U.S. payroll jobs expected to surge
U.S. ISM manufacturing index expected to post new 37-year high
Biden announces $2.25 trillion infrastructure program funded by corporate tax hikes
Pandemic resurgence continues with highest percentage increase since JanuaryU.S. payroll jobs expected to surge — The consensus is for Friday’s payroll report to show a strong increase of +650,000, adding to Feb’s increase of +379,000. The March unemployment report will be released on Friday when the U.S. government is open, but the markets are closed for the holiday.
Payroll jobs have risen by a monthly average of only +317,000 in the past six months. The economy needs to start producing monthly job increases of +500,000 or more if the labor market is expected to get back to normal by next year. Even at that rate, it would take 19 months to win back the 9.5 million jobs that are needed to match the pre-pandemic record high posted in February 2020.
Wednesday’s March ADP employment was strong at +517,000, which supported expectations for a solid payroll report today. That was mildly below expectations of +550,000, but the Feb ADP report was revised higher by 59,000 jobs to +176,000 from +117,000.
The surge in March jobs is expected to stem from the sharp drop in the pandemic statistics and reduced business restrictions. People are starting to eat out at restaurants more and airline travel is up to a 1-year high, prompting some new hiring. Also, fiscal stimulus is boosting the economy.
Friday’s March unemployment rate is expected to fall -0.2 points to 6.0%. That would be a new 1-year low but would still be well above the pre-pandemic record low of 3.5%. The unemployment rate is likely to only edge lower in the coming months as more people come back into the labor market to look for a job as economic conditions improve.
U.S. ISM manufacturing index expected to post new 37-year high — The consensus is for today’s Mar ISM manufacturing index to show a +0.7 point increase to 61.5, adding to Feb’s +2.1 point increase to 60.8. The ISM index in February was already at a 17-year high. The expected increase to 61.5 today would be a new 37-year high, illustrating near-euphoria in the manufacturing sector.
Biden announces $2.25 trillion infrastructure program funded by corporate tax hikes — President Biden on Wednesday largely met market expectations by announcing a $2.25 trillion infrastructure program to be implemented over eight years. The program is named “The American Jobs Plan.”
The Biden administration said the program would be paid for with corporate tax hikes, thus avoiding a major new increase in the national debt. The administration said that the corporate tax increases will be “fully paying for the investments in this plan over the next 15 years.” The corporate tax hikes would involve a hike in the minimum corporate tax to 28% from 21%, a hike in the minimum tax on global corporate income, and the phase-out of fossil-fuel subsidies.
The $2.25 trillion program consists of $620 billion for transportation, $650 billion for clean water and broadband, $580 billion for strengthening U.S. manufacturing, and $400 billion to provide improved care for the elderly and the disabled.
The Biden administration is expected to detail the second part of its massive $4 trillion spending proposal in mid-April. The administration said that proposal would focus on “helping families with the challenges like health care costs, child care, and education.” Spending on that package is expected to be at least partially offset by higher personal taxes on high-income taxpayers.
Speaker Pelosi said she hopes to move the American Jobs Plan through the House by early July, possibly allowing the Senate to pass the bill before its August recess. However, a delay into September or October is certainly possible, particularly if the two packages are paired together as one massive bill.
The markets showed only a modest reaction to the plan, which had been thoroughly previewed in the media. The 10-year T-note yield on Wednesday consolidated below Tuesday’s 14-month high of 1.77% and closed the day up +4 bp at 1.74%. The S&P 500 index on Wednesday closed +0.36%, and the Nasdaq 100 closed +1.51%. However, there was a pop in clean energy and electric-vehicle stocks due to the increased money and tax credits announced for those sectors.
Pandemic resurgence continues with highest percentage increase since January — The pandemic statistics continue to rise, indicating that a new Covid wave has begun. Dr. Fauci and others at the CDC have been warning about the likelihood of a new wave due to the Covid variants and the fact that many areas are dropping their restrictions and that travel is increasing. At this point, officials can only hope that the relatively high vaccination rate can curb the wave before it gets much worse.
The 7-day average of new daily U.S. Covid infections on Tuesday rose to a new 1-month high of 67,521. The 7-day average has risen sharply by +27% from a week earlier, which is the highest growth rate since just before Covid infections peaked in mid-January.
The good news is that vaccinations are going relatively quickly. According to the CDC’s Covid Data Tracker, 29.4% of the U.S. population has had at least one vaccine dose, and 16.4% of the U.S. population has been fully vaccinated. Also, the single-dose Johnson & Johnson vaccine has now been administered to 3.3 million Americans. Bloomberg reports that an average of 2.83 million doses per day were administered over the past week, which means about 0.7% of the total U.S. population is being vaccinated each day.