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The weird jobs report ahead — Friday’s May jobs report is something of a wild card given the crazy low April number. But it should come in somewhere around 600K to 700K. The problem is you could use this number — strong but not what we need post-Covid — to make arguments both for and against President Joe Biden’s big $4 trillion spending plans on infrastructure and family issues.
Opponents of doing more big spending can argue that anything close to 600K suggests the economy is doing fine and doesn’t need more juice, especially with inflation rising. And they can argue that a weaker number also means we don’t need more spending because generous federal help may already be keeping people out of the labor force. Data don’t necessarily support this argument but the lack of labor supply is a real and vexing issue.
By contrast, the White House can argue that a strong number suggests their approach is working and their plans will only further enhance the recovery and ensure a stronger and more equally distributed long-term expansion. And they can argue that a weak number means the federal government still needs to do more to help people as we emerge from the Covid-19 era.
It’s a super messy puzzle at the moment but at least the May data should give us a few more clues to what is actually going on in this recovery like no other. But beware of any definitive arguments.
Via Goldman Sachs: “Our trackers suggest that current household employment has increased modestly since the April survey week and that the unemployment rate has edged down since increasing to 6.1% in the April report.
“We estimate that nonfarm payrolls will rise 750k and that the unemployment rate will fall by three-tenths to 5.8% in Friday morning’s employment report for May. The ratio of unemployed workers searching for jobs to job openings now stands at 2017 levels.”
RSM’s Joe Brusuelas: “We expect total employment to increase by 615,000 jobs when the employment report for May is released on Friday, with the possibility of a strong month of growth because of diminished seasonal effects linked to the echo of the pandemic-induced collapse in employment last year.
“We strongly recommend that viewing the data over a smoothed three-month average will provide a more reasonable assessment of the quickly changing American labor market. … [W]e expect robust growth in the leisure and hospitality sector—where wages are so low that people might rationally choose to stay at home until their unemployment benefits expire over the next 90 days.”
GOOD THURSDAY MORNING — Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.
Treasury Secretary Janet Yellen attends a welcome event for the G-7 finance ministers and pre-recorded video will air at the G-20 Infrastructure Investors Dialogue … Jobless Claims at 8:30 a.m. expected to keep falling to 388K from 406K … ADP private employment at 8:15 a.m. expected to show a gain of 650K …
MORE ON THE JOBS PICTURE — Via Morning Consult economist John Leer: “Low labor force participation rates (54.5%) mask weaknesses in the employment recovery not captured by the unemployment rate. …
“A storm could lie ahead for personal finances. Expiring federal unemployment benefits, the end of mortgage forbearance and increasing gas prices pose an imminent threat, and faster jobs growth is needed to counterbalance a loss of income.”
FIRST LOOK: EXECS REMAIN BULLISH — Via the second-quarter AICPA Economic Outlook Survey: “Business executives are predicting the economy will roar back in the coming year, with revenue and profit growth expectations not seen since 2018 …
“Seventy percent of business executives expressed optimism about the U.S. economy over the next 12 months, up from 47 percent last quarter, as government relief funds, vaccine rollouts and relaxed workplace restrictions have improved business conditions. It’s the first time a majority of executives have held a positive sentiment on the economy since the pandemic began”
SCOOP: SHADY PRIVATE EQUITY DEALINGS IN FLORIDA — Miami Herald’s Ben Wieder: “Wellington, Florida private equity manager Elliot Smerling faces criminal charges for allegedly using falsified financial documents and fake pledges by the endowment fund at New York University and multiple major financial institutions to obtain a $150 million line of credit from Silicon Valley Bank earlier this year on behalf of his firm JES Global Capital.”
STOCKS TURN CHOPPY ON WALL STREET — AP’s Damian J. Troise and Alex Veiga: “Stocks managed to end with modest gains on Wall Street after a day of wavering back and forth. The S&P 500 edged up 0.1 percent Wednesday, with help from technology stocks. Energy companies also rose along with the price of crude oil. The Dow Jones Industrial Average and the Nasdaq also rose about 0.1 percent.
“Movie theater operator AMC Entertainment nearly doubled in another bout of heavy trading as the company embraced its status as a ‘meme’ stock being driven higher by hordes of individual investors. Other stocks like GameStop that have been championed on online message boards also rose. Treasury yields fell.”
AMC EMBRACES MEME STOCK STATUS — AP’s Michelle Chapman and Stan Choe: “After its movie theaters were shut and its stock was nearly left for dead because of the pandemic, AMC Entertainment is embracing the horde of fanatical investors who helped shock its shares back to life as part of this year’s ‘meme stock’ buying spree.
