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June 4, 2021
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Everyone’s Holding Their Breath for Today’s Jobs Report

It’s a high-stakes morning in the world of economic policy, with all eyes on a fundamental question ahead of the Bureau of Labor Statistics’ May employment release this morning: Was the April jobs report a blip, or did it underscore something deeply wrong with the country’s economic recovery? 

 

On one hand, many economists believe the economy added a robust number of jobs in May. The latest weekly jobless claims reached a pandemic-era low, the ADP jobs report came in above expectations and the Federal Reserve’s Beige Book this week showed that U.S. economic activity is picking up. 

 

“It’s not atypical for a jobs report to miss expectations coming out of a recession, and it causes all this handwringing,” said Mark Zandi, chief economist at Moody’s Analytics. “But there’s too many tailwinds to the economy to keep it down for long.” 

 

Zandi said last month’s report was due to a “confluence” of factors, including some industries that thrived in the pandemic by rightsizing payrolls as the economy opened up (such as delivery companies). 

 

Yet John Leer, Morning Consult’s economist, points to our recent jobs data showing that pay and income losses, along with jobless numbers, have remained fairly steady during May from the previous month. Labor force participation rates in Morning Consult’s data also signals weakness in the economic recovery, he said. (Read more from Leer in his analysis here.)

 

Morning Consult data suggests that “business conditions” — or the inability to find work — are becoming less of a reason for why people are struggling to find full-time employment, while “health/medical limitations” and child care obligations are increasingly important. (More details in Morning Consult’s latest economic outlook here.) 

 

Want to catch up with us after the jobs report is released? Leer is available for a live Ask Me Anything session on Morning Consult’s Twitter feed this morning, starting at 8:45 a.m. Watch for it here

 

Top Stories

  • In their meeting on Wednesday, President Joe Biden outlined for Sen. Shelley Moore Capito (R.-W.Va.), a lead negotiator for Republicans infrastructure, other options for paying for a smaller infrastructure package that don’t include hiking the corporate tax rate to 28 percent from 21 percent, people briefed on the matter said. White House press secretary Jen Psaki said yesterday that the White House would “keep a range of paths open,” and that Biden will keep arguing for the corporate tax increase in other negotiations. (The Wall Street Journal
  • The Federal Housing Finance Agency said it’s extending for a third time a moratorium on evictions on multifamily properties backed by Fannie Mae and Freddie Mac, which the agency oversees. The extension, which was supposed to expire at the end of this month, is now in effect until the end of September. (Reuters
  • Biden signed an executive order raising the number of Chinese companies banned from receiving American investment to 59, amending former President Donald Trump’s list in a way that Biden’s team said can hold up in court and is sustainable. The list still includes China’s largest telecoms, such as China Mobile Communications Group Co., China Unicom Ltd. and China Telecommunications Corp., and top chipmaker Semiconductor Manufacturing International Corp. (Bloomberg)
  • Biden and former Treasury secretary Lawrence Summers spoke on the phone late last month as Summers outlined his concerns on inflation and Biden’s economic policies, three people with knowledge of the matter said. White House aides say that concerns about inflation and price spikes are due to the economy’s rebound from the pandemic and are not due to Biden’s policies. (The Washington Post)
 

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Events Calendar (All Times Local)

 

What Else You Need to Know

General
 

Biden can’t quit infrastructure talks and progressives are losing their minds

Laura Barrón-López et al., Politico

Progressive activists have mostly kept their cool as President Joe Biden’s infrastructure negotiations with Republican senators stretch on longer than planned. But with talks ongoing and new concessions being offered, leaders of liberal organizations say they’re losing patience, fearful that the White House is wasting time in pursuit of Republican votes that are unlikely to materialize.

 

Millennials Are Running Out of Time to Build Wealth

Olivia Rockeman and Catarina Saraiva, Bloomberg

In almost every way measurable, millennials in the U.S. at 40 are doing worse financially than the generations that came before them. Fewer millennials own homes than their parents did at their age. They have more debt — especially student debt.

