Week in Review: May 7, 2021

Economic data for the week generally failed to meet consensus expectations.  Given the recent strength across multiple indicators, it was not necessarily surprising to see consensus expectations become unsustainably high. For the most notable releases, employment and ISM data, April readings did in fact pull back from their prior month levels. However, despite the declines, ISM data remained at levels associated with very strong economic growth

Nonfarm payrolls added just 266K jobs in April, well below the consensus forecast of 978K, and down from the revised 770K jobs added in March; job gains for March were originally reported at 916K. Headline unemployment rose 0.1% to 6.1%. The miss sparked debate about the cause(s) of the weakness. Some argued that current unemployment benefits are creating a disincentive for people to work. Recent research by Bank of America estimated that it would take a job paying at least $32K/year for an individual to be better off than collecting benefits. Others argued that the miss was the result of a lack of child care, inconsistent school schedules and ongoing concerns about the coronavirus. As with so many debates, the truth is likely somewhere in the middle.

Manufacturing and services data released by industry group ISM declined in April but remained at levels associated with strong economic growth. The pullback in both sectors was widely attributed to supply chain constraints and labor shortages, issues that are expected to improve in the coming months.

The trade deficit rose 5.5% in March to a record $74.4B, as US consumer spending benefited from recent stimulus and the broader economic recovery.