The help wanted signs are out all over the country as businesses are having difficulty finding workers as the U.S. economy re-opens. The government assistance programs established in the pandemic are responsible as they compensate workers the same as when they were employed. These programs were needed when the pandemic shut-down the economy, however, businesses are re-opening and need labor to generate revenue. Why? There is no incentive to go back to work. This unique situation between labor and employers shined through the jobs number on Friday as payrolls were reported at +266k while +1mm was expected. The miss was the biggest on record and maybe it was just a temporary blip in the data but it implies that a full-blown recovery may not happen until Q4.
If all this is true, then the Fed was right to hold-off on changing their policy. The economy is rebounding but it may take longer to find normalcy where supply chains are unclogged and the labor market finds equilibrium. For the financial markets, this means that interest rates will remain low and the stock market loves to hear that news. Equities did end the week on a positive note after the payroll number as the S&P 500 broke free of a three week consolidation period which should continue into next week.
Chart of the Week!
Economic & Central Banking Snippets
- Employers are struggling to find workers. There are more job openings in the U.S. this spring than before the pandemic hit in March 2020.
- Worker filings for unemployment benefits in the U.S. reached a new low since the pandemic began. Jobless claims, a proxy for layoffs, fell 92,000 last week to 498,000, the Labor Department said Thursday. (WSJ)
- Productivity in Q1 grew by 5.4% q/o/q annualized, above the estimate of up 4.3% as companies try to produce all they can to meet strong demand with the labor that they have.
- The Bank of England (BOE) said the U.K. is on track for a stronger economic recovery than it previously expected. The BOE raised its 2021 growth outlook to 7.25% from the 5% it had forecast in February. The central bank also repeated that QE will end by year end.
Macro Snippets
- Nearly 800 companies will report results next week. Earnings results from S&P 500 companies have beaten expectations by an average of over 20%, according to FactSet.
- A federal judge set aside a national eviction moratorium, saying the CDC exceeded its authority in imposing it.
- Chicken breast prices have more than doubled since the beginning of the year according to market-research firm Urner Barry. Wingstop CEO Charlie Morrison said the company is speaking daily to chicken suppliers that are struggling because they are having trouble getting enough workers.
- Moviegoers are returning to AMC Entertainment’s theaters. AMC said that by the end of April, most of its nearly 600 U.S. locations were in operation. About 61% of North American theaters have reopened, according to media measurement company Comscore. Unfortunately, this suggests many locations in the U.S. might have closed permanently because of the pandemic. (WSJ)
- The biggest U.S. meat producer is making a big move into meat alternatives. Tyson (TSN) Foods announced it will launch new plant-based products under its Raised and Rooted brand. The company will return to the sector by offering burger patties, Bratwurst, Italian sausages, and ground “meat.”
- Lumber futures extended a record rally as sawmills struggle to meet insatiable demand. The biggest U.S. producer is saying that it has sold out of some key homebuilding materials for several weeks.
That is all for now and thank you for being a subscriber!
Regards,
President – Kisco Capital