- U.S. labor market expected to recover a bit in January after disappointing December
- Senate works through the evening on vote-a-rama for pandemic-aid budget resolution
- Pandemic figures continue to improve
- U.S. trade deficit expected to narrow mildly
U.S. labor market expected to recover a bit in January after disappointing December — The markets have been discouraged about the labor market data seen since November when the pandemic soared and forced many businesses to close down or cut back their operations. In December, ADP jobs fell by -78,000, and payrolls fell by -140,000.
However, the markets are hoping for a modest recovery in payroll jobs in January, with a gain today of +100,000. The markets are hoping the labor market can then gain some upside momentum going into spring, assuming the pandemic statistics continue to improve.
The U.S. labor market has a very long way to go before recovering all the jobs seen before the pandemic. Indeed, Treasury Secretary Yellen on Tuesday said, “it will be years before the country reaches full employment again.”
Payroll jobs have so far recovered only a net 12.3 million jobs from April’s pandemic trough, which represents a 56% recovery of the 22.8 million jobs lost in March-April 2020. The U.S. economy will have to produce another 9.8 million jobs in order to reach the record high 152.463 million jobs seen in February 2020 before the pandemic hit.
Expectations for today’s payroll report strengthened after ADP on Wednesday reported that its employment figure rose by +174,000, which was substantially stronger than market expectations of +50,000. In fact, earlier this week, the market was expecting a payroll gain of only +50,000 versus the current expectation of +100,000.
Meanwhile, today’s Jan unemployment rate is expected to be unchanged at 6.7% for the second straight month. The unemployment rate has fallen sharply from April’s record high of 14.7%. However, the unemployment rate remains very high at 6.7%, nearly double the pre-pandemic 50-year low of 3.5%.
Moreover, the unemployment rate would be significantly higher if it weren’t for the many people who have dropped out of the labor market, either because they gave up on finding a job or perhaps because they needed to stay at home and take care of children during the pandemic.
In fact, the current U.S. “U-6” under-employment rate, which includes discouraged and underemployed workers, currently remains very high at 11.7%. That is well above the pre-pandemic level of 7.0% seen in February 2020.
Senate works through the evening on vote-a-rama for pandemic-aid budget resolution — The Senate continued its vote-a-rama well into Thursday night, voting on amendments for the 2021 budget resolution. The Senate passed at least two amendments, which means the House will now have to approve the Senate version of the budget resolution. The House passed the initial version on Wednesday.
The Senate is trying to get the budget resolution passed by the end of this week so that it doesn’t have to wait until after Mr. Trump’s impeachment trial, which begins this coming Tuesday.
The 2021 budget resolution provides the framework for the $1.9 trillion pandemic aid bill. After Congress passes the resolution, the bill will then be forwarded to Congressional committees for them to write the actual legislation for the pandemic aid bill. When the final legislation is completed, it will then need to be approved by the House and Senate with majority votes and signed by President Biden.
The budget resolution instructs the committees to produce the legislation by February 16, allowing the House to vote on the bill as soon as February 23. Democrats intend to pass the pandemic aid bill before expanded unemployment benefits expire in mid-March.
Pandemic figures continue to improve — The 7-day average of new Covid infections on Thursday fell to a new 2-3/4 month low of 129,907, the lowest since mid-November, according to data compiled by Bloomberg. The single-day number of Covid infections on Tuesday fell to a 5-week low of 114,270 and was at only 116,596 on Thursday.
The markets are hoping that the worst of the Covid pandemic has passed and that new Covid infections will continue to decline into summer. U.S. officials are hoping that most Americans who want a vaccination will have received one by summer. However, the Covid variants continue to be a wildcard since they could spread quickly and might also be less inhibited by the current vaccinations.
U.S. trade deficit expected to narrow mildly — The consensus is for today’s Dec U.S. trade deficit to narrow mildly to -$65.7 billion from November’s -$68.1 billion.
The U.S. trade deficit has fallen sharply during the pandemic because exports have fallen faster than imports. In November, U.S. exports were down -12.5% y/y while imports were up +0.3% y/y.
The Biden administration is in the process of reviewing U.S.-Chinese relations and has not indicated how it might handle the Trump tariffs that remain in place from Mr. Trump’s trade war with China. Even after Mr. Trump’s U.S.-Chinese phase one trade deal in February 2020, the U.S. left in place a 25% penalty tariff on $250 billion of Chinese goods and a 7.5% tariff on $120 billion of Chinese goods. Meanwhile, China still has in place retaliatory tariffs on nearly all $110 billion of U.S. products that it imports. However, China says it still intends to make good on its promise to buy $200 billion of U.S. products in 2020 and 2021.
