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Business

U.S. labor market powers ahead with strong job gains, lower unemployment rate

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  • Nonfarm payrolls increase 943,000 in July; June revised up
  • Unemployment rate falls to 5.4% from 5.9% in June
  • Average hourly earnings gain 0.4%; workweek steady

WASHINGTON, Aug 6 (Reuters) – U.S. employers hired the most workers in nearly a year in July and continued to raise wages, giving the economy a powerful boost as it started the second half of what many economists believe will be the best year for growth in almost four decades.

The Labor Department’s closely watched employment report on Friday also showed the unemployment rate dropped to a 16-month low of 5.4% and more people waded back into the labor force. The report followed on the heels of news last week that the economy fully recovered in the second quarter the sharp loss in output suffered during the very brief pandemic recession.

“We are charting new economic expansion territory in the third quarter,” said Brian Bethune, professor of practice at Boston College in Boston. “The overall momentum of the recovery continues to build.”

Nonfarm payrolls increased by 943,000 jobs last month, the largest gain since August 2020, the survey of establishments showed. Data for May and June were revised to show 119,000 more jobs created than previously reported. Economists polled by Reuters had forecast payrolls would increase by 870,000 jobs.

The economy has created 4.3 million jobs this year, leaving employment 5.7 million jobs below its peak in February 2020.

President Joe Biden cheered the strong employment report. “More than 4 million jobs created since we took office,” Biden wrote on Twitter. “It’s historic – and proof our economic plan is working.”

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Hiring is being fueled by pent-up demand for workers in the labor-intensive services sector. Nearly $6 trillion in pandemic relief money from the government and COVID-19 vaccinations are driving domestic demand.

But a resurgence in infections, driven by the Delta variant of the coronavirus, could discourage some unemployed people from returning to the labor force.

July’s employment report could bring the Federal Reserve a step closer to announcing plans to start scaling back its monthly bond-buying program. The U.S. central bank last year slashed its benchmark overnight interest rate to near zero and is pumping money into the economy through the bond purchases.

“This is the last employment report Chair (Jerome) Powell sees before Jackson Hole, and we have to imagine that he lays the groundwork for a potential September tapering announcement,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “We think the odds continue to rise that tapering begins before the end of 2021.”

Stocks on Wall Street rose, with the Dow Jones Industrial Average (.DJI) and the S&P 500 (.SPX) index hitting record highs. The dollar (.DXY) jumped against a basket of currencies. U.S. Treasury prices fell. read more

BROAD EMPLOYMENT GAINS

Employment in the leisure and hospitality sector increased by 380,000 jobs, accounting for 40% of the job gains, with payrolls at restaurants and bars advancing by 253,000.

A “Now Hiring” sign advertising jobs at a hand car wash is seen along a street in Miami, Florida, U.S. May 8, 2020. REUTERS/Marco Bello/File Photo

Government payrolls increased by a whopping 240,000 jobs as employment in local government education rose by 221,000. Education jobs were flattered by a seasonal quirk.

Hiring was also strong in the professional and business services, transportation and warehousing, and healthcare industries. Manufacturing payrolls increased by 27,000 jobs, while construction employment rebounded by 11,000 jobs. Retail trade and utilities were the only sectors to shed jobs.

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Details of the smaller household survey from which the unemployment rate is derived were also upbeat. Household employment shot up by 1.043 million jobs, leading the unemployment rate to decline half a percentage point to its lowest level since March 2020.

The jobless rate, however, continued to be understated by people misclassifying themselves as being “employed but absent from work.” Without this misclassification, the unemployment rate would have been 5.7% in July.

About 261,000 people entered the labor force, lifting the participation rate to 61.7% from 61.6% in June. The employment-to-population ratio, viewed as a measure of an economy’s ability to create employment, rose to 58.4% from 58% in June.

Even more encouraging, the number of long-term unemployed dropped to 3.4 million from 4 million in the prior month. They accounted for 39.3% of the 8.7 million officially unemployed people, down from 42.1% in June. The duration of unemployment fell to 15.2 weeks from 19.8 weeks in June.

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There was also an improvement in the number of people who have permanently lost their jobs. With economic growth this year expected to be around 7%, which would be the fastest since 1984, further recovery is expected.

