The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
By Elliot D. Pollack & Co.
Hiring was a huge letdown in April, with nonfarm payrolls increasing by a much less than expected 266,000 and the unemployment rate rose to 6.1% amid an escalating shortage of available workers compared to job openings. Dow Jones estimates had been for 1 million new jobs and an unemployment rate of 5.8%. Many economists had been expecting an even higher jobs number amid signs that the U.S. economy was roaring back to life. There was more bad news: March’s originally estimated total of 916,000 new jobs was revised down to 770,000 jobs, though February saw an upward revision to 536,000 jobs from 468,000 jobs.
The employment report is filled with mixed results. Average hours worked did increase, and involuntary part-time workers for economic reasons decreased substantially (meaning those working part-time but not by choice, just due to lack of additional work, were able to convert to full time work). However, it is clear that there are many workers not ready, able, or simply hesitant to accept employment. There are a few reasons why employment has not increased as expected:
- Workers concerned about getting COVID on the job.
- Still caring for children at home due to local school restrictions or not being able to locate adequate childcare.
- People are staying home and living on unemployment or other stimulus funds they may have received (which has allowed many to remain out of the workforce for the first two reasons).
Although the restaurant and hotel industries had notable job gains over the last few months, job vacancies are causing stress once again on operators trying to fully open their businesses. As the federal benefits expire, vaccines continued to be administered, and the outlook on the health and safety of individuals and places of work continues to improve, we should see hiring pick up over the next few months.
U.S. Snapshot:
- Initial claims dipped below 500,000 for the first time since the pandemic sign. The week ending May 1st came in at 498,000. This points to the employment recovery continuing in May.
- The employment recovery continues in April despite the underwhelming numbers. An estimated 266,000 jobs were added last month. That was well below the 1 million expected. Additionally, the number of jobs gained in March was downwardly revised by 146,000 and February was upwardly revised by 68,000. Overall, the economy keeps gaining jobs and the lackluster number takes the pressure off the Fed to increase interest rates.
- The economy has recovered 14.1 million jobs and the interest rate has dropped from 14.8% to 6.1% through April.
- The number of job openings surpassed 8.1 million in March despite nearly 10 million Americans currently looking for employment. This is the highest number of openings since the this data series began in December 2000. The economy has continued to open up and the demand for labor has increased, especially in the service industries such as accommodations, food services, arts, entertainment, and recreation. Job opening increased in nearly every industry with the exception of healthcare and social assistance. And these are openings for both skilled and unskilled positions.
- U.S. Productivity rebounded to a 5.4% annualized rate in the first quarter 2021. Productivity has been up and down since the start of pandemic. The unit labor cost declined 0.3% annualized rate.
- ISM’s manufacturing slowed down in April from its record pace. April’s level decreased to 60.7% from 64.7%. The slowdown was surprising but remains well above the 50% level that indicates growth. The service index had a slight decline as well in April. The drop of 1% to 62.7% keeps the service near the record levels.
- Consumer credit increased by $25.8 billion in March. The majority of the increase was in non-revolving credit with $19.4 billion. Revolving credit was up $6.4 for the month. This is the second consecutive monthly increase over $25 billion.
- Manufacturer’s new orders increased $5.8 billion or 1.1%, in April. This follows a 0.5% decline in March.
- Inflation has been a red-hot topic this week as April’s number were released. The consumer price index increased 4.2% and core inflation increased 3.0% from a year ago. The Producer price index saw an even higher price index of 6.2%. Higher inflation had been expected for a while. The consensus points to the increase in inflation to be temporary and no changes are expected from the Fed.
- Inflation fears brought down the consumer sentiment in May, according to the latest survey from the University of Michigan. The sentiment declined from 88.3 to 82.8 in May. The majority of survey respondents point to the higher-than-expected level of inflation seen in April as the reason for the lower expectations.
- U.S. retail sales were flat in April as consumers shifted their spending more to bars and restaurants in April. Despite the lack of growth, April’s retail sales matched a particularly strong March (up 10.7% from February).
Arizona Snapshot:
- Retail sales in March were up significantly from February and especially from a year ago. The jump we saw at a national level happened locally as well. Total taxable sales were up 20.6% for the month and 33.5% from a year ago in Arizona. Maricopa County saw an increase of 20.8% and 32.5%. March’s percent growth over a year ago was the highest it has ever been (nominally).
- Maricopa County’s housing trends continue, according to the Information Market’s latest data. Year-to-date, the number of new home sales increased 8.6% and the number of resales is up 22.3% for the same period a year ago. The April median sales price for new homes is up 8.9% for the month and 24.6 % in from a year ago.
