Weekly Financial Wrap

Why Did Stock Explode When Jobs Bombed?

April’s jobs report was lower than expected, but Wall Street didn’t care.

The U. S. economy produced only 266,000 new jobs in April. The private sector added 218,000 jobs. Meanwhile, government employment rose by 48,000. As a result, unemployment moved from 6 to 6.1 percent. 

Stocks React

Following the release of the jobs numbers, all the major exchanges posted gains. The Nasdaq moved up 1.1 percent, the S&P 500 gained .7 percent, and the Dow rose .4 percent.

The jobs report had no impact on the markets. So, what caused them to move up? Inflation fears were eased. However, since that time some inflation concerns have increased stock volatility.

Federal Reserve (Fed) Chair Jerome Powell said he would want to see several strong jobs reports back-to-back before reducing Fed treasury purchases. As a result, the 10 year Treasury yield fell three basis points to 1.54 percent immediately after the jobs report.  

Why Jobs Did Not Meet Expectations

Some speculate that federally enhanced unemployment benefits have caused unemployed people to shun work. So far, 11 states, Alabama, Arkansas, Idaho, Iowa, Mississippi, Missouri, Montana, North Dakota, South Carolina, Tennessee, and Wyoming, have announced they will bar residents from accepting federal unemployment checks in June or July. The program is scheduled to terminate on September 6.

However, economists and Biden administration officials discount that argument. They cite a shortage of workers with qualified skills for some jobs. In addition, some employees may still be concerned about safety.

“It’s clear that there are people who are not ready and able to go back into the labor force,” Treasury Secretary Janet Yellen told reporters, citing parents whose children are still learning remotely. “I don’t think the addition to unemployment compensation is really the factor that is making a difference.”

A Closer Look

Data released in the Labor Department report shows some interesting causes for the modist jobs performance.

Automobile and parts manufacturers cut 27,000 jobs last month. This has been linked to the semiconductor chip shortage and supply chain problems.

There were significant gains in the hospitality industry. Hotels added 54,400 jobs. In addition, bars and restaurants hired 187,000 people. However, food and liquor stores dropped 49,400 jobs.  Both may be the result of the easing of pandemic restrictions.

Delivery services is another area where the reduction in COVID-19 fears made an impact. Currier and delivery service reduced employment by 77,400.

Bottom Line

According to the Labor Department, 9.8 million Americans are out of work. That is a high number, but far below the 23.1 million in April last year. 

As President Biden said following the report, “Our efforts are starting to work. But the climb is steep and we still have a long way to go.”

Grocery Prices Rising

The old question was – which came first the chicken or the egg? Now, it might be – which costs more? 

SA will look at why the cost of groceries is going up in Sunday’s focus article. 

Govcoins Coming

The sustainability of cryptocurrencies and their challenge to the currencies of central banks is forcing national governments to enter the world of digital money. As a result, we are in the middle of history that will likely be studied for centuries.

The New Money

The rise of cryptocurrencies is creating a decentralized world of finance. However, since they also challenge conventional currencies, more governments are planning to issue their own cryptocurrencies.

Called Govcoins, these state-produced cryptocurrencies promise to make digital currencies work more efficiently and reliably. However, they may dramatically change how retail banks operate or threaten their existence.

Central Banks

Govcoins would be created and processed through central banks, such as the Federal Reserve Bank, Bank of England, or other national banks. That would give such institutions control over the digital currency. The influence of networks and individuals would be reduced or eliminated.

Instead of having a checking or savings account with your local bank, your Govcoin would be in a central bank. Transactions would be processed through a payment app.

That could lead to individuals and businesses leaving their digital funds in the central bank. As a result, your local bank might not have money to make loans.

Threat to American Influence in the World

Today, the world’s reserve currency is the U. S. dollar. That is strengthened by America’s open capital markets. However, cryptocurrencies have the potential to upend the dollar’s dominance by offering an alternative means of moving payments across borders.

If U. S. policymakers want to preserve that dominance, they may have to establish an American Govcoin.

A Long Way To Go

Over 50 countries are researching and some are implementing digital currencies. China has introduced a limited version of the e-yuan; the European Union is planning an e-euro by 2025 and America is exploring an e-dollar.

The technical challenges of a nation issuing a cryptocurrency are relatively simple. The great questions are how to preserve individual privacy and what role central and retail banks will play in the future. Historic times indeed.

New Office Perks 

Most major employers are offering vaccines and changing workspaces to increase employee safety and promote a return to the office.  However, some companies are going a leap further.

CoStar, an analytical and research service company. is offering workers who return to the office the chance to win a Tesla Model S. However if cars are not that enticing, they are also offering $10,000 in cash and a trip to Barbados.

The incentive program was conceived soon after CoStar offered COVID-19 vaccines to employees.  Even with the vaccine, many employees were reluctant to get back in the office. However, with the chance to win one of the big prices, over 30 percent of the workforce has returned to CoStar offices.

Cash Bonus For Taking Vacation

Another weird new employee benefit arising from the pandemic has employees getting a bonus to take vacation time.

Many employees working from home have not made use of vacation time. That has created a logjam of time off for many employers. As a result, some have resorted to unusual measures to induce employees to take a break.

PricewaterhouseCoopers (PwC), a global assurance and consulting firm, is paying employees $250 for every week of vacation they book for the next year up to $1,000. Meanwhile, other companies, such as Google, are giving employees an additional vacation day for booking time off.

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