On Monday, we learn that consumer sentiment is the highest since the end of the Great Recession.
On Tuesday, we’re told that Americans’ fear of hunger, eviction and foreclosure are at record highs.
On Wednesday, a new analysis tells us that GDP is expected to grow by 6% in the 1st quarter of 2021.
On Thursday, an article shows that over 10 million people are still unemployed, with tens of thousands of restaurants and bars permanently closed.
And on Friday, one strategist suggests that the stock market will grow by another 30% this year.
Another one says that because stock prices are so overpriced relative to earnings the market is due for a major correction.
Quite a week, eh?
By Dave Allen for Discount Gold & Silver
Something about this economy isn’t adding up. In fact, it’s a take-your-pick look at what ills the world’s states of finance.
For investors, the most frustrating thing making critical decision making so hard — and unreliable — is all the mixed signals out there…day after day after day.
On Monday, we learn that consumer sentiment is the highest since the end of the Great Recession.
On Tuesday, we’re told that Americans’ fear of hunger, eviction and foreclosure are at record highs.
On Wednesday, a new analysis tells us that GDP is expected to grow by 6% in the 1st quarter of 2021.
On Thursday, an article shows that over 10 million people are still unemployed, with tens of thousands of restaurants and bars permanently closed.
And on Friday, one strategist suggests that the stock market will grow by another 30% this year.
Another one says that because stock prices are so overpriced relative to earnings the market is due for a major correction.
Quite a week, eh? What’s an investor to do? Problem, spend the weekend wiping your eyes, trying to read between the lines and seeing the forest for the trees!
JOBS A MISMATCH OF EXPECTATIONS
As job growth appears to be poised to take off thanks to improving vaccine numbers and increasing C-suite and customer optimism, Axios’ Felix Salmon believes the economy is confronting a dilemma:
“There’s a mismatch of expectations between workers and employers that's becoming a standoff.”
Salmon points to the jobs bonanza that economists are predicting will take off this year, which he says could be restrained by a market where American workers — especially lower-paid — demand higher wages and employers say no.
Even with well over 10 million fewer Americans employed than before the pandemic, more business surveys show that companies are struggling to find workers (yes, another mixed signal).
Last week's Job Openings and Labor Turnover Survey showed a record 7.4 million job openings in February, the most since January 2019.
Actual hiring, however, rose to just 5.7 million jobs, which was the lowest total (excluding the pandemic) since May 2019.
Similarly, 40% of small businