Trend watch and what’s new this week
Based on hospitalizations (slide 9), COVID-19 remains largely under control in the U.S. Yet, new cases are rising again, albeit modestly (slide 6). A handful of the largest states have increasing cases (slide 8).
Some of the travel-related activity-based data (slides 5 and 7) has dipped WoW, including weekly air passengers and restaurant bookings. However, hotel occupancy remains strong, jumping to 66.6%, which is the highest level since October ’21 and above the pre-pandemic 5-year average. Temporary staffing also rebounded, snapping a 3-week decline. Rail freight also strengthened in April and the latest week.
Strong job growth continued in April, but overheating fading
U.S. payrolls in April added 428,000, which was much stronger than expected. It marked the twelfth straight month with job growth greater than 400,000, which is unprecedented. The total number of U.S. jobs is now less than 1% from the pre-pandemic level (slide 10). We also show the breakdown by industry of where the jobs were created (slide 11).
Some of the internal component figures ebbed, signaling that the overheating conditions within the labor market that have panicked investors are beginning to wane. Average hourly earnings, including for production & non-supervisory workers (slide 11) and hours worked slipped, while the unemployment rate held steady at 3.6%.
Meanwhile, the April jobs report clearly illustrates that the U.S. economy can power through the risks associated with the Russia-Ukraine conflict, including higher energy prices, and inflation pressures. However, U.S. is among the largest energy producers. Oil & natural gas drillers have already hired more workers in 2022 than during any of the past 11 years (slide 12). This should continue to ramp up throughout this year.
Federal Reserve delivers half-point hike, announces balance sheet reduction, and expects soft-ish landing
As widely expected, the Fed raised interest rates this week by a half point, the second increase in this cycle (slide 13). Additionally, the Fed took the next step in normalization, announcing that it will start reducing its balance sheet on June 1.
More importantly, Chair Powell stressed the Fed’s nimbleness, opening the door to adjusting future moves based on incoming economic data. That was decidedly less hawkish than the Fed’s last meeting. It also restores the maximum flexibility doctrine, making it easier to maneuver a “soft-ish” landing of the economy.
With so many crosswinds, we acknowledge that the U.S. economic picture appears cloudy. Furthermore, many people are onboard the “U.S. is heading for a recession” train.
Indeed, there continue to be mixed signals, including the negative first quarter GDP figure and the brief yield curve inversion a month ago, along with extreme trepidation that the Fed will push the economy into recession.
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