 

Yellow Faces House Probe Over $700 Million Covid-Aid Loan

Billy House and David Westin, Bloomberg

A House panel is scrutinizing a $700 million national security loan given to trucking company Yellow Corp. from pandemic relief funds during the Trump administration. The investigation is the latest in a series of inquiries by the Select Subcommittee on the Coronavirus Crisis Congress into the trillions of dollars in aid that were approved by Congress under former President Donald Trump.

 

Former Treasury Official Sentenced to Six Months for Leaks

Rebecca Davis O’Brien, The Wall Street Journal

A federal judge sentenced a former senior U.S. Treasury Department official to six months in federal prison for leaking a trove of sensitive financial information about Paul Manafort and others, capping a case that emerged from a Trump administration crackdown on government leaks to journalists. Natalie Mayflower Sours Edwards, who served as a senior adviser in the Treasury’s Financial Crimes Enforcement Network, or FinCEN, pleaded guilty last year to one count of conspiracy to make unauthorized disclosure of “suspicious activity reports,” known as SARs, which banks are required to file to FinCEN.

 
Fiscal Policy
 

Yellen Faces Deal-Making Test in Wrangle Over Global Tax

Saleha Mohsin et al., Bloomberg

Treasury Secretary Janet Yellen is facing pressure to move toward a global tax deal by the end of the week as she meets her Group of Seven counterparts for the first time as the world’s most powerful finance minister at a summit in London. Yellen’s team is downplaying expectations for progress this month, seeing the meetings over the coming days as an opportunity to build momentum toward an international tax agreement at the Group of 20 meetings in July, a U.S. Treasury official said.

 

Dems start to get tax-hike anxiety

Bernie Becker and Aaron Lorenzo, Politico

Democrats hung with former President Barack Obama when he campaigned for higher taxes on the rich. And they didn’t blink when Republicans passed another round of tax cuts in 2017, without a single Democratic vote, after years of getting clubbed by the GOP for being the tax-and-spend party.

 
Economy and Monetary Policy
 

Wage Growth Is Holding Up in Aftermath of the Economic Crash

Ben Casselman and Jeanna Smialek, The New York Times

When millions of workers were getting layoff notices last spring, Sharon McCown got something different: a raise. Target, where Ms. McCown was earning $13 an hour stocking shelves and helping customers, gave frontline workers an extra $2 an hour in hazard pay in the early months of the pandemic. 

 

Jobless Claims Drop to Another Pandemic Low

Gwynn Guilford, The Wall Street Journal

Worker filings for initial jobless claims have dropped by 35% since late April, adding to signs of a healing labor market as the U.S. economy ramps up. Weekly unemployment claims, a proxy for layoffs, fell to 385,000 last week from a revised 405,000 the prior week, the Labor Department said Thursday.

 

Job Openings at U.S. Small Businesses Increase to Fresh Record

Olivia Rockeman, Bloomberg

U.S. small-business owners reported a record share of unfilled positions in May, and more firms are boosting wages to attract workers, the National Federation of Independent Business said Thursday. Some 48% of firms had unfilled positions last month, a fourth consecutive record, the NFIB said in a report published Thursday. 

 

Government Bond Yields Expected to Stay Low as Inflation Fears Ease

Paul J Davies, The Wall Street Journal

U.S. and European government bond yields ticked higher Thursday after strong business survey readings in Europe, but investors said the recent rise was overdone and that fears inflation would soon cause central banks to lift interest rates had subsided. Encouraging figures in the European services industry purchasing managers’ surveys buoyed hopes around the reopening of the economy, though the continent’s inflation outlook remains much weaker than in the U.S.

 

Is New York’s Year of Lavish Tipping Coming to an End?

Kevin Quealy and Amanda Rosa, The New York Times

As New Yorkers return to eating inside restaurants and riding subways, another aspect of city life is returning to normal: tips. The pandemic turned New Yorkers into big tippers, particularly in the first months of the shutdown.

 
Banking
 

Fed’s Quarles says reworked bank regulatory system performed ‘quite well’ through pandemic

Pete Schroeder, Reuters

Federal Reserve Vice Chair Randal Quarles says the banking system and recently reworked rules policing them performed “quite well” through the coronavirus pandemic, but urged regulators to continue to pursue fixes to bring an end to runs on money market funds. According to prepared remarks, Quarles also argued that the Fed’s countercyclical capital buffer, which can be increased to force banks to hold more cash to guard against instability, should only be utilized during times of “significant irrational exuberance.”

