Another month, another stellar jobs report in the era of President Joe Biden. Not only did he resolve the coronavirus pandemic and develop the vaccines, but Biden is also resuscitating the world’s largest economy. Is there anything he cannot do? Well, perhaps climbing some stairs, but that is a story for another day.
Bidenomics Delivers a Strong March Jobs Report?
The U.S. economy added the largest number of new positions since August, buoyed by more states reopening their economies, companies rehiring, vaccine rollout, and warmer weather. But the recovering labor market is still eight million jobs short of where it stood before the COVID-19 public health crisis. According to the Bureau of Labor Statistics (BLS), the United States created 916,000 new jobs in March, beating the median estimate of 647,000. The January and February jobs numbers were also revised up by a combined 156,000: 67,000 to 233,000 in January and 89,000 to 468,000 in February.
The unemployment rate fell to 6%, down from 6.2% in February. This is the best jobless rate reading in more than a year. But Labor Department officials noted in the news release that the figure does not consider the roughly four million Americans who lost their jobs last year and left the workforce. Here were the leading sectors in the monthly snapshot of the labor market last month:
Leisure and hospitality: 280,000
Government: 136,000
Construction: 110,000
Professional and business services: 66,000
Manufacturing: 53,000
Transportation and warehousing: 48,000
Moreover, the labor force participation rate rose to 61.5%, average hourly earnings slipped 0.1%, and average weekly hours surged to 34.9. Is the U.S. setting up for a monster summer jobs reading?
You Gotta Roll with It
Toilet paper shortages are so 2020. In 2021, it is all about the price consumers will pay for their toiletries and a diverse array of other goods at the supermarket. Kimberly-Clark, the maker of Huggies and Scott, announced that it plans to increase its consumer products selling costs in North America, from toilet paper to diapers to cereal. Its leading brands – Huggies diapers and Scott toilet paper – will see price hikes of high-single digits that would take effect toward the end of June. The company is dealing with rising raw-material costs, adding that the pricing adjustments are necessary to offset the surge in commodity cost inflation.
As you finally head back to work, you will be able to afford toilet paper. It is the American Dream after a year of coronavirus-induced house arrest. Indeed, there is no inflation if you do not eat, live under a roof, seek medical care, or go to the bathroom.
Fading Dollar Hegemony is Non-Cents?
Is it the end of days for the U.S. dollar? Despite the greenback defying market expectations in the first quarter of 2021 by rallying more than 3% against its major rivals in foreign exchange markets, the buck's status as the chief global reserve currency has diminished to a 25-year low. Be it geopolitical developments or market forces – the dollar is under attack from all fronts.
The International Monetary Fund (IMF) recently published its Composition of Official Foreign Exchange Reserves (COFER) data for the fourth quarter. What did it find? Shares of U.S. dollars were 59.02% during the October-to-December period. This is down from 60.72% at the same time in the previous year. Most other currencies witnessed growth in the final quarter of 2020:
Euro: 21.24%
Japanese yen: 6.03%
Pound sterling: 4.69%
Chinese yuan: 2.25%
Canadian dollar: 2.07%
Australian dollar: 1.82%
The Swiss franc was unchanged quarter-over-quarter at 0.17%.
It has been clear for a few years that the world is becoming too nervous about relying on the greenback being an everlasting reserve currency. Global financial markets are beginning to eye alternatives, while other nations are demanding some respect. China has been pushing greater ubiquity for the yuan by increasing yuan-denominated cross-border transactions and emphasizing the country’s adoption of a digital yuan.
Of course, foreign markets are not the primary culprit for the buck’s demise, but rather it is the Federal Reserve arranging a meeting between the dollar and currency heaven.
Spiking the Punch Bowl
The Federal Reserve realizes just how much Wall Street depends on the punch bowl to survive. As a result, the U.S. central bank accepts that it is too difficult to remove it from the New York Stock Exchange. Officials recently went on a public relations blitzkrieg, informing investors and the public that the Eccles Building will keep running the printing press, maintaining near-zero interest rates, and buying up assets. The only way the punch bowl will be taken off the table is when the recovery has deepened.
Fed Chair Jerome Powell told NPR that any adjustment to monetary policy would occur "very, very gradually over time and with great transparency, when the economy has all but fully recovered." Fed Vice Chair Richard Clarida conceded that the institution will keep the training wheels on until the economic recovery is "well and truly complete." Fed Governor Lael Brainard promised "resolute patience," while San Francisco Fed President Mary Daly pledged "a healthy dose" of patience.
This is a complete contradiction to William McChesney Martin's mantra, the ninth Fed president who served under five presidents from 1951 to 1970. His philosophy was that the central bank's role is "to take away the punch bowl just as the party gets going." Considering that stocks have reached all-time highs, Martin would likely declare now is the time to tighten the balance sheet.
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Read more from Andrew Moran.
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