Payroll employment rises by 266,000 in April; unemployment rate changes little at 6.1% Total nonfarm payroll employment rose by 266,000 in April, and the unemployment rate was little changed at 6.1 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains in leisure
and hospitality, other services, and local government education were partially offset by employment declines in temporary help services and in couriers and messengers.
Initial claims for unemployment insurance declined in the week ending May 1 to 498,000 from 590,000 in the prior week, revised from 553,000. The Action Economics Forecast Survey panel expected 549,000 new claims. The latest week’s figure represents a new low since the start of the pandemic in March 2020. It remains well above pre-pandemic levels. The 4-week moving average fell to 560,000 in the week ended May 1, also a pandemic low, from 621,000 during the previous week.
Initial claims for the federal Pandemic Unemployment Assistance (PUA) program fell to 101,214 in the week ended May 1, down from 121,414 in the prior week. These are the lowest levels since April 11, 2020. The PUA program provides benefits to individuals, such as the self-employed, who are not eligible for normal state unemployment insurance benefits. Given the brief history of this program, these and other COVID-related series are not seasonally adjusted.
Continuing claims for regular state unemployment insurance rose to 3.690 million in the week ended April 24 from 3.653 million in the previous week, revised from 3.660 million.
The state insured rate of unemployment held at 2.6% for the third straight week, the lowest level since the pandemic started. It reached 15.9% in May 2020.
Continuing PUA fell markedly in the week ended April 17 to 6.863 million from 6.975 million in the prior week. This remained the lowest since the first few weeks of the pandemic period, except for a temporary dip during the week between Christmas and New Year’s. Also in the April 17 week, the number receiving Pandemic Emergency Unemployment Compensation (PEUC) fell sharply to 4.973 million, the lowest level since the second week of February. This program covers people who have exhausted their state benefits.
The total number of all state, federal, and PUA and PEUC continuing claims fell to 16.157 million in the week ended April 17, down from 16.562 million in the prior week. This is also the lowest since very early in the pandemic period, except for the week after Christmas. This grand total is not seasonally adjusted.
Data: Labor Department. Chart: Axios Visuals
- Worker Shortage Strains Return to U.S. Business Employers in sectors like manufacturing and restaurants aren’t finding enough people to hire, threatening to hold back the U.S.’s economic recovery. Among the reasons potential workers are holding back: fear of getting Covid, lack of child care and enhanced unemployment benefits.
(…) There are more job openings in the U.S. this spring than before the pandemic hit in March 2020, and fewer people in the labor force, according to the Labor Department and private recruiting sites. (…)
Some businesses are forgoing work, such as not bidding on a project, delivering parts more slowly or keeping a section of the restaurant closed. That reduces the pace of the economy’s expansion. Other companies are raising wages to attract employees, which could inflate prices for customers or reduce profit margins for owners. (…)
On May 4 in the Pittsburgh Business Times:
Doubling starting wages from $7.25 an hour to $15 an hour generated 1000s of applicants, instead of a trickle. “It was instant, overnight. We got thousands of applications that poured in.” Before the announcement, ice cream parlor would see a few applicants per position, but many wouldn’t show for the interview.
TECH DEMAND:
It Isn’t a New Era for Productivity Yet Productivity gains have more to do with the early stages of economic recovery than your work-from-home setup
The Labor Department on Thursday reported that U.S. productivity, as measured by how much the typical worker gets done in an hour, rose at a 5.4% annual rate in the first quarter, putting it 4.1% above its year-earlier level. Considering that productivity growth averaged just 1% annually in the decade before the Covid-19 crisis struck, that is something. (…)
When the economy is coming out of a downturn productivity goes up for the simple reason that in the early stages of a recovery demand rises faster than companies can hire workers and add hours. In the fourth quarter of 2009, for example, productivity was up 6.1% from its year-ago level, but that petered out quickly. (…)
All the adaptations that we made during the pandemic still count for something, however. From doctors doing virtual patient visits to restaurants moving to electronic menus to salespeople working remotely, businesses in many sectors have learned new ways to be more efficient. Nor are all the adaptations people figured out widespread, and there may be some incredibly effective ones that hardly anyone has heard of yet. (…)
SENTIMENT WATCH
Fed Says Covid Is Major Financial Risk, Asset Prices Vulnerable to ‘Significant Declines’ A range of asset prices could be vulnerable to large and sudden declines if the coronavirus isn’t contained or the economic recovery stalls, according to a central bank report.
(…) “Should risk appetite decline from elevated levels, a range of asset prices could be vulnerable to large and sudden declines, which can lead to broader stress to the financial system,” the central bank said in its semiannual Financial Stability Report. (…)
Banks remain well capitalized, it said, and leverage is low among broker-dealers. Household debt is manageable, and businesses are better able to service their obligations as interest rates remain low and earnings improve, it said.