 

Wall Street’s Intern Return Marks Start of Back-to-Office Summer

Jenny Surane, Bloomberg

Gone are the cozy deskside chats and boozy networking nights at packed bars. In are daily health checks and recommendations for masking up. 

 
Financial Products and Investments
 

Ackman’s Pershing Square in talks to buy 10% of Vivendi’s Universal

Mathieu Rosemain and Svea Herbst-bayliss, Reuters

Billionaire William Ackman’s Pershing Square Tontine Holdings (PSTH.N) is in talks to buy 10% of Universal Music Group in a deal that would value the label at $40 billion and make it the largest ever investment by a blank check vehicle. Pershing would invest $4 billion to buy the Universal stake, making it the largest target for a special purpose acquisition company (SPAC), trumping Southeast Asian ride-hailing and food delivery firm Grab Holdings’s SPAC deal.

 

AMC Rides Roller-Coaster in Wild Week for New King of Memes

Paul Jarvis, Bloomberg

AMC Entertainment Holdings Inc.’s wild week isn’t done yet. After four days in which the new king of meme stocks doubled, AMC dropped in Friday’s premarket session, falling 5.7% from the last close. 

 
Housing and GSEs
 

Building a Home in the U.S. Has Never Been More Expensive

Marcy Nicholson et al., Bloomberg

From lumber to paint to concrete, the cost of almost every single item that goes into building a house in the U.S. is soaring. In some cases, the price increases have topped 100% since the pandemic began.

 

The Huge Tax Break for Home Sellers: What to Know About the $500,000 Exemption

Laura Saunders, The Wall Street Journal

The market is sizzling for home sellers, and President Biden wants to raise taxes on long-term capital gains for people with incomes above $1 million. These two facts make it a good time to focus on the cherished tax break known as the home-sellers’ exemption, both to see how it applies now and how Mr. Biden’s proposals would affect it.

 

Mortgage rates wander higher but remain below 3 percent

Kathy Orton, The Washington Post

After the holiday weekend, mortgage rates drifted up but still stayed under 3 percent. According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average rose to 2.99 percent with an average 0.6 point. 

 
Financial Technology
 

All-or-Nothing Investment Websites Used Wirecard for Card Payments

Paul J. Davies, The Wall Street Journal

More than half a dozen websites that securities regulators alleged stole money from novice investors in the U.S., Canada and elsewhere have one thing in common: They all used Wirecard AG, the German technology company that collapsed after an alleged multibillion dollar fraud of its own.

 

U.S. Looks Into Cryptocurrency’s Role in Ransomware Hacks

David Uberti and James Rundle, The Wall Street Journal

The Biden administration is examining cryptocurrency’s role in recent hacks that have disrupted important U.S. industries including healthcare, fuel and food, exploring new ways to track victims’ payouts to foreign ransomware gangs. White House officials this week said they are pushing to better trace ransomware payments, which hackers demand to unlock companies’ data.

 

Bitcoin falls after Elon Musk tweets breakup meme

Ryan Browne, CNBC

Bitcoin’s price fell Friday morning after Elon Musk posted a tweet suggesting he’s fallen out of love with the world’s top cryptocurrency. The billionaire Tesla CEO tweeted a meme about a couple breaking up over the male partner quoting Linkin Park lyrics, adding the hashtag #Bitcoin and a broken heart emoji.

 
Opinions, Editorials and Perspectives
 

Here’s How to Understand the Next Jobs Report

Dean Baker, The New York Times

When the Labor Department released a disappointing employment report for April, it caught many economists by surprise. Most of us had predicted the economy had created around 900,000 jobs and forecast a drop in the unemployment rate of 0.2-0.3 percentage points.

 

Powell’s Dollar, China’s Problem

The Editorial Board, The Wall Street Journal

Remember the dollar? Jerome Powell and his colleagues at the Federal Reserve generally prefer to forget about it, but other countries don’t have that luxury.

 






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