Washington (AP) — The US economy is causing turmoil and whiplash at about the same rate as increasing jobs.
More than a year has passed since the coronavirus caused a record economic plunge and job losses, but the recovery was unexpectedly fast, so many companies could fill their jobs or over-customers. It was also not possible to secure sufficient supply to respond to the explosion. Request.
“Things exploded, it was like a lamp switch,” said Kirby Maron, president of Elmer Schultz Services, a family-owned company in Philadelphia. “The labor market is just out of control. You can’t literally hire technicians … We’ve grown so rapidly that the supply chain wasn’t ready for it.”
Economic forecasters, who have few historical precedents to guide them through the aftermath of a global pandemic, are pondering questions that they cannot answer with confidence.
Does strong consumer spending reflect economic and resilience, or is it temporarily supported by federal stimulus checks?
Was the April consumer price index a temporary rise, or an ominous sign of accelerated inflation?
Is the moderate two-month employment growth a result of too many good things? Does the employer want as much employment as possible? Or is the labor market as strong as economists think? Implication that there is no?
In many ways, the news was encouraging. From January to March, the economy grew at a tremendous pace of 6.4% per annum. And this quarter, the pace is expected to accelerate to nearly double digits.
But the big picture of the US economy is quite subtle. Here are five vital signs in detail.
Employers added 559,000 jobs last month in addition to 278,000 in April. These are usually considered very healthy numbers. However, with record-high job openings and free-consumer consumers, predictors expected more jobs. Some economists expected that the recovery from the pandemic recession would increase jobs by 800,000, 900,000 and even more than 1 million per month.
What explains the shortage?
Economists mainly point out what they call a short-term mismatch. Companies post job listings faster than applicants can respond. After all, many Americans have health problems associated with COVID-19, childcare problems with delayed reopening of school, career uncertainty after many jobs have disappeared forever in the last 15 months, etc. Also, some people earn more from federal and state unemployment support than they did when they worked, taking time before looking for another job. I will.
Some say that labor shortages cannot be solved by traditional methods. That is, raising wages and providing more generous benefits and working conditions. In fact, the process seems to have begun. Average hourly wages rose significantly in April and May.
Consider Gina Schaefer, who owns 13 Ace Hardware stores in Herndon, Virginia, and Washington, DC, and is rapidly staffing for spring and summer, when sales are usually high.
Since March, Schaefer has hired nearly 120 people, both seasonal workers and long-deferred employees on behalf of those who retired last year when COVID devastated the economy. Her company pays a minimum hourly wage of $ 15.50 to compete with a major chain that currently pays $ 15, offering health insurance, paid leave, sick leave, and 401 (k) plans after employees work for about six months. doing.
“We firmly believe that finding employees in a better workplace is fine,” she said.
After months of living at home, millions of consumers have returned home. Energetic and enthusiastic, their finances were strengthened by a $ 1,400 fiscal stimulus earlier this year. The surge in housing and stock market stock prices has further heightened the urge for consumption among the wealthy.
Consumer confidence is high. And after the $ 1,400 stimulus to most individuals made a big profit in March, Americans increased their spending again in April.
That said, Rubeela Farooqi, US Chief Economist at High Frequency Economics, is seeing signs of warning. Confidence and spending are still healthy, but declining. Retail sales surged in March and then leveled off in April. This suggests that the positive effects of stimulus may have diminished. A similar trend was seen at the end of last year, after the effects of previous federal stimulus measures began to diminish.
In addition, the Conference Board’s monthly consumer confidence survey found that expectations for the next six months actually fell in May.
“I don’t know how this evolves,” says Farooqi.
Financial markets endured an unwelcome shock last month when the Ministry of Labor reported that consumer prices rose 0.8% from March to April and 4.2% from 12 months ago. This is the largest year-on-year increase since 2008.
Some leading critics, including former Treasury Secretary Larry Summers, risk that President Joe Biden’s trillions of dollars in federal stimulus funding will cause inflation and force the Federal Reserve to resort to interest rate hikes. Warns that there is sex.
However, Fed Chair Jerome Powell and many economists say they do not believe the inflation surge will last long. They say this mainly reflects a temporary supply chain bottleneck that has pushed up prices, but it will ease over time. But for now, wood, computer chips and others. Material shortages contribute to inflationary pressure.
Maron of Elmer Schultz Services in Philadelphia said that the supply shortage in his industry is so severe that members of the trade association of the Commercial Food Service Equipment Association share inventories.
“You can go to a friend who is in stock,” he said. “No, I’ve never seen anything like that in my business for the last 30 years.”
The housing market has served as a source of economic and resilience during the pandemic, but it wants to move to ultra-low interest rate mortgages and more spacious bargains to meet the needs of telecommuting. Supported by the needs of many closed families.
However, the housing boom has recently shown signs of fatigue as prices have risen to the point where many cannot afford it, and the supply of homes for sale has been severely restricted. Home construction fell 9.5% in April, at least in part, because builders postponed the project due to higher costs of timber and other supplies that contributed to higher house prices. Pointed out to.
New home sales fell nearly 6% in April, and existing home purchases fell 2.7%. As long as there is a shortage of available homes and selling prices continue to rise, many prospective buyers will continue to look outside.
Despite supply chain blockages and labor shortages, US factories are thriving. The Institute for Supply Management’s Manufacturing Index rose to 61.2. Numbers above 50 show growth, with manufacturers winning for the 12th straight month.
Half of the buyers surveyed by industry groups say they had a hard time finding workers. Given supply issues, it is unclear whether the factory will be able to maintain stable production. ISM has found that delivery from suppliers is progressing at the slowest pace since 1974. Of the 18 industries, 16 reported delivery delays.
AP business writers Christopher Rugerber (Washington) and Joyce M. Rosenberg (New York) contributed to this report.