What’s Happening in the World Economy: America’s Jobs Riddle

Hello. Today we look at the upcoming US Employment Report for May on why factory price inflation is not affecting China’s consumers and the impact of Covid on poverty.

Fool me once

After April’s US labor market report stunned all economic forecasters with disappointingly low payroll increases, this time around, analysts are prepared for any possible surprise.

“I have a number of models that spit out zero and others that spit out a million,” said Aneta Markowska, chief economist of US finance at Jefferies, who, like many Wall Street economists, missed the previous month’s figure. “This is the world we are currently living in. To be honest, anything is possible. “

Employment estimates for May range from a 335,000 increase in wages – still better than April 266,000 – to a million, according to a Bloomberg poll.

The lesson from April was that employers were struggling to find enough workers to fill positions for at least three reasons, reports Olivia Rockeman.

  • Continuing childcare requires parents, especially mothers, to stay at home
  • Extended, improved unemployment benefits that encourage some to postpone return to work
  • Persistent health concerns at a time when vaccination rates were lower than they are today

All of these dynamics should have subsided in May, with federal aid to childcare, the increase in vaccinations and the cut in additional unemployment benefits by some Republican governors.

“The April outage was, in our view, an isolated incident, and the ongoing reopening across the country will bring significantly higher numbers of Americans into employment in May,” said Yelena Shulyatyeva, Andrew Husby and Eliza Winger of Bloomberg Economics.

However, complicating factors remain as consumer behavior evolves.

  • The decline in jobs in transportation and storage in April suggests that demand for online shopping is easing
  • Grocery store employment also fell, suggesting fewer people are cooking at home
  • Honeywell International said last month that nearly 500 employees will be laid off as N95 face mask production ceases

The only clear conclusion, regardless of the numbers, is that with the number down in the millions from last year, there is still a long way to go for recovery.

—Chris Anstey

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The business scene

As China struggles to contain rising commodity prices, there is one key factor that is giving the central bank some breathing space: the link between producer and consumer prices has broken.

Intense competition between smaller businesses, fueled by the rise in e-commerce, and weak domestic demand mean that China’s factories absorb rising production costs instead of passing them on to consumers at home. Despite anecdotal reports of price increases, overall consumer inflation has been and is likely to remain tame.

This allows the central bank to maintain the lower interest rates it introduced in China after the coronavirus last year, while policymakers seek targeted measures to alleviate commodity scarcity and limit speculation.

Today’s must-reads

  • Tax dispute. Global negotiators trying to rewrite tax rules for the digital age argue over a threshold for corporate revenue. To allow these broader international negotiations to progress, the US imposed tariffs – but immediately delayed them – in retaliation for tariffs imposed by six nations on internet companies. Meanwhile, the Biden government has proposed requiring the collection of data on foreign cryptocurrency investors operating in the US in order to strengthen international cooperation against tax evasion.
  • China ban. President Joe Biden plans to change a U.S. investment ban in companies related to China’s military this week. Regardless, U.S. lawmakers are proposing to invest $ 190 billion in research and development to counter China’s advances in science and technology.
  • Fed shift. The US Federal Reserve plans to gradually sell a portfolio of corporate bonds acquired through an emergency credit facility launched last year.
  • Hot case. Real estate prices around the world have risen the most since before the global financial crisis, after a market surge was observed in places from New Zealand to Canada during the pandemic.
  • Somebody else’s problem. The Australian central bank said the hot housing market had “distributive consequences” but monetary policy was not the tool to address the problem.
  • Disaster in Yemen. Covid-19 is at the bottom of the pecking order of the catastrophe for Yemen, the poorest Arab state and a strategic channel for world trade where nearly seven years of war before the pandemic created the world’s worst humanitarian crisis.

Interesting research

refers to America's job conundrum: New Economy Daily

VJ / LY ratios and GDP per capita

The impact of the pandemic on poverty should be given greater consideration by policymakers, according to new research from the London School of Economics, Oxford University and the World Bank.

Their researchers estimated that by December 2020, nearly 20 million years of life had been lost to Covid-19 and that over 120 million additional years had been spent in poverty due to the pandemic. In 70 of the countries surveyed, poverty was a more important cause of falling well-being than mortality.

“This severe global economic shock caused the first turnaround in global extreme poverty since the Asian financial crisis of 1997 – and only the second real increase in global poverty since measurements began in the early 1980s,” the report says.

On #EconTwitter

Is the boom in demand over?

refers to America's job conundrum: New Economy Daily

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The fourth annual Bloomberg New Economy Forum will bring the world’s most influential politicians together in Singapore November 16-19 to mobilize behind efforts to build a sustainable and inclusive world economy. Find out more here.

– With the assistance of Brendan Murray

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