The U.S. Economy Created 379,000 Jobs in February… The unemployment rate dropped one tick, from 6.3% to 6.2% .
What it means— The big gains were in the private sector, which added 465,000 jobs while public employment shed almost 90,000 jobs. The biggest additions were in hospitality and leisure (think bartenders and hotel workers), which added 286,000 jobs. With Texas and other states lifting pandemic restrictions as COVID cases drop, we can expect more employment reports like this in the months to come. We still have over four million fewer jobs in the economy than we did in February 2020, but we should recoup most of them before the end of the summer.
The Fed Provides Little Assurance That It Will Tackle Inflation… Fed Chair Jay Powell spoke on Thursday and noted that employment remains well below acceptable levels and worrisome inflation is a long way off.
What it means— There’s a rule somewhere in the Federal Reserve handbook that requires bankers to mask their remarks. They won’t say, “We’re raising rates at our next meeting,” and they won’t say, “We’re valuing employment over inflation this year.” Investors have to estimate what future Fed policy will be by parsing public statements and reading tea leaves.
What investors heard on Thursday provided cold comfort against potentially hot inflation. Powell played down the threat of rising rates as a sign of good inflation, which investors took to mean that that economy can run hot for an unspecified time before the Fed will act. Yields marched higher, with the 10-year Treasury bond yield breaking above 1.5%, and stocks sold off. If economic growth jumps as states relax economic restrictions, expect the nervousness to continue, with long rates creeping higher while stocks bounce and fall.
Factory Orders Rose 2.6% in January… The gains outpaced the expected 2.1% increase.
What it means— We used a good bit of the $900 billion stimulus spending from December to buy more stuff in January. The question is, what happens next? With the savings rate back near 20% and another relief package sitting in Congress, it’s a good bet that consumers will have a lot of cash to spend as the economy reopens over the next several months. Some people have pointed out that higher-income households have most of the increased savings and that they won’t be inclined to spend it. Betting that a return to freedom won’t be celebrated with spending has poor odds.
When we’re free to travel and mingle without capacity restrictions and masks, people at all income levels will be anxious to get out and about. Make your summer reservations now while you still can. As for factory orders, they might drop a bit when the February and then March figures are released. Carmakers are reducing their output due to the computer chip shortage. It will be temporary.
Interest Rate Volatility Drives Up Refinancing … The 30-year fixed-mortgage rate dipped from 3.73% to 3.57%, and the number of households refinancing their loans went up 26% from the previous week and 224% compared with the same week last year.
What it means— Contrary to popular belief, people aren’t stupid. While 30-year mortgage rates are off the historic lows of below 3%, they still remain exceptionally low by historical standards. With another $1.9 trillion in relief spending in the works and states beginning to relax pandemic restrictions, investors are worrying about inflation and driving long interest rates higher, which is pushing up mortgage rates. Consumers are trying to get in while rates are still low. If rates push higher, they will weigh on both the refinance and purchase markets, possibly taking a little air out of the real estate market.
JPMorgan Trying To Sublet Nearly 800,000 Square Feet of Office Space in Manhattan… The investment bank stated that it remains committed to the city.
What it means— This sure sounds like the old kiss-off line, “It’s not you, it’s me.” Right. Or maybe, “It’s nothing personal.” The move by JPMorgan is just the latest indication that once the economy fully reopens, things aren’t going back to how they were pre-COVID in the commercial real estate sector.
The work-from-home genie is out of the bottle. We’ve figured out that we can be productive without commuting and won’t have to deal with in-the-office politics. Companies have figured out that they can let go of swaths of expensive office space by sending employees a headset and webcam. One real estate professional in Tampa, Florida, estimates that we have enough existing office space to meet demand for the next decade. When we reprice these assets this year, a lot of investors will see substantial losses, and many cities will be staring at much lower property tax revenue.
Student Group Demands That Officials Remove George Washington Statue… at University of Washington… In Washington State… More than 8,000 people signed a petition calling for the university to remove the statue of Founding Father George Washington as well as to cut ties with the Seattle Police Department and to disarm campus security. Given that the statue resides on a campus also named for Washington in a state named for Washington, it would be a lot easier for the offended students, faculty, and other people to move somewhere else. If they’re looking for a place where nothing offensive has ever happened, maybe they could be the first to inhabit Mars.
Data supplied by HS Dent Research
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