Faced with a record 9.2 million job openings, employers continued to raise wages to attract workers. Average hourly earnings increased 0.4% last month, with sharp gains in the hospitality industry. That followed a similar rise in June and lifted the year-on-year increase in wages to 4.0% from 3.7%.

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Lack of affordable child care and fears of contracting the coronavirus have been blamed for keeping workers, mostly women, at home. There also have been pandemic-related retirements as well as career changes. Republicans and business groups have blamed enhanced unemployment benefits, including a $300 weekly payment from the federal government, for the labor crunch.

Half of the nation’s states led by Republican governors have ended these federal benefits before their Sept. 6 expiration. Economists are cautiously optimistic that the worker shortage will ease in the fall when schools reopen for in-person learning and sustain the strong pace of hiring.

“August should be another big month, and September as well, as there are still millions who need to find work quickly,” said Chris Low, chief economist at FHN Financial in New York.

Reporting by Lucia Mutikani;
Editing by Dan Burns and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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Health

U.S. nurses’ COVID-19 grief pours out online: ‘I just don’t want to watch anyone else die’

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Aug 6 (Reuters) – Nichole Atherton couldn’t take it anymore.

The intensive care nurse watched helplessly last year as COVID-19 sufferers died in her Mississippi hospital – slowly, painfully and alone. Then in July she was again confronted with a wave of deathly ill patients, even though almost all likely could have saved themselves by getting the coronavirus vaccine.

“People want to argue about masks and vaccines and freedom. I just don’t want to watch anyone else die,” the 39-year-old mother of two wrote on Facebook a few days ago. “I see their faces in my nightmares. And it feels like it is never ending.”

As the United States grapples with rising infections, hospitalizations and deaths amid a surge of the virus’ Delta variant, exhausted and desperate health care workers are turning to social media to describe the grim reality they face.

For some, the writing is cathartic, a way of processing their grief and anxiety. Others see it as a responsibility, using their devastating encounters with death to try to convince skeptical Americans to take the pandemic seriously.

“I just wanted people to know that it’s real, and it’s scary, and it’s hard for us,” Atherton said in a phone interview. “The first wave was heartbreaking, because there was nothing people could do except stay away from the people they love. This time, there are options.”

New daily coronavirus cases in the United States have hit a six-month high, with the seven-day average reaching nearly 95,000. That rate is five times higher than it was less than a month ago, Reuters data shows. read more

Health officials have said the surge has been driven almost entirely by the unvaccinated. Vaccines are not widely available in many other countries, yet in the United States just 49% of the population of 330 million is fully vaccinated.

Doctors, nurses and hospital leaders interviewed by Reuters in six states described a workforce that is depleted and demoralized by wards overflowing with mostly unvaccinated patients.

The health providers who have waded into public forums in an effort to counter disinformation said they have sometimes been attacked online by anti-vaccine skeptics.

“There’s so much misinformation out there,” said Tiya Curtis-Morris, an emergency and intensive care nurse in southeastern Louisiana. “Maybe if I tell people, and they understand what we deal with everyday … but they don’t want to hear it.”

Louisiana’s governor reinstituted a mask mandate this week as the state set new daily hospitalization records and Curtis-Morris has been urging Facebook friends to wear them.

She is more careful discussing vaccines, saying she understands why some people are hesitant. The 46-year-old single mother of four daughters is vaccinated but held off until recently in having her younger children inoculated, in consultation with their pediatrician. Her mother has thus far refused, citing fears of side effects.

‘IT DIDN’T HAVE TO BE LIKE THIS’

Nichole Atherton, an intensive care nurse who has seen a fresh wave of coronavirus disease (COVID-19) patients at the hospital where she works, gives a thumbs-up in this undated handout photo in Ocean Springs, Mississippi, U.S., Nichole Atherton/Handout via REUTERS

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Earlier this week, ICU nurse Kathryn Ivey, 28, spent her break time at a Tennessee hospital crafting an emotionally raw Twitter thread.

“It is so much worse, this time,” she wrote. “We all have so much less to give. We are still bearing the fresh and heavy grief of the last year and trying to find somewhere to put all this anger. But the patients don’t stop coming. And the anger doesn’t stop coming.

“It didn’t have to be like this,” she concluded.

The thread went viral.

Ivey said in an interview that she put her feelings down in writing for the sake of her mental health. A rash of patients – younger and younger, she said – have flooded her hospital, virtually all unvaccinated.

