This Week’s Economic Update, March 8, 2021

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Be warned that a new pandemic is brewing.  Early prognostications indicate a wide spread outbreak is coming on March 14.  The onset of full-blown March Madness Symptoms are expected on Thursday March 18.  Experts at CBS, TBS and TruTV are saying to be especially aware of symptoms over late parts of the week and through the weekends until April 5.  Vaccines are offered in 8 rounds which require the patients to stay stationary in a living room while receiving TV NCAA Immunotherapy over an extended period of hours on March 18, 19, 21, 22, 27, 28, April 3 and April 5.  Those who receive the treatment are expected to be immune from March Madness for about 11 months.  No masks are required to prevent the spread of this disease.  However, body and face paint in the colors of your favorite college basketball team have been found to alleviate some symptoms.

The job numbers released on Friday showed a massive miss in prior reports for January.  The non-farm employment number was moved up by 117,000 from a positive 49,000.  No real reason was given for the revision except that additional reports were received.  This does prove out my earlier indicators that the job market is stronger than expected with many employers struggling to find qualified workers to hire.

The February Job report was also much better than expected with strong additions of jobs in the service sector as bars, hotels and restaurants began reopening during the month.  Retail added 41,000, primarily from hiring by big box stores, as well as health and personal care stores.  There was a loss of 20,000 in clothing and accessory stores as we continue to shift from in person shopping to on-line. 

Manufacturing hiring grew by 21,000 but could have been higher as many job openings continue to go unfilled.  Construction jobs fell by 61,000 reflecting drops in specialty trade contractor and heavy construction blamed mostly on the weather in February.  Employment in Mining shed 8,000 jobs primarily in support activities for mining.  6,000 were lost in the support arena while only 2,000 were lost in oil and gas extraction.  Since the peak in January 2019, mining has lost 153,000 jobs of which 100,000 occurred in 2020 due to the bankruptcies in the oil extraction field.

Banking is on the front cusp of significant layoffs.  The major money center banks have announced that with the ending of most stimulus packages aimed at supporting the banking industry, they no longer will hold off on restructuring.  Beyond Wells Fargo and other larger banks, many regional banks are announcing staff cuts and office closings.  While working from home continues to be an option for many in the operations and even the sales side of things, the banks are finding out more clearly who are necessary and who is not, who is productive and who is not, what the true level of teller transactions is and with new technology how little face to face contact is now needed in the banking industry.  This will be a work in process throughout 2021.

The ISM report released this week showed a nice increase, going from 58.7 in January to 60.8 in February.  New orders hit 64.8, production rose to 63.2.  Backlog orders hit 64 which was a 4.3 jump.  This is primarily due to inventory levels being low as well as supply chain issues on a growing number of parts and raw materials that are now beginning to impact production.  The March number will be impacted by shortages.  In manufacturing, firms continue to struggle with absenteeism, short term shut downs to sanitize and difficulty hiring workers.  This may be the new normal.

Between the supply chain issues and high demand, particularly for steel, shutdowns and slow downs in March are inevitable.  Inflation is taking off in many areas.  All the commodities that are followed by the report, with the exception of dairy, are up in price in the last 30 days. 

The economy is taking off with the only limitations being inputs like labor and raw materials.  This will only drive prices higher during the next two quarters.

Have a great week.

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