Daily Brief: US Job Growth Drops Off, But Eager Employers Are Still Adding To Inflation Worries

Daily Brief: US Job Growth Drops Off, But Eager Employers Are Still Adding To Inflation Worries

almost 3 years ago3 mins

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Data out on Friday showed the US economy added a lower-than-expected 266,000 jobs in April, even as employers do everything they can to woo new starters.

What does this mean?

There were around eight million fewer Americans working in April compared to a pandemic-free February 2020, and the unemployment rate ticked up from 6% last month to 6.1%. That might not sound like much, but economists had been expecting it to drop to 5.8%. Turns out plenty of employers are reporting that they can’t find enough workers, which is all the more remarkable considering there are still over ten million Americans out of work. There are plenty of reasons that might be, but one’s looking particularly plausible: some people are earning more in unemployment benefits than they would be doing the nine-to-five.

Changes in payrolls since February 2020
Source: The Wall Street Journal

Why should I care?

The bigger picture: Work hard, play harder.

The hiring conundrum has encouraged lots of firms to up the salaries they’re offering applicants, if not throw in a signing bonus to sweeten the deal. That explains why wages actually climbed by more than expected, despite the drop-off in job growth. So with more money to spend and suddenly a lot more to spend it on, Americans are all set to throw around plenty of cash. And that – along with the highest prices for raw materials in almost a decade – is fueling fears of rising inflation.

Unemployment rate continues to fall

For markets: Bonds are losing ground.

All this talk of rising inflation has got investors worried that the US central bank will raise interest rates sooner than expected to slow down climbing prices. That’s not great news for bonds, whose prices move inversely with interest rates. And that’s not great news for one of the world’s biggest bond exchange-traded funds, which has seen investors pull more money out of the fund than they’ve put in for the sixth month in a row – the longest run since 2013.

Keep reading for our next story...

Square's Earnings Beat Expectations – And The Company's Thankful For Crypto

Square image

Square reported better-than-expected quarterly earnings late last week, as cryptocurrencies brought the payments provider the inner peace it’s been longing for.

What does this mean?

Square’s sales more than tripled last quarter, surpassing analysts’ estimates by around 50%. That jump was mostly thanks to brisk bitcoin trading on its Cash App: the company adds a fee whenever users buy or sell crypto, and those charges came to 1,100% more than the same time last year.

Bitcoin is Square's dominant revenue source

Still, Square isn’t greedy: it made just $75 million in profit from $3.5 billion of crypto-related revenue. Maybe the company’s simply sharing some goodwill, having announced in February that it’d invested around $170 million in bitcoin. But there might also be an ulterior motive. With rival PayPal hoping its own nascent crypto platform becomes a major source of growth, Square’s low margins could be cannily competitive. Investors certainly seem to think so: they sent Square’s shares up 6% on Friday.

Square stock
Source: Google Finance

Why should I care?

The bigger picture: Wall Street wants in.

A slew of recent announcements reveal just how keen traditional financial firms are on grabbing a slice of the crypto action. Besides Goldman Sachs’ unveiling of a new dedicated trading team, rival BNY Mellon is vying to administer the US’s first bitcoin exchange-traded fund. One high-profile venture capital firm, meanwhile, is looking to follow its successful backing of Coinbase by raising a fresh $1 billion fund to invest in a few more crypto plays.

For markets: The Fed is not amused.

Investors’ appetite for risk-taking has pushed up the prices of everything from cryptocurrencies to junk bonds. But the US central bank isn’t celebrating: the Federal Reserve is concerned that many parts of the market are unsustainably elevated, and that this – combined with nosebleed-inducing levels of company debt – could pose a risk to the US financial system. Better pack it in and head to Bali…

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