Blog Post

Jobs Dilemma

Markets rose on Monday but fell sharply on Tuesday following comments from Janet Yellen that the Fed may need to raise interest rates if President Biden’s $4BN in additional spending is approved, to prevent the economy from overheating.  She later clarified her remarks to support the independence of the Federal Reserve and that she wasn’t predicting or recommending that the Fed make any changes.  Stocks stabilized on Wednesday and Thursday but rallied sharply on Friday due to the weak jobs report dampening inflation and interest rate increase fears.

So what is going on with jobs?  The number of job openings has soared in nearly every sector.  Employers are offering higher starting pay and incentives to get new hires but many positions are unfilled.  The issue is multifaceted but we see the following factors:

  • Those not yet vaccinated are fearful of contracting Covid-19 in the workplace.
  • Many potential workers cannot yet get childcare.
  • Some don’t have the skills required for the new job or unwilling to switch careers.
  • Many unemployed people make more or close to the same on enhanced tax free unemployment than if they were working.

Montana has decided to stop offering the extra $300 per week, which with their basic unemployment comes up to the after tax equivalent of $21.80 an hour for not working.  They are also strengthening the requirements for unemployment to show that recipients are actually seeking employment.  South Carolina has announced they will be stopping enhanced unemployment after June 30th.  This may help, but many more than the current 40% of people need to get vaccinated so we can reach heard immunity.  That will likely take 70% to 90%.  At that point it will make daycare more available and greatly reduce workplace transmission.

Treasury yields fell with the 30-year bond yield closing at 2.274% and the 10-Year note closing at 1.564%.  Crude oil rose to $64.83 a barrel and natural gas rose to  $2.957 per MMBTUs.  The U.S. dollar index fell to 90.20 and gold rose to $1833.00 an ounce. 

In the economic numbers this week:

  • IHS Markit released purchasing manager’s indices for April:  Keep in mind that anything below 50 represents contraction and over 50 represents growth.
    • Eurozone manufacturing PMI rose from 62.5 in March to 62.9 in April.
    • Eurozone composite PMI rose from 53.2 in March to 53.8 in April.
    • U.S. Manufacturing PMI rose from 59.1 in March to 60.5 in April.
    • U.S Services PMI rose from 60.4 in March to a record 64.7 in April.
    • Canada Manufacturing PMI rose from 57.2 in March to 58.5 April.
    • Mexico Manufacturing PMI rose from 45.6 in March to 48.4 in April.
  • The Commerce Department reported the U.S. trade deficit rose 5.6% in March.  Imports rose 6.3% and exports rose 6.6%.   Since imports are a larger amount to trade, the size of the deficit increased.
  • The Labor Department reported: 
    • The U.S. added 266,000 jobs in April after many economists predicted there would be one million or higher new jobs.  March’s increase was revised down to 770,000 and February was revised up to 536,000.  Unemployment increased from 6.0% in March to 6.1% in April.  Leisure and hospitality gained 331,000 jobs but manufacturing fell 18,000 mainly due to microchip shortages in the automotive industry.  Retail and healthcare jobs also declined.
    • A seasonally adjusted 498,000 workers filed initial claims for unemployment in the week ending May 1st down from a revised 594,000 the week before. 
    • The 4-week moving average, designed to smooth out volatility, fell to 560,000.
    • Continuing claims were little changed at 3.7MM in the week ending April 24th.
    • A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 16.5MM to 16.2MM in the week ending April 17th.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
  • The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
    • Field production of crude oil was unchanged at 10.9MM BPD.
    • Natural gas storage rose 60BN cubic feet and is below the average level at this time of year during the past five years.
  • Baker Hughes reported the number of active oil rigs rose 2 to 344.  The number of active natural gas rigs rose 7 to 103.
  • Factset reported with 88% of S&P500 companies reporting Q1 earnings, the blended earnings growth rate is 49.4%.  If this continues, this may be the best quarter of earnings growth since Q3 2010.

Please call us if you have any questions.

Best Regards,

Loren C. Rex, CFP®, MA                                                            Erik A Smith AIF®

President                                                                                  Managing Partner

Generations Financial Planning & Wealth Management        269-441-4143

77 E. Michigan Ave, Suite 140

Battle Creek, MI  49017

Tel 269-441-4090

Carrie Fuce, Assistant 269-441-4091

Toll Free: 800-513-8180

Fax 866-381-2301

Visit our Website:  www.genfinplan.com

Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated. 

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.

