Ally Pyle
April 01, 2022
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April Fools….
Although my lexicon and cleverness on the Bloomberg terminal is unmatched to Andrew, we couldn’t go a whole week without a little bit of commentary. So, in today’s blog, I’ll offer an update on the Employment Summary released from the US Bureau of Labor and Statistics.
As North America moves into a full reopening and the economy continues to recover, the employment data is almost back to its pre-pandemic levels. This morning we learned US nonfarm payrolls advanced by 431,000 for the month of March, bringing the average for the first quarter of 2022 to 562,000 per month after revisions. Recall that January and February’s numbers were revised up by 23,000 (to 504,000) and 72,000 (to 750,000) respectively. How does this measure up to growth seen in 2021, despite emerging variants? The short answer, quite closely; for the first 11 months in 2021, the US economy added an average 555,000 jobs per month. This surpassed the November 2020 projection and came extremely close to the May 2021 forecast following the passage of the American Rescue Plan.
The largest contributor to the March number was the leisure and hospitality sector, with a gain of 112,000. The food services and drink venues saw growth of +61,000 and accommodation came in at +25,000. While the industry continues to recuperate, employment is still down by 1.5 million or 8.7 per cent since February 2020. From a market perspective, we see a completely different story, which makes sense if we think of the market as a forward-looking mechanism.
If we take a look at the Dynamic Leisure & Entertainment Intellidex Index (DZL-US), we are well above pre-pandemic levels, which had topped out at around 6132 in January of 2020. On March 18th, 2020, the index plunged to 2349 but had gained a whopping 213% a year later touching 7416 on an intraday high, today we’re sitting around 6604. With pandemic fears in the rearview (somewhat), inflationary price pressures will certainly be a headwind for this industry, specifically whether these companies will be able to successfully pass down higher cost to consumers. This coming at a time when excess household savings are shrinking.
Okay back to jobs. Coming in a close second, is the professional and business services, which added 102,000 jobs. Employment in this industry saw an increase of 723,000 jobs compared to February of 2020, giving nod to technology advancements allowing a major portion of this sector to work remotely. Rounding out the top five was retail trade, adding 49,000 followed by an increase of 38,000 from the manufacturing sector and construction continued to trend up gaining 19,000 (fully returning to its pre-covid level).
We ended March with an unemployment rate of 3.6 per cent, capturing a decline of 0.2 percentage points, to note, the unemployment rate hit a low of 3.5 per cent in 2019. On the wage front, average hourly earnings rose 0.4 percentage points from February, up 13 cents to $31.73. This represents a 5.6 per cent increase from just a year ago.
It is clear that the labour market is strengthening, however Americans are essentially facing a pay cut with inflation at its highest (since the early 1980’s) and outpacing wage growth. It’s also this same robust pace of recovery that is supporting the Fed in its monetary tightening, with a 50-basis point rate hike expected for the May meeting. By then, for us north of the border, will also see a hike in temperature…and that is no joke…hopefully.
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These are the personal opinions of Alexandra Pyle and may not necessarily reflect those of CIBC World Markets Inc.
Alexandra Pyle is an Associate Investment Advisor working with Andrew Pyle, Investment Advisor.