Trend watch and what’s new this week
On the COVID-19 front, key virus trends in the U.S. continue to decline (slide 6). Additionally, second COVID-19 boosters have been approved in the U.S. for those over 50 years old. This should help mitigate severe outcomes (hospitalizations and deaths) and allow the economic recovery to progress further.
Yet, there are concerns about the Omicron BA.2 variant, which is now the dominant strain in the U.S. (slide 8). We will continue to closely monitor the COVID-19 trends both within the U.S. and globally.
Incoming activity-based data has strengthened (slides 5 and 7). We have upgraded the relative trend for restaurant bookings, meaning it is favorable for overall economic growth. It has been hovering roughly even with the same week in 2019 for the past 8 weeks. Even weekly air passenger counts, which slipped 2.8% week over week, were solid. It was just the second decline in the past 9 weeks and the level (14.6 million) was higher than every week in 2021 except for Thanksgiving week.
This week, we highlight weekly jobless claims (slide 9), which are one of the best real-time economic indicators. Both initial claims and continuing claims are back below pre-pandemic levels, which is a very good sign.
We also revisit the number of new vehicles shipped via rail (slide 10), which hit a 13-month high. As new vehicle supply continues to climb, it should help with inflation pressures.
On slide 11, we show the trend of corporate travel and weddings. Both activities lagged the overall recovery; however, both are returning and should continue to rebound in 2022.
U.S. payrolls in March added 431,000, missing the consensus of 490,000 but was still very good. The unemployment rate fell to 3.6% from 3.8%, while wages and the labor force participation rate both rose. On slide 12, we show the number of full-time U.S. workers, which is now roughly 1% off the pre-pandemic level. Compared to the prior two recessions, the speed of the job market recovery has been remarkable.
On the virus front, trends continue to improve despite very relaxed social distancing and increased activity. It is also despite the emergence of the aforementioned Omicron BA.2 variant, at least for now. That said, new infections will likely increase from current levels, but health care experts don’t expect another massive surge in the U.S. because roughly 75% of Americans over age 12 are fully vaccinated and a large portion of the unvaccinated have already been infected by one or more of the prior strains.
The labor market strength—March job growth and the decline in the unemployment rate and initial jobless claims—points to a strong economy, albeit overheating. It also clearly illustrates that the U.S. economy should power through the risks associated with the Russia-Ukraine conflict, including higher energy prices.
This also underscores our view that hotter inflation readings will linger for longer, but reinforces our “no recession” call. Indeed, inflation-adjusted growth will be lower than we expected in ’22, but we don’t see the makings of a recession present at this moment. Furthermore, the Federal Reserve (Fed) will remain laser focused on inflation, which equates to faster-than-expected rate hikes in ’22.
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