“The company said Wednesday it’s launching a program called AMC Investor Connect to keep in direct contact with those 3.2 million investors. Many bought AMC stock early this year, even when professional investors were running away, and helped lift it from less than $2 on Jan. 5 to as high as $72 in Wednesday afternoon trading.”
STUDY SHOWS STIMULUS CHECKS SUBSTANTIALLY REDUCED HARDSHIP — NYT’s Jason DeParle: “In offering most Americans two more rounds of stimulus checks in the past six months, totaling $2,000 a person, the federal government effectively conducted a huge experiment in safety net policy. …
“A new analysis of Census Bureau surveys argues that the two latest rounds of aid significantly improved Americans’ ability to buy food and pay household bills and reduced anxiety and depression, with the largest benefits going to the poorest households and those with children. The analysis offers the fullest look at hardship reduction under the stimulus aid.”
CLIMATE CHANGE RISKS WILL AFFECT BANK CAPITAL IN THE LONG RUN — Reuters’ Pete Schroeder: “U.S. regulators will ‘eventually’ have to factor climate change risks into bank capital rules, but it is still too soon to say when that would become necessary, a top official told Reuters.
“Acting Comptroller of the Currency Michael Hsu said in an interview that regulators were still exploring the best way to incorporate climate change risks such as extreme weather events or major policy shifts into bank supervision and oversight”
HARKER: MAY SOON BE TIME TO THINK ABOUT TAPERING BOND-BUYING — WSJ’s Michael S. Derby: “Federal Reserve Bank of Philadelphia leader Patrick Harker on Tuesday said he is getting ready to think about paring central bank stimulus as the economy continues to recover from the effects of the coronavirus pandemic.
BLACKROCK CEO SEES POTENTIAL FOR ‘BIG SHOCK’ FROM INFLATION — Bloomberg’s Annie Massa: “BlackRock Inc. Chief Executive Officer Larry Fink said that investors may be underestimating the potential for a spike in inflation. ‘Most people haven’t had a forty-plus year career, and they’ve only seen declining inflation over the last 30-plus years,’ Fink said at a virtual event hosted by Deutsche Bank AG on Wednesday. ‘So this is going to be a pretty big shock.’”
JPMORGAN CHASE HALFWAY THROUGH PUSH TO OPEN 400 NEW BRANCHES — Reuters’ Elizabeth Marshall: “JPMorgan Chase & Co is halfway through a campaign to open 400 new bank branches and is closing in on being the first U.S. bank to have a brick and mortar presence in every state except Alaska and Hawaii, a bank executive said on Wednesday. JPMorgan is already the largest American bank by assets, providing loans, credit cards, savings accounts and other services to nearly half of all U.S. households.”
ECONOMIC RECOVERY IS HERE AND IT’S UNLIKE ANYTHING YOU’VE SEEN — WSJ’s Gwynn Guilford and Sarah Chaney Cambon: “The U.S. economic recovery is unlike any in recent history, powered by consumers with trillions in extra savings, businesses eager to hire and enormous policy support. Businesses and workers are poised to emerge from the downturn with far less permanent damage than occurred after recent recessions, particularly the 2007-09 downturn.
“New businesses are popping up at the fastest pace on record. The rate at which workers quit their jobs — a proxy for confidence in the labor market — matches the highest going back at least to 2000. American household debt-service burdens, as a share of after-tax income, are near their lowest levels since 1980, when records began. The Dow Jones Industrial Average is up nearly 18 percent from its pre-pandemic peak in February 2020. Home prices nationwide are nearly 14 percent higher since that time.”
TRANSITIONS — Via JPMorganChase: “Demetrios Marantis has been named the new Global Head of Corporate Responsibility at JPMorgan Chase. He will take over for Peter Scher who is now overseeing Morgan Health, a new business unit dedicated to improving employer-based healthcare, as well as the firm’s continued business expansion in the Mid-Atlantic region.”
BUSINESS ROUNDTABLE ADDS 2 — Business Roundtable is adding new heft to its bench of outside lobbying firms. The Roundtable on hired a team from Owen Evans Ingols to lobby on infrastructure development. Last month, it brought on Resolution Public Affairs, the firm founded by former Chuck Schumer aide Heather McHugh to lobby on Biden’s infrastructure proposal
ENGAGED — Augustus Christensen, founder at financial media company Share Scoops and a JPMorgan Chase alum, on Saturday proposed to Marissa Apstein, merchant at fashion company Madewell. Marissa writes: “He’s been taking piano lessons for about a year, but I’ve never heard him play. He wrote a song for me and then had all of my best friends waiting to surprise me after he performed and proposed.”
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