America’s economy doesn’t let war or pandemic get in the way of good times

Significant gaps remain in the post-pandemic economy. Downtown office buildings continue to be underused, which may be one of the most enduring changes as workers and employers have realized that many jobs can be done from home; businesses are still scrambling to find materials and hire workers at a time when vacancies are at an all-time high.

But after the winter, when war, a new wave of coronavirus and already high inflation have painted a potentially bleak picture of even faster price increases and slower growth, the latest government data and high frequency show an increase that looks set to continue.

The monthly nonfarm payrolls report, due on Friday, is expected to show an increase of nearly 500,000 jobs in March and a further decline in the unemployment rate to 3.7%, according to economists polled by Reuters. High-frequency data from payroll service providers such as UKG and Homebase showed hiring momentum continued through the end of the month and likely into April.

Gasoline consumption may have fallen in March as national prices rose above $4 a gallon, but Energy Information Administration data shows gasoline consumption remains stable at about 95% of forecast, about the same level as with start of the pandemic. 2022.

Air travel is approaching 90% of pre-pandemic levels. Data from restaurant booking site OpenTable shows that for 15 of the last 18 days through March 30, restaurant visitor numbers were 95% of pre-pandemic levels.

Inflation that is three times the Federal Reserve’s 2% target could mean consumers are getting less for their money. February’s spending data showed that consumption had actually fallen, adjusted for inflation, and that energy was taking up a large share of household budgets.

The decline, however, comes after a surge in spending in January, and Fed analysts and policymakers agreed this week that neither global events nor the ongoing pandemic have done much damage to the US economy so far.

“So far, high gasoline prices have not led to a demand collapse,” analysts at RBC Capital Markets wrote this week. Given rising wages and the still large savings of many households from pandemic payments, “the average American has never been more financially able to guzzle $4 gas than he is today.” The outbreak of war in Eastern Europe threatens to further fuel inflation, which is currently at its highest level in four decades. The prospect of a more aggressive Fed response to rising prices fueled talk of a “hard landing” – a recession triggered by higher interest rates, tighter credit and subsequent cuts in business and household spending.

Part of the bond market closely watched this week showed continued concern over the results, with 10-year Treasury yields briefly falling below 2-year Treasury yields, signaling a waning confidence in future economic growth.

Still, what economists and Fed officials see as more telling signals from the bond market remained sound.

“It is premature to start the countdown to recession,” wrote Aneta Markowska and Thomas Simons, analysts at Jefferies. “This is not like a late cycle economy (…). This is a medium cycle economy, and the economic cycle has room to continue.”

BACK TO NORMAL

Far from weakening the economy, the Fed’s target rate remains well below a level that discourages spending or investment. The US central bank raised the federal funds rate by a quarter of a percentage point on March 16, raising it from the near-zero level set in March 2020 to offset the economic impact of the pandemic.

Interest rates are expected to rise steadily from now on, with Fed officials predicting at least a quarter of a percentage point increase in each of the six remaining policy meetings this year – with the potential for even more by the end. year, cancel any remaining support for economic growth from the Fed.

Fed policymakers said this week that they will be closely monitoring the impact of these planned rate hikes on inflation and economic growth, and that they will be prepared to either raise borrowing costs faster if prices do not respond, or pause if appropriate.

But they stressed that the economy seems resilient for now, as businesses may struggle to find workers and materials, but are also meeting record demand while earning high profits and increasing wages.

For some measurements, the return to normal is l. Oxford Economics recently “shelved” its weekly economic recovery tracker because the data it indexed, measuring employment, financial conditions, mobility and other issues, “essentially returned to pre-pandemic levels,” writes Oxford analyst Oren Klachkin.

There are also signs that the larger changes expected by economists as part of a “normalized” economy are beginning to emerge.

Spending on services jumped in February while spending on goods fell, which Fed officials expect could help fight inflation. Consumers bought a record number of goods during the pandemic, when options for spending on services were limited by social distancing rules and measures that forced many businesses to close. High demand for cars, bicycles, household appliances and other goods has collided with a global supply chain unable to keep up with the times, driving up prices.

Foot traffic data from mobile phone tracking company Unacast showed visits to home improvement and electronics stores, as well as car dealerships, will drop sharply in 2022 compared to last year, while the hospitality sector is rapidly recovering.

As for one measure of the recovery in the service sector, data from the Las Vegas Convention and Visitors Authority showed a still large gap of 18% in February in total visits to the popular events and convention city. However, demand was strong enough to increase the average daily room rate by 15%, and overall available room revenue is less than 10% lower than in 2019.

There are even some tentative signs that inflation may be heading in the right direction.

February data show that year-on-year prices continue to rise, but a key indicator of monthly inflation fell by one-tenth of a percentage point.

The month does not set a trend, but at a press conference after the end of the political meeting on March 15-16, Fed Chairman Jerome Powell said such a monthly drop from month to month is “really what we expect.” for.”

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