Economic activity will grow 9% in the second quarter, according to the Blue Chip consensus. The creation of one million net jobs was expected in April and only 266,000 emerged, according to the official report. The unemployment rate, inclusive, rose one tenth to 6.1%.
The US economy will grow 9% in the second quarter, according to the Blue Chip consensus. The inertia of the first quarter –and the de-accumulation of inventories by more than 2 and a half points of the product– support the figure. The projections cover an arc that starts above 6% and almost scratches 12%. There are numbers to choose from, all of them robust. The economy is a hurricane of activity, what about the job market? After all, economic policy has full employment between eyebrows and eyebrows as its main objective. One million net jobs were expected to be created in April. And here is a big surprise: barely 266 thousand emerged, according to the official report. The unemployment rate, inclusive, rose one tenth to 6.1%If it had not been for the hiring of entertainment and hospitality, a sector that is reopening thanks to mass vaccination, the economy would have netted jobs. Is it true? A similar discrepancy between predictions and results is not remembered (the memoirs yes, but in 1998). The employment report is highly volatile, subject to successive revisions that can be profound, and therefore a single piece of data that is so out of focus should be taken with a grain of salt. And what did the markets do? Here’s a little surprise: celebrate. The Dow Jones Industrial and the S & P500 set new records. Sell in May? No way. No index more effusive, however, than the Nasdaq. Tech stocks were back on the attack with gusto. And what do they have to celebrate? That the silhouette of the tapering, the probability that the Fed start cutting back on buying long bonds –120 billion dollars, every month-, step back. It will not happen anytime soon if the spirits of the world of work advance at the rate of a quarter of a million additional jobs per month (and not by leaps of a million, as Jay Powell himself suggested at the time). Less is more for Wall Street? This was billed by the Stock Exchange. A very robust figure could give you a nervous breakdown, and peace of mind is a plus.
The Stock Market responded as if it were in the best of two worlds. He did not question the thesis of more than healthy growth, and he did buy from the report the notion that no overheating is on the horizon. Did Treasury Secretary Janet Yellen say that rates might have to be raised to avoid overruns? Well, at this slower pace, but not slow, it won’t be necessary either. Treasury rates plummeted on the news and ended the day where they started. A level of 1.57% at 10 years is a caress. But is it really the best of two worlds? That the economy is growing robust is proven by all the PMI reports, the companies on their balance sheets, the real estate bonanza and how much loose data is examined. And that the job market is doing better than what the job report says, too. The sustained decline in requests for unemployment benefits –now below 500,000– and the creation of 742,000 jobs in the private sector according to the ADP measurement for April suggest this. The labor report itself indicates that demand is intensifying. Hours worked – an anticipatory index, unlike employment – were stretched to the maximum and average hourly wages the same. However, the evidence does corroborate that the job offer is less elastic than would be desirable. Vacancies are opened and they are not filled. Not only are raw materials in short supply, but also skilled labor. Being graphic: businesses are prospering, there is more freight than trucks, and more trucks than drivers. He said Being graphic: businesses are prospering, there is more freight than trucks, and more trucks than drivers. He said Being graphic: businesses are prospering, there is more freight than trucks, and more trucks than drivers. He said Tom Barkin of the Richmond Fed: “Those who pay $ 15 an hour have less difficulty in hiring.” In Texas, a trucking company offers up to $ 14,000 a week to attract an experienced driver. Perhaps the path to full employment is steeper than the flat Phillips curve that Yellen and the Fed have in mind. In that case, it won’t be the best of two worlds, but worse both ways. Are inflation risks further away than before? Quite the opposite. And the same is the tapering. Bottlenecks can stunt growth and boost prices. But the stock market prefers to believe that this is not the case. For now, the Fed, be it one case or another, will still stand idly by.