currency
Republic of the Marshall Islands	​Introduced a new DLT / Blockchain based currency called the Sovereign (‘SOV’) in February 2018 after issuing the Sovereign Currency Act of 2018.
Sweden Central Bank	​E- Krona - a one year project launched in 2020 adressing concerns regarding the oboslecense of physical cash in Sweden and its consequences.
​Swiss National Bank	The Swiss Exchange (SIX) and the Swiss National Bank (SNB) are working on a proof of concept to explore how digital central bank money could be used in the settlement of tokenized assets between market participants.

The table above elucidates the impression that CBDCs are gaining prominence across the globe. The development of this centralized digital currency is expected to increase convenience and practicality for legal tender.

Google to develop its own CPUs for upcoming notebook and tablet computers

Tech giants venture into semiconductor development

Company	Year the first in-house chip design unveiled	Area
Apple	2010	Began using own iPad and iPhone processors a decade ago; began replacing Intel's CPUs with own Apple Silicon in Mac computers and laptops last year
Google	2016	Unveiled fourth-generation AI accelerator for data centers and began using own mobile processors for Pixel smartphones in 2021; working on CPUs for Chromebooks and tablets and other custom chips, including for autonomous driving
Tesla	2017	First self-driving AI chip released in 2019; recently unveiled custom chip for training its AI networks and AI models using own supercomputers
Amazon	2018	Developed processors for data center servers and several custom AI chips for cloud services and Echo smart speakers; working on networking chips
Baidu	2018	Began using own AI computing chip in 2020, recently unveiled the second generation for use in smart transportation and autonomous driving; spun off chip design unit Kunlun in 2021
Alibaba Group	2018	Founded T-Head Semiconductor in 2018 as wholly-owned chip entity; unveiled its AI accelerator and CPU infrastructure in 2019
Facebook	2019	Developing AI chips for data centers

Google is developing its own CPUs to be used for upcoming notebook and tablet computers. This decision by Google is the latest of signs which reinforce the notion that major tech companies recognize in-house chip development to be crucial to their competitiveness.

It is speculated that Google will roll out their very own CPUs for their notebook and tablet computers in 2023.

Google’s strategy of in-house chip development is a logical move. Global rivals of the US internet giant such as Amazon, Facebook, Microsoft, and Tesla have also been developing their own semiconductors to be used for powering their products. (See attached image) In-house chip development is beneficial for tech companies as it enables them to integrate product-specific features, which in turn reduces their reliance on suppliers. In-house chip development enables the offering of unique products and services, which raise the company’s competitiveness in the market. Furthermore, in-house chips enable better software and hardware integration.

In-house chip development is however not without its challenges, even for an internet giant like Google. Chip development requires significant investment in terms of both cost and time. State-of-the-art 5 nanometre semiconductor chips cost approximately $500 million USD to develop. In addition to the required investment, tech companies developing their own chips must compete with chip developers such as Intel and Nvidia for production capacity.

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References:

Yates, C. (2021, August 30). Everything you need to know about Central Bank digital currencies. Advisor Perspectives. https://www.advisorperspectives.com/commentaries/2021/08/30/everything-you-need-to-know-about-central-bank-digital-currencies

Timiraos, Nick. (Sept. 3, 2021.). Jobs Report Likely Derails Case for September Fed Taper. [Website]. Retrieved from Jobs Report Likely Derails Case for September Fed Taper - WSJ

U.S. Bureau of Labor Statistics. (Sept. 3, 2021.). Employment Situation Summary. [Website]. Retrieved from Employment Situation Summary (bls.gov)

Ting-Fang, C. (2021, September 1st). Google developing own CPUs for Chromebook laptops. Retrieved from Nikkei Asia: https://asia.nikkei.com/Business/Tech/Semiconductors/Google-developing-own-CPUs-for-Chromebook-laptops