The Labor Market Puzzle
Week of May 10, 2021
Stocks closed mixed last week as signs of continued economic recovery and upbeat earnings helped some sectors while the struggles persisted for high-growth companies.
The Dow Jones Industrial Average gained 2.67%, while the Standard & Poor’s 500 rose 1.23%. But the Nasdaq Composite index, home for many high-growth companies, lost 1.51%. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 1.20%.1,2,3
Energy, financials, materials, and industrials led the market higher on more upbeat news regarding the economic recovery.
But technology and other high-valuation companies didn’t participate in the rally, weighed down by Treasury Secretary Janet Yellen’s comments that interest rates may need to rise. Despite a decline in long bond yields, high growth stocks were under selling pressure for most of the week.4
On Friday, a miss on April employment numbers seemed to dial back fears that the Fed might have to adjust interest rates. Stocks rallied on the news, especially some of the hard hit high-valuation companies.5
Labor Market Puzzle
The labor market appears to be gaining momentum ahead of a fuller summer reopening. The Automated Data Processing National Employment Report showed that private payrolls rose by 742,000 jobs (the largest gain since September 2020), while new jobless claims fell to under 500,000, sending its four-week average to the lowest point since the pandemic began.6,7
With expectations set very high, the April employment report (266,000 new jobs) came in well short of the consensus estimate of one million new jobs. Businesses have complained about difficulties in hiring workers, with individuals delaying their return to the workforce due to health concerns and ongoing school closings.5
This Week: Key Economic Data
Tuesday: Job Openings and Labor Turnover Survey (JOLTS).
Wednesday: Consumer Price Index (CPI).
Thursday: Jobless Claims.
Friday: Industrial Production. Consumer Sentiment.
Source: Econoday, May 7, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Monday: Duke Energy (DUK), Simon Property (SPG), Air Products and Chemicals, Inc. (APD), Marriott International (MAR).
Tuesday: Electronic Arts (EA), Palantir Technologies, Inc. (PLTR).
Wednesday: Coupang, Inc. (CPNG).
Thursday: The Walt Disney Company (DIS).