Most stock indices ended the week mixed with substantial gains.  The small cap Russell 2000 had a small gain and the Nasdaq Index ended negative for the week.

Markets rose on Monday but fell sharply on Tuesday following comments from Janet Yellen that the Fed may need to raise interest rates if President Biden’s $4BN in additional spending is approved, to prevent the economy from overheating.  She later clarified her remarks to support the independence of the Federal Reserve and that she wasn’t predicting or recommending that the Fed will make any changes.  Stocks stabilized on Wednesday and Thursday but rallied sharply on Friday due to the weak jobs report dampening inflation and interest rate increase fears.

So what is going on with jobs?  The number of job openings has soared in nearly every sector.  Employers are offering higher starting pay and incentives to get new hires but many positions are unfilled.  The issue is multifaceted but we see the following factors:

  • Those not yet vaccinated are fearful of contracting Covid-19 in the workplace.
  • Many potential workers cannot yet get childcare.
  • Some don’t have the skills required for the new job or unwilling to switch careers.
  • Many unemployed people make more or close to the same on enhanced tax free unemployment than if they were working.

Montana has decided to stop offering the extra $300 per week, which with their basic unemployment comes up to the after tax equivalent of $21.80 an hour for not working.  They are also strengthening the requirements for unemployment to show that recipients are actually seeking employment.  South Carolina has announced they will be stopping enhanced unemployment after June 30th.  This may help, but many more than the current 40% of people need to get vaccinated so we can reach heard immunity.  That will likely take 70% to 90%.  At that point it will make daycare more available and greatly reduce workplace transmission.

Treasury yields fell with the 30-year bond yield closing at 2.274% and the 10-Year note closing at 1.564%.  Crude oil rose to $64.83 a barrel and natural gas rose to  $2.957 per MMBTUs.  The U.S. dollar index fell to 90.20 and gold rose to $1833.00 an ounce. 

In the economic numbers this week:

  • IHS Markit released purchasing manager’s indices for April:  Keep in mind that anything below 50 represents contraction and over 50 represents growth.
    • Eurozone manufacturing PMI rose from 62.5 in March to 62.9 in April.
    • Eurozone composite PMI rose from 53.2 in March to 53.8 in April.
    • U.S. Manufacturing PMI rose from 59.1 in March to 60.5 in April.
    • U.S Services PMI rose from 60.4 in March to a record 64.7 in April.
    • Canada Manufacturing PMI rose from 57.2 in March to 58.5 April.
    • Mexico Manufacturing PMI rose from 45.6 in March to 48.4 in April.
  • The Commerce Department reported the U.S. trade deficit rose 5.6% in March.  Imports rose 6.3% and exports rose 6.6%.   Since imports are a larger amount to trade, the size of the deficit increased.
  • The Labor Department reported: 
    • The U.S. added 266,000 jobs in April after many economists predicted there would be one million or higher new jobs.  March’s increase was revised down to 770,000 and February was revised up to 536,000.  Unemployment increased from 6.0% in March to 6.1% in April.  Leisure and hospitality gained 331,000 jobs but manufacturing fell 18,000 mainly due to microchip shortages in the automotive industry.  Retail and healthcare jobs also declined.
    • A seasonally adjusted 498,000 workers filed initial claims for unemployment in the week ending May 1st down from a revised 594,000 the week before. 
    • The 4-week moving average, designed to smooth out volatility, fell to 560,000.
    • Continuing claims were little changed at 3.7MM in the week ending April 24th.
    • A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 16.5MM to 16.2MM in the week ending April 17th.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
  • The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
    • Field production of crude oil was unchanged at 10.9MM BPD.
    • Natural gas storage rose 60BN cubic feet and is below the average level at this time of year during the past five years.
  • Baker Hughes reported the number of active oil rigs rose 2 to 344.  The number of active natural gas rigs rose 7 to 103.
  • Factset reported with 88% of S&P500 companies reporting Q1 earnings, the blended earnings growth rate is 49.4%.  If this continues, this may be the best quarter of earnings growth since Q3 2010.

Please call us if you have any questions.

Best Regards,

Loren C. Rex, CFP®, MA                                                            Erik A Smith AIF®

President                                                                                  Managing Partner

Generations Financial Planning & Wealth Management        269-441-4143

77 E. Michigan Ave, Suite 140

Battle Creek, MI  49017

Tel 269-441-4090

Carrie Fuce, Assistant 269-441-4091

Toll Free: 800-513-8180

Fax 866-381-2301

Visit our Website:  www.genfinplan.com

Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated. 

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.

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