Stuck in a rut  New unemployment claims barely fell last week and seem to be stuck above the 400k level. This is the second week in a row that unemployment claims have not trended lower as we would hope, and could indicate potential stress in the labor market continuing despite the economy reopening.  Moral of the story: Job openings are at record levels as employers are desperately looking for more workers, but I don’t anticipate the unemployment picture will change meaningfully until the fall, when kids start going back to school and the elevated federal unemployment benefits run out. At this point, just feels like a broken record… Can’t stop…

Apparently no biggie The consumer price index, which measures price inflation for a basket of consumer goods, increased 5% in May, ahead of expectations for a 4.7% increase. This is the sharpest increase in annual inflation we’ve seen since the summer of 2008, just before the US went into the Great Financial Crisis. Core inflation, which excludes food and energy, increased 3.8%, which is the biggest jump we’ve seen in this measure since May 1992, that was literally before I was born.  Moral of the story: Markets pretty much ignored this report as the consensus seems to be that the elevated inflation is transitory in nature and should pass in the…

Below expectations  The US added 559k new jobs in May, short of expectations for 671k new jobs. The leisure and hospitality once again led job gains in May with 292k new jobs, followed by the education and health and government sectors. There was, unsurprisingly, a decrease in construction jobs last month as we’ve seen the rising construction costs put a slight damper on the construction market. Overall, the unemployment rate fell to 5.8%, the lowest so far in the pandemic, but that number doesn’t account for those who left the workforce as a result of the pandemic and are likely to return.  Moral of the story: Employers are eager to…

Meeting in the middle  Democrats and Republicans have been going back and forth trying to find a middle ground for Biden’s original $2.3T proposed infrastructure plan. Republicans came back this week with a $928B plan, further narrowing the gap the Democrats’ latest $1.7T number. Biden wants to do this on a bipartisan basis, but it is possible to send this through reconciliation without Republican support.  Moral of the story: The biggest hurdle, imo, is that there isn’t clear alignment on what “infrastructure” means to both parties – while Biden’s trying to solve for everything from roads and bridges to healthcare, others view infrastructure as more of a “roads and bridges” kind of…

Some signs of budging  Trying to figure out the upcoming actions of the Federal Reserve has been super topical recently because of the close (generally inverse) relationship between inflation and interest rates. So, when you’re worried about inflation increasing too much, you could increase interest rates to decrease inflation. The Fed has been pretty steadfast in its belief that the higher inflation coming through the remainder of this year is going to be transitory in nature (vs. a more permanent issue that needs to be addressed with a policy change like increasing interest rates). However, the latest meeting minutes indicated that if the economy continues to recover aggressively, there’s a chance that…

Inflation coming in hot  Consumer price inflation (CPI), which measure the cost of a basket of goods (including energy and housing) increased 4.2% in April compared to the year earlier. This is significantly higher than the 3.6% increase that was broadly expected and marks the largest jump in inflation in over 12 years. Excluding food and energy (which tend to be the most volatile components of CPI), core CPI still increased 3%, compared to the 2.3% increase expected.  Moral of the story: The Fed’s inflation target is 2%, so more than double that figure is a big number. We knew inflation numbers were going to be big, but the magnitude…

The classic chicken and egg question  Given the promising employment data we’ve seen in the forms of weekly jobless claims reaching new pandemic lows, the market was expecting a really strong April employment report. In an unfortunate turn of events, we only created 266k new jobs in April, compared to the expectation of 1 million new jobs for the month. With this, the unemployment rate inched higher to 6.1%, instead of falling to the 5.8% expected by the market. The bad news continued as March’s initially reported 916k gain was revised downward to 770k.  Moral of the story: Despite the jobs report being so incredibly bad, markets didn’t really react…

Growth underway  The resurgence of the US economy is well underway as US GDP grew 6.4% for the first quarter. With more vaccinations and another round of stimulus, consumer spending surged 10.7%. Also, ICYMI, the housing market is red hot, driving personal investments in housing up 11%. The optimism of reopening also helped businesses ramp up normalized spending as well and investments from businesses jumped up 10%. I’ve mentioned supply chain hiccups holding back industrial production, and we saw that flow through into inventory levels, which fell nearly $148b because production couldn’t keep up with demand. Had that not happened, GDP would have actually grown closer to 9%. All this demand is,…

Not a fluke We’re continuing to see improvement in the employment market as last week’s unemployment claims came in at a new pandemic-low of 547k and well below economists’ expectations of 603k. The outlook is even more promising as companies are looking to resume hiring at a normal pace this summer as reopening continues with the better weather and vaccine distribution running at ~3m doses per day.  Moral of the story: This report confirms last week’s numbers weren’t driven by a one-time issue and it seems like we’re making some great strides in regaining employment. We still have to keep chugging along though given ~8m fewer people are employed today…

The stimmy effect  The path to an economic recovery is becoming clearer with every new month of economic data. March retail sales jumped 9.8% on the back of the latest round of stimulus checks. Spending was higher across many categories with sporting goods, clothes, and food & beverage leading the way. Last week’s new unemployment claims also fell to 576k, which is a pandemic-low.To put this into context, the weekly unemployment claims were sitting closer to ~200k pre-COVID, had jumped to a high of 6.15m during the worst part of the pandemic, and have been stuck in the 700k-900k range for a while. Moral of the story: It’s largely anticipated…