The United States labor market was on fire in June. It was about as hot as the heat dome in central Canada. Could this be the start of a beautiful friendship between Bidenomics and the post-pandemic economy? It should be an interesting few months for the jobs market, and the president will probably do a premature victory lap before falling asleep in front of the fire in the White House.
A Heat Dome in the Labor Market
According to the Bureau of Labor Statistics (BLS), the U.S. economy gained 850,000 new jobs in June, the best reading since August of last year. This also beat the median estimate of about 700,000 as leisure and hospitality (343,000), government (188,000), professional and business services (72,000), retail trade (67,100), and education and health care (59,000) led the way.
The unemployment rate edged up to 5.9%, falling short of the market forecast of 5.7%. The modest jump was attributed to more people returning to the workforce as 26 states prematurely eliminated the sweetened federal jobless benefits. Moreover, average hourly earnings rose 0.3% in June to $30.30, average weekly hours slipped to 34.7, and the labor force participation rate was unchanged at 61.6%.
Overall, this was a strong labor report and could be the key driver for the Federal Reserve to unwind its whatever-it-takes $120-billion-a-month quantitative easing (QE) program. But not all economists are satisfied, pointing out the millions of Americans who remain out of work.
Making Globalism Great Again? Achieved
The Organisation for Economic Cooperation and Development (OECD) announced that 130 nations agreed to a framework that would install a global minimum tax of 15% on corporations. The current draft has been separated into two pillars. The first is an allocation of profits and taxing rights on corporations to pay the levy where they operate and generate profits. The second consists of a floor on competition over the corporate income tax.
OECD Secretary-General Mathias Cormann stated that the countries giving a nod of approval to the plan represent about 90% of the world’s gross domestic product. The penalty is projected to create about $150 billion in additional global tax revenues. It is expected to be finalized in October and go into effect in 2023. But could the framework go ahead as intended? It depends on the nine holdouts, including Ireland, which enjoyed a corporate tax of 12.5%, attracting all sorts of immense multinational enterprises. Still, the biggest proponents of the proposal must be relieved that China and India have joined the rest of the planet in concurring to a global minimum tax.
President Joe Biden said in a statement that the race to the bottom is over, and the private sector will start paying its fair share.
“With a global minimum tax in place, multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down. They will no longer be able to avoid paying their fair share by hiding profits generated in the United States, or any other country, in lower-tax jurisdictions.”
Is Your July 4 Barbecue Cheaper in 2021?
The White House issued a July 1 tweet, noting that Americans’ Fourth of July barbecue will be cheaper than it was a year ago. It was full of puns, but was it short on facts? By using data from the Farm Bureau, the administration claimed that, for example, pork chops are down 2% from July 2020, while ground beef is 8% lower year-over-year. However, hog prices are up 103% over the last 12 months, and ground beef prices have surged 6% since before the coronavirus pandemic. Inventories are climbing again, and China’s crackdown on the commodities market is contributing to a decline in food prices, but this has not resulted in relief at the supermarket – yet.
That said, even if the administration were being honest in the tweet, does it really matter? Sure, a family might be saving 16 cents on a bag of potato chips compared to last year, but this is offset by the dramatic climb in gasoline prices and the cost of lumber for the bench upon which families sit to eat their meal. As The Babylon Bee quipped:
“Americans everywhere are pumped for the full 16 cents they will be saving on barbecues this year, as long as they don’t have to drive anywhere to pick up their groceries, since the gas costs would offset any savings on onions, mustard, and relish. But, according to the White House, as long as the nation is willing to walk to the grocery store, keep their air conditioning off, and not buy any chips or soda, they’ll have a full 16 cents to burn.”
Once again, Washington is out of touch with the rest of the country. But what administration is not these days? Inflation is alive and well in the United States this Independence Day. Come on, man!
Party Like it’s 1997!
Rate hike? What rate hike? Oh, that! The financial market has already shrugged off the planned increases to interest rates in 2023. For the first time since 1997, the S&P 500 recorded seven consecutive record highs, settling the July 2 trading session at 4,352.54, thanks to a jobs report that was hot but not too hot and about $1 trillion in newly printed money this year. So now that the first half of 2021 is over, what will happen in the second half? More of the same: A Federal Reserve-induced boom in equities.
Read more from Andrew Moran.
Photo by dinnercraft