She expressed little hope that her words would make a difference. People who are most adamantly against vaccines will only be convinced if they see their loved ones sick, she said.

“That just breaks my heart: that people need to go through this hurt to understand,” said Ivey, who began her career during the pandemic. “I know beyond a shadow of a doubt that if these people knew what COVID was, they would not risk it. But ignorance is a powerful thing.”

Despair drove Atherton, the Mississippi nurse, to speak out.

On Facebook this week, she described in harrowing detail an unvaccinated woman struggling to breathe and scared of leaving her children behind without a mother.

At one point, the woman was desperate for a sip of water, and Atherton – despite her misgivings – agreed to remove her oxygen for a few seconds to offer her a drink. Soon after, the woman was intubated, having seen her family for the last time via video call.

“I wonder if I hadn’t let her have that sip of water if she would still be alive,” Atherton wrote. “My rational side knows she was too sick. She wouldn’t have made it anyway. My emotional side will never stop wondering.”

Three people have messaged her to say they will get vaccinated, Atherton said.

But the accumulated strain of seeing so much death has become too much for Atherton, who told her hospital last week she is resigning.

She plans to work as a nurse elsewhere, she said. She just can no longer bear witness to COVID-19’s daily toll on members of her own community.

Reporting by Joseph Ax in Princeton, New Jersey; Additional reporting by Sharon Bernstein in Sacramento, California, and Brad Brooks in New Orleans; Editing by Colleen Jenkins and Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

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Business

Stimulus hopes set to lift S&P 500 to near record highs

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A Wall Street sign is pictured outside the New York Stock Exchange in New York, October 28, 2013. REUTERS/Carlo Allegri/File Photo

  • Futures up: Dow 0.33%, S&P 0.44%, Nasdaq 0.48%

Aug 2 (Reuters) – The S&P 500 was set to open near record highs on Monday as a $1 trillion U.S. infrastructure bill raised hopes of more fiscal stimulus, while investors turned to a deluge of macroeconomic data this week to gauge the pace of a domestic rebound.

The Senate on Sunday unveiled the bipartisan plan to invest in roads, bridges, ports, high-speed internet and other infrastructure, with some predicting the chamber could pass this week the largest public works legislation in decades. read more

Shares of infrastructure-related stocks including Caterpillar Inc (CAT.N) inched higher in premarket trading.

Trillions of dollars in monetary and fiscal stimulus have lifted Wall Street’s main indexes to record highs, while strong second-quarter corporate earnings led the S&P 500 (.SPX) to end Friday with its sixth monthly gain in a row.

Signs of a steady economic recovery have also boosted demand for so-called value stocks (.IVX), including industrials (.SPLRCI), energy (.SPNY) and financials (.SPSY), but the recent spread of the Delta coronavirus variant has raised concerns of another hit to growth.

“I don’t think investors are worried about broader macroeconomic numbers even if they are showing signs of a slowdown; the concern lies in the risk of reopening being on pause because of the spread of the Delta variant,” said Dennis Dick, a proprietary trader at Bright Trading LLC.

“People know if things do go wrong, the Federal Reserve will add further support.”

After the Fed stuck to a dovish policy last week, focus this week will be on business activity data on Monday and Wednesday, while on Friday, the Labor Department will issue its monthly employment report.

Economists expect nonfarm payrolls to have risen 900,000 last month, compared with 850,000 in June.

At 8:18 a.m. ET, Dow e-minis were up 114 points, or 0.33%, S&P 500 e-minis were up 19.25 points, or 0.44%, and Nasdaq 100 e-minis were up 71.5 points, or 0.48%.

In a sign of global M&A activity picking up, Square Inc (SQ.N), the payments firm of Twitter Inc (TWTR.N) co-founder Jack Dorsey, said it would purchase Australian buy now, pay later pioneer Afterpay Ltd (APT.AX) for $29 billion. read more

Afterpay’s Australia-listed stock surged 18.8%, while Square’s U.S.-listed shares fell 4.4%.

Meanwhile, a rebound in corporate profits and a recent drop in bond yields are helping to moderate U.S. equity valuations, bolstering the case further for owning stocks.

After mixed quarterly reports from technology behemoths last week, in focus this week are earnings reports from companies such as Eli Lilly and Co (LLY.N), CVS Health Corp (CVS.N) and General Motors Co (GM.N).

Shares of ride hailing firms Uber Technologies Inc (UBER.N) and Lyft Inc (LYFT.O) rose about 1% ahead of their second-quarter results this week, where investors will look for comments on how an ongoing driver shortage and the Delta variant were clouding the outlook for the year. read more

Reporting by Sagarika Jaisinghani and Shashank Nayar in Bengaluru; Editing by Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.

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Business

Investors eye COVID-19 spread, Golden Cross to gauge U.S. dollar trajectory

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A U.S. dollar note is seen in front of a stock graph in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration

July 23 (Reuters) – A rally in the U.S. dollar has investors looking at a broad range of factors — from global COVID-19 infections to yield gaps — to determine whether the greenback will continue appreciating.

The dollar is up 4% from its lows of 2021 and is among the world’s best performing currencies this year, boosted by last month’s hawkish shift from the Federal Reserve, burgeoning inflation and safe-haven demand driven by COVID-19 worries.

Because of the dollar’s central role in the global financial system, its moves ripple out towards a broad range of asset classes and are closely watched by investors.

For the United States, a period of sustained dollar strength would be a double-edged sword, helping tamp down inflation by increasing the currency’s buying power while denting the balance sheets of exporters by making their products less competitive abroad.

On the other hand, dollar strength would continue pushing down currencies such as the euro and British pound, potentially giving a boost to the recoveries in those countries.

Here are several things investors are watching to determine the dollar’s trajectory.

THE DELTA VARIANT

Some investors believe the dollar – a popular safe haven during uncertain times – will rise if the Delta variant of COVID-19 spreads and risk aversion grows in markets.

COVID worries have already helped the dollar notch gains against the currencies of countries where the Delta variant is proliferating, including the Australian dollar and the British pound. Those gains could fade if coronavirus concerns ebb in coming months, however.

“We’re seeing a lot of risk factors and uncertainty across assets, said Simon Harvey, senior FX market analyst at Monex Europe. “Investors are looking at all these and saying that they’re going to find refuge in the dollar.”

GLOBAL GROWTH

While some investors are concerned the U.S. rebound is slowing, it still outpaces the bounce seen in Europe and other regions.

That gap in growth, illustrated by such metrics as stronger manufacturing sector growth and inflation, is among the factors putting upward pressure on the dollar, said Morgan Stanley’s James Lord in a recent podcast.

“There is a case still for the dollar to strengthen as we do see more divergence,” he said.

YIELD GAP

Though Treasury yields have recently slid, the gap between real yields on U.S. government debt and some foreign bonds has widened, raising the allure of dollar-denominated assets. Real yields represent the cost of borrowing after stripping out inflation effects.

The spread between the real yield on 10-year Treasury Inflation Protected Securities at “constant maturity” and those on their German counterpart, for instance, stood at 72 basis points late Thursday, up from 63 basis points two months ago.

POSITIONING SQUEEZE

Speculators’ net short positions on the U.S. dollar fell to their lowest level since March 2020 last week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on July 16.

“The most crowded trade in the world through the first quarter was the short dollar. We had, unquestionably, a squeeze on the way back,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

The dwindling bearish sentiment could mean there is less fuel for further dollar gains. At the same time, “the dollar and other currencies do tend to overshoot when they are correcting, in both directions,” Schamotta said.

GOLDEN CROSS

The Dollar Index’s (.DXY) 50-day moving average is close to crossing above its 200-day moving average and forming a chart pattern known as a “Golden Cross” that is seen as a bullish signal by those who follow technical analysis.

A Golden Cross “could herald another leg higher for the greenback,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Reporting by Saqib Iqbal Ahmed; editing by Ira Iosebashvili and Richard Pullin

Our Standards: The Thomson Reuters Trust Principles.

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Business

U.S. housing starts accelerate, building permits skid to eight-month low

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  • Housing starts increase 6.3% in June; May revised down
  • Single-family starts rise 6.3%; multi-family up 6.2%
  • Building permits drop 5.1%; single-family down 6.3%

WASHINGTON, July 20 (Reuters) – U.S. homebuilding increased more than expected in June, but permits for future home construction fell to an eight-month low, likely reflecting hesitancy caused by expensive building materials as well as shortages of labor and land.

The report from the Commerce Department on Tuesday suggested a severe shortage of houses, which has boosted prices and sparked bidding wars across the country, could persist for a while. Demand for houses is being driven by low mortgage rates and a desire for more spacious accommodations during the COVID-19 pandemic.

Though lumber prices are coming down from record highs, builders are paying more for steel, concrete and lighting, and are grappling with shortages of appliances like refrigerators.

“Reports of multi-month delays in the delivery of windows, heating units, refrigerators and other items have popped up across the country, delaying delivery of homes and forcing builders to cap activity, and many builders continue to point to a shortage of available workers as a separate challenge,” said Matthew Speakman, an economist at Zillow.

Housing starts rose 6.3% to a seasonally adjusted annual rate of 1.643 million units last month. Data for May was revised down to a rate of 1.546 million units from the previously reported 1.572 million units. Economists polled by Reuters had forecast starts would rise to a rate of 1.590 million units.

Despite last month’s increase, starts remained below March’s rate of 1.737 million units, which was the highest level since July 2006. Homebuilding increased in the West and the populous South, but fell in the Northeast and Midwest.

Single-family starts rose 6.3% to a rate of 1.160 million units. The volatile multi-family homebuilding category advanced 6.2% to a pace of 483,000 units.

Starts increased 29.1% on a year-on-year basis in June.

Permits for future homebuilding fell 5.1% to a rate of 1.598 million units in June, the lowest level since October 2020. Permits are now lagging starts, suggesting that homebuilding will slow in the coming months.

Stocks on Wall Street were trading higher after a sharp selloff on Monday. The dollar (.DXY) gained versus a basket of currencies. U.S. Treasury yields fell.

BUILDERS CAUTIOUS

While lumber futures have dropped nearly 70% from a record high in early May, economists caution that higher prices are likely to prevail because of wildfires in the Western United States.

Real estate signs advertise new homes for sale in multiple new developments in York County, South Carolina, U.S., February 29, 2020. REUTERS/Lucas Jackson/File Photo

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Dustin Jalbert, head of Fastmarkets RISI’s lumber team, also noted that log prices are soaring in the interior of the Canadian province of British Columbia and duties are potentially set to increase on Canadian producers later this year.

There are also signs that the exodus to suburbs and other low-density areas in search of larger homes for home offices and schooling is gradually fading as COVID-19 vaccinations allow companies to recall workers back to offices in city centers.

A rise in COVID-19 infections among unvaccinated Americans also poses a risk to the housing market outlook.

Economists expect the housing market, one of the economy’s star performers during the coronavirus pandemic, was a mild drag on gross domestic product in the second quarter.

Still, homebuilding remains underpinned by the dearth of homes available for sale. The inventory of previously-owned homes is near record lows, leading to double-digit growth in the median house price.

A survey from the National Association of Home Builders on Monday showed confidence among single-family homebuilders fell to an 11-month low in July.

Shortages and higher input prices likely weighed on new home sales in June. The Mortgage Bankers Association Builder Application Survey, which was published on Tuesday, showed mortgage applications for new home purchases fell 23.8% in June from a year ago. Applications decreased 3% compared to May. The data has not been adjusted for typical seasonal patterns. The Commerce Department is due to publish new home sales data for June next Monday.

Homebuilders and a group of other stakeholders met last Friday with White House officials, including Commerce Secretary Gina Raimondo and Housing and Urban Development Secretary Marcia Fudge, to discuss strategies to address the short-term supply chain disruptions in the homebuilding sector.

Building permits fell in all four regions in June. Single-family permits dropped 6.3% to a rate of 1.063 million units, the lowest since August 2020. Permits for multifamily housing slipped 2.6% to a rate of 535,000 units.

The backlog of single-family homes yet to be started grew in June to the highest level since October 2006.

“Widespread anecdotal reports point to builders delaying or turning down orders to allow shortages to ease and to catch up to a growing construction backlog,” said Mark Palim, deputy chief economist at Fannie Mae in Washington.

Housing completions fell 1.4% to a rate of 1.324 million units last month. Single-family home completions declined 6.1% to a rate of 902,000 units, the lowest level since October.

Realtors estimate that single-family housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to close the inventory gap.

The stock of housing under construction rose 1.8% to a rate of 1.359 million units last month.

Reporting by Lucia Mutikani
Editing by Chizu Nomiyama and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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