A suite of stronger-than-expected economic data on jobs, retail sales, and corporate earnings came out April 15, reinforcing the view that a potential boom, much-anticipated by economists, may be getting more traction.
Overall, the data shows fewer workers losing their jobs, Americans eager to spend more, and corporate profits getting fatter, sending all three major Wall Street indexes higher on the opening bell.
On the jobs front, the Labor Department said in a release (pdf) that the number of U.S. workers filing for unemployment fell last week to 576,000. That’s the lowest number of weekly jobless claims since the onset of the pandemic, which sent them surging above 6 million in March 2020. Economists polled by Reuters predicted 700,000 jobless applications last week.
“With a huge, better-than-expected decline in new claims for unemployment assistance, at long last, the economic recovery appears to be picking up speed,” Bankrate.com senior economic analyst Mark Hamrick told The Epoch Times in a statement. “Not only did the headline number of seasonally adjusted initial claims drop beneath the 700,000 level, but it continued on below 600,000 to the lowest since mid-March of 2020.”
Still, the Labor Department figures indicate 16.9 million people continuing to collect unemployment benefits in all programs, showing that the labor market has a ways to go before recovering to pre-pandemic levels. While the unemployment rate in March fell to 6 percent, it remains well above the 3.5 percent in February 2020, before the outbreak sent it soaring to 14.8 percent.
Alfredo Ortiz, president and CEO of the Job Creators Network, told The Epoch Times in an email that “the reason our economy is recovering is because state and local governments are relaxing their lockdowns and businesses are opening up,” but that this isn’t stopping some officials “from calling for more lockdowns—even though our small business community can’t afford that.”
Ortiz also pushed back on President Joe Biden’s “plan to increase taxes by $2.5 trillion,” citing a study indicating that the move “will eliminate more than 1 million jobs.”
The study (pdf) that Ortiz referred to was conducted by Rice University economists John W. Diamond and George R. Zodrow for the National Association of Manufacturers (NAM). It found that under Biden’s proposed tax hikes, the average annual job losses would be 600,000 each year over 10 years, and real wages would fall by 0.6 percent in the long run.
“This study tells us quantitatively what manufacturers from coast to coast will tell you qualitatively: increasing the tax burden on companies in America means fewer American jobs. One million jobs would be lost in the first two years, to be exact,” Jay Timmons, president and CEO of the NAM, said in a statement.
The drop in jobless claims coincides with a strong uptick in retail sales (pdf), painting a picture of Americans increasingly willing to shop, eat out, and otherwise spend again as the economy reopens.
Sales at stores, car dealers, and restaurants jumped 9.8 percent in March. It’s the biggest gain since retail sales surged by 18 percent last May, in a sharp bounce-back from the April 2020 lockdowns. Economists polled by Reuters had forecast that retail sales would increase 5.9 percent in March.
The broad-based rebound was led by sales at clothing stores, which soared 18.3 percent, and in motor vehicles, with receipts at auto dealerships surging 15.1 percent after falling 3.5 percent in February. Consumers also boosted spending at restaurants and bars, leading to a 13.4 percent jump in receipts, while sales at building material stores vaulted 12.1 percent.
Strong retail sales are a big boost for the U.S. economy, which is mostly driven by consumer spending.
Optimism was further lifted by upbeat quarterly earnings reports from companies including Citigroup, Bank of America, and BlackRock, which all beat analysts’ forecasts.
Economic growth is expected to top seven percent this year, which would be the fastest pace since 1984.
But with growth expectations so high, some investors are worried that inflation could swing up and stay high. A key risk is that a bout of sustained inflation could send bond yields higher, hurting corporate profits, and triggering volatility in markets.
So far, U.S. Treasurys stayed subdued after April 15’s stronger-than-expected reports, while longer-term yields actually fell, to the surprise of some analysts.
The 10-year U.S. Treasury yield had surged to a 14-month high of 1.776 percent on March 30 on bets that massive fiscal stimulus would speed up a U.S. recovery and stoke faster inflation. But yields have eased this month, in part owing to the Fed’s insistence that labor market slack will prevent the economy from overheating and in part due to strong uptake in recent Treasury auctions, which also serves to tame yields.
“A fair amount of the recent increases in the 10-year and 30-year Treasury yields are due to the anticipation of a more robust recovery than previously forecast,” Steven Saunders, director and portfolio adviser at Round Table Wealth Management, told The Epoch Times in an email.
“Coming into the year, most other asset classes had already priced in a recovery and above average growth for 2021, rebounding back to and above pre-COVID levels, while Treasury yields were still depressed. Those depressed levels were likely unsustainable given the recovery that was already underway.”
Reuters and The Associated Press contributed to this report.