The Morning Commentary: Enduring Strength of the US Consumer
A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Enduring Strength of the US Consumer
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Andrew Kositkun Senior FX Advisor
Virus cases are on the rise, with the seven-day average of new daily cases at 55,900 during the week ending March 28. This is a 9.1% increase from the prior week, with case increases most notable in the Northeast and Midwest.
However, increased infections are not limited to these areas, as 34 states and Washington, D.C., all reported a weekly increase in daily cases. More concerning, the decline in hospitalizations has stopped, with new admissions up slightly from a week ago. Given this, the rate of new vaccinations in the U.S. provides cautious optimism that the U.S. will be able to avoid a major surge in cases and hospitalizations that derails its economic reopening.
Despite the rise in case counts, the U.S. consumer remains resilient. According to OpenTable data, dining out has increased to a new high since the start of the pandemic, albeit still down 27% from 2019 levels, for the week ending March 29. Meanwhile, air travel is nearing 1.4 million passengers a day. This is up nearly 5.7 times from a year ago. While all these measures are still well below pre-pandemic levels, the pace of improvement sets the U.S. up for a strong second quarter.
Moreover, labor market indicators are also generally pointing to an improving labor market. Case in point:
The American Staffing Association Staffing Index is up a strong 12.8% from a year ago. While base effects helped with the year-over-year gain, demand remains little changed from the elevated levels seen two years ago, meaning demand for temporary workers remains strong.
Homebase data shows that small-business employment is up 1.9% from a month ago, with broad-based gains across census regions.
High-propensity business applications continue to grow faster than the pace seen two years ago, with year-to-date applications up 31% through the first 12 weeks of the year.
Two weeks ago, initial jobless claims dropped below 700,000 for the first time since the pandemic started in March of last year. It should be noted that this week’s number moved slightly over 700,000, so work remains to be done, but the latest data is encouraging.
And that brings us to this morning’s blowout jobs report. For the month of March, U.S. employers added 916,000 jobs against expectations for 660,000 new jobs. February’s jobs number was also revised up to 468,000 from 379,000, with the unemployment rate falling to 6% and the labor force participation rate increasing by 0.1% to 61.5%. Overall, job gains were broad based as massive stimulus and vaccine progress aid the economic reopening.
Bottom line: The recovery is far from complete, but data points continue to suggest an improving — although still depressed — labor market. As the economy continues to reopen and stimulus works its way into the economy, the expectation is for job growth to accelerate materially over the coming months.
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