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All talk of a quick recovery of the US jobs market and thus an imminent rate hike was shattered by the harsh reality on Friday. The new job creation and unemployment figures came out as a failure.
S&P 500
Almost 1 million new jobs were expected to be created. In fact, it turned out to be about 270 thousand. Analysts had forecast an unemployment rate of 5.8%, in fact it turned out to be 6.1%. It was very far from what analysts had expected. For the analysts, of course, this is bad. But for the stock markets around the world it is good. A very weak labour market report would loosen the Fed’s rhetoric. We won’t be hearing about a monetary policy tightening anytime soon. There will also be less talk of an inflationary spiral.
In a bid to prop up the economy, the Donald Trump and Joe Biden administrations have been pouring money into the economy. And they continue to do so. Particular attention is directed at unemployment benefits, which in many cases are more (including state-specific supplements) than the person previously received at their job.
The result is complete absurdity. Why would a person go out to work, guaranteeing a lower standard of living and drastically reducing the amount of free time they have?
This absurdity has direct proof. According to the same Friday data, pay has risen much more than analysts expected. That is, with 10 million unemployed in the US, employers are forced to raise wages because they cannot attract the right number of workers.
Added to this is another problem. The shortage of raw materials. It is the one that has caused the prices of oil, copper, lumber and virtually all recyclable products to skyrocket.
And now what the analysts will not start talking about until a month from now. The current situation (high benefits preventing people from going to work + a shortage of raw materials) will lead to a slowdown in the US economy. Corporate reports for the second quarter could be much worse than expected. As a result, inflation could fall to 2% by the end of the year. And there will be talk of a new Fed stimulus programme.
03.03 Australian retail sales for March
10.30 EU Sentix investor confidence indicator for May
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