High asset valuations were also flagged in the previous financial stability report, released in November. Thursday’s report showed measures of risk-taking have continued to rise in equity and bond markets since then. It also noted pockets of opaque risk and high leverage, particularly among hedge funds and related entities. (…)
Thursday’s report pointed to so-called “meme stocks” and the boom in initial public offerings supported by special-purpose acquisition companies, or SPACs, as evidence that investors’ appetite for risk “is elevated relative to history.” It also noted that yields on lower-rated corporate bonds have “declined significantly” over the past six months even as Treasury yields rose, indicating investors are accepting lower returns to take on risk. (…)
- From Dutch Tulips to Internet Stocks, Bubbles Often Burst Long before SPACs and NFTs, investors clamored for everything from exotic bulbs to Pets.com. What history shows is that an inventive corner of the financial world can turn into a mania that attracts swindlers and wipes out investors.
- ARRK!!! Schwab’s Liz Ann Sonders tweeted this chart Wednesday showing an index of non-profitable tech stocks, up 437% off their March 2020 lows but down 30% since mid-February.
Julien Bridgen superimposed Cathie Wood’s ARKK’s ETF.
Sentiment booster from Goldman Sachs:
EARNINGS WATCH
We now have 419 reports in, an 87% beat rate and a very broad +23.1% surprise factor to +51.7% (revenues +3.9% to +13.9%). A near 14% revenue jump with below 2% inflation can offset most costs/margins issues.
Q1 earnings are now seen up 50.2% (50.9% ex-Energy). Trailing EPS are now $156.82, expected to reach $187.43 at the end of the year and $210.37 in 2022.
From 2019, EPS could be up 15% in 2021 and 29% in 2022. The S&P 500 is up 25% from its pre-pandemic level.
We are starting to get stats on Q2 guidance which needs watching given widespread cost pressures. With only 65% of the number of pre-announcements we normally get in a given quarter, positive guidance is up 12% (+4) against +24% (+5) for negative guidance and a N/P ratio of 0.7 vs 0.6. Not worrisome so far.
Based on Q1 corporate conference calls, executives do not sound too concerned about margins thanks to strong revenue growth allowing cost pass-throughs. Wage issues are not prominently mentioned, overall.
Chinese Manufacturers Sidestep Trade Barriers by Buying Factories Overseas China’s government has provided billions of dollars in subsidies to state-owned companies to acquire Western manufacturing rivals and to build factories beyond its own borders. “They have an appetite for economic conquest.”
For decades, France’s Valdunes SAS charged premium prices for the wheels it made for high-speed trains and other rail systems around the world. That strategy changed after a Chinese state-owned industrial conglomerate bought the company in 2014.
The new owner, Maanshan Iron & Steel Co., or MA Steel, slashed prices in a bid to dominate the market.
“We were told that we shouldn’t miss a single order. That was explicit,” recalled Jérôme Duchange, Valdunes’s former top executive in France. “They have an appetite for economic conquest.” (…)
“Chinese companies are expanding. They are investing everywhere,” said Luisa Santos, deputy director of BusinessEurope, the region’s main business association. “This means that the flaws we see in the Chinese market are now being exported to other markets.”
The European Union this week proposed legislation to rein in companies in Europe that are subsidized by foreign governments, one of a series of measures that aim to counter the global expansion of Chinese firms. (…)
What makes China different is the outsize role state-controlled companies play in its economy, and its willingness to support their expansion abroad. (…)
The U.S. and Europe have long relied on the World Trade Organization and tariffs to penalize China for subsidizing exports with grants, tax breaks and credit from state-owned banks, measures that helped the country grow rapidly. But the WTO rules weren’t written to constrain subsidies that a government gives to its manufacturers overseas.
The result: Chinese-owned factories outside of China usually face lower tariffs than those imposed on factories inside the country—or escape them altogether. (…)
David Swensen, Yale’s Iconic Endowment Chief, Dies at 67
David Swensen, Yale’s legendary endowment chief, died Wednesday night at age 67 of cancer. In his 36 years at the fund’s helm, he pioneered the push into alternatives, with less reliance on traditional stocks and bonds.
Thanks to this strategy, Swensen, a Yale-trained economist, increased the university’s endowment to $31.2 billion as of 2020, from $1 billion when he arrived in 1985 after a stint on Wall Street. (…)
I met David in 1986 (I think) and was struck by his smart mind. Astute, curious and open minded, unafraid of being a contrarian. A remarkable investor. Sixty-seven!!!