For the week, the markets seem to have been aided by strong first-quarter earnings reports and declining unemployment claims. However, a lower-than-expected number of new hires in April may lend credence to the Federal Reserve’s suggestion that the economy is still far from full recovery and accommodative measures are still needed. While tech shares rebounded at the end of last week, it wasn’t enough to keep the Nasdaq from falling after closing 1.5% lower. However, the remaining benchmark indexes advanced, led by the Global Dow, followed by the Dow, the S&P 500, and the Russell 2000. The market sectors were also mixed for the week. Energy (8.9%), materials (5.9%), financials (4.2%), industrials (3.4%), health care (2.3%), and consumer staples (1.6%) advanced, while consumer discretionary (-1.2%), utilities (-1.1%), real estate (-0.9%), and information technology (-0.5%) fell. Communication services closed the week unchanged. The yield on 10-year Treasuries dipped, crude oil and gold prices climbed, while the dollar fell.
Last Week’s Economic News
- April saw the addition of 266,000 new jobs after 770,000 new jobs were added in March. The unemployment rate, at 6.1%, inched up 0.1 percentage point from the previous month, and the number of unemployed persons, at 9.8 million, increased by 102,000 from March. These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the COVID-19 pandemic (3.5% and 5.7 million, respectively, in February 2020). The number of permanent job losers, at 3.5 million, was also little changed over the month but is 2.2 million higher than in February 2020. The labor force participation rate increased by 0.2 percentage point to 61.7%, and the employment-population ratio was essentially unchanged at 57.9%. In April, the number of persons not in the labor force who currently want a job was 6.6 million, about 200,000 less than the March total but up by 1.6 million since February 2020. In April, 18.3% of employed persons teleworked because of the COVID-19 pandemic, down from 21.0% in the prior month. In April, 9.4 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic — down from 11.4 million in the previous month. In April, notable job gains occurred in leisure and hospitality, food services and drinking places, and financial activities. Employment edged down in manufacturing, couriers and messengers, motor vehicles and parts, and in food and beverage stores.
- According to the latest April PMI™ data from IHS Markit, the purchasing managers’ index was 60.5 in April, up from 59.1 in March. This figure is the highest since data collection began in May 2007. Driving the overall increase in manufacturing was a sharp upturn in output and new orders. Fiscal and monetary stimulus directed toward the manufacturing sector are helping drive the surge.
- The services sector is booming, according to the IHS Markit U.S. Services PMI™. The services purchasing managers’ index registered 64.7 in April, up from 60.4 in March. This is the sharpest upturn since the index began in late 2009. Stronger client demand and a rise in new sales helped drive the surge in services. Pressure on capacity remained evident, as backlogs of work accumulated at a faster pace, and employment rose at the second-sharpest rate on record. Meanwhile, input costs advanced at the quickest rate since data collection began in October 2009 amid supplier price hikes. Many businesses passed the increase in input costs on to consumers, who saw output prices increase for the fourth consecutive month.
- According to the latest report, the goods and services trade deficit increased for the third consecutive month after climbing 5.6% in March. Exports increased 6.6%, while imports advanced 6.3%. March exports were $200.0 billion, $12.4 billion more than February exports. March imports were $274.5 billion, $16.4 billion more than February imports. Year to date, the goods and services deficit increased $83.2 billion, or 64.2%, from the same period in 2020. Exports decreased $21.0 billion, or 3.5%. Imports increased $62.2 billion, or 8.5%.
Eye on the Week Ahead
This is a busy week for important economic reports. Data focusing on inflationary trends for April is available through the Consumer Price Index, the Producer Price Index, and the retail sales report. Consumer prices were up 2.6% over the 12 months ended in March, largely driven by surging energy prices. The CPI, less food and energy prices, is up 1.6% during the same 12-month period. The April monthly budget statement from the Federal Reserve is also out this week. The government deficit in March was $660 billion and $1.7 trillion year to date.
Sincerely,
Robert G. Carpenter