U.S. Highlights
- Markets see-sawed on the week as investors were pulled between positive economic news and concerns about rising bond yields and rising Covid-19 cases in Europe.
- Soft U.S. economic data for February, which was hit by severe winter weather, is likely to be a pothole on the road to much stronger growth in the spring.
- With vaccinations gathering speed, the day is fast approaching when consumers will feel safe returning to close-contact activities. This boost to the services sector will help drive an acceleration in the job market in the spring.
Canadian Highlights
- Budget season is in full bloom. This week saw Ontario, Quebec, and Nova Scotia release their 2021 plans. Meanwhile, the federal government announced the national budget will be tabled on April 19th.
- Provincial spending will remain elevated in the years to come with both Ontario and Quebec outlining new support measures in their respective budgets. Stronger economic growth is expected to gradually ease the debt burden.
- The federal government appears poised to place emphasis on its objective to “build back better.” Proactive fiscal policy is likely to have some staying power.
U.S. – Bad February Data a Temporary Setback
Equity markets see-sawed this week as investors were pulled between positive economic news and concerns about rising bond yields and rising Covid-19 cases in Europe. After several weeks of increases, there was some give back in the 10-year Treasury yield, even as Fed speakers seemed relatively unconcerned about the move up in yields.
One positive economic headline came from the weekly jobless claims, which were at the lowest level since the pandemic began. Claims are moving in the right direction, but the headline lacks context. 684 thousand claimants in the week of March 20th is still higher than any of the worst weeks in 2009 during the Great Recession. Also, that figure only accounts for regular state benefits, which many workers have exhausted a year into the pandemic.
Looking at continuing claims in all programs – including the emergency federal pandemic programs – 7.2% of the 16+ population (or nearly 19 million people) were collecting benefits of some kind in early March (Chart 1). That is a staggering number, which in part reflects the expansion of benefits under last year’s CARES Act, but also the steep hill left to climb when it comes to the job market.
This was the message echoed by many Fed speakers this week. Namely, that the Fed will continue to provide support to the economy until the job market recovery is “well and truly done” and that the recovery is “far from complete.” The ramp-up in vaccinations we are seeing is critical to accelerating the employment recovery, which lost momentum in the winter as lockdowns were tightened.
The job market recovery will accelerate once spending on services does. Services…
Read More: The Weekly Bottom Line: Bad February Data a Temporary Setback