The U.S. labor market added 266,000 jobs in April, a moderate improvement in employment but a sharp miss from consensus expectations. April was the one-year anniversary of the trough of the coronavirus pandemic recession, which saw jobs reduced by a record 22.4 million. April 2020 also saw the fastest wage growth in recent memory, with wages rising 8.2% y/y. The composition of the U.S. workforce sharply changed as a result of the pandemic, as millions of low-paid workers lost their jobs while relatively high-paid workers remained employed, telecommuting to work and even clocking in more hours than usual. This composition effect can help explain the spike in wages we saw in April 2020, but even when you remove this effect by holding sector weights and hours worked fixed at pre-pandemic levels, wage growth was much faster than average and remains above long-term trends. The U.S. has now recovered 63% of jobs lost from the pandemic and wage increases have remained robust, growing 0.7% m/m and 0.3% y/y in April. After adjusting for the underlying composition effect, we find that wages rose an impressive 8.0% in April on a percentage change over two years basis. While rising commodity prices and supply bottlenecks may cause inflation that is only transitory, robust wage increases may signal stickier inflation ahead. This is of crucial importance to bond investors, as sustained wage inflation could potentially pull forward the Fed’s timeline for policy normalization.
-JP Morgan
Happy Monday. Good Luck out there this week.
Global Spotlight
A Turkish fence-mending visit to Saudi Arabia. Turkey’s foreign minister, Mevlut Cavusoglu, on May 11 will visit Saudi Arabia in the first such visit since the diplomatic dust-up around the 2018 killing of Saudi journalist Jamal Khashoggi at the Saudi Consulate in Istanbul.
Pressure on Indian Prime Minister Narenda Modi to consider a nationwide lockdown amid a COVID-19 tsunami. India’s COVID-19 outbreak remains severe, with more than 400,000 new cases being reported daily, and on May 10 Rajasthan and Karnataka states will become the next Indian states to implement strict statewide lockdown measures.
Presidential candidate registration in Iran. Iran will begin its five-day registration window May 11 for candidates wishing to stand in June 18 presidential elections.
Confirmation of the president of the Tibetan government-in-exile. The India-based Central Tibetan Administration on May 14 will officially announce its new president, Penpa Tsering, who will be only the second leader to have held the post following two-term president Lobsang Sangay.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q1 earnings are expected to be 50.4% from 20Q1. Excluding the energy sector, the earnings growth estimate is 51.1%.
- Of the 439 companies in the S&P 500 that have reported earnings to date for 21Q1, 87.2% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 76%.
- 21Q1 revenue is expected to be 12.9% from 20Q1. Excluding the energy sector, the growth estimate is 13.7%.
- During the week of May 10, 18 S&P 500 companies are expected to report quarterly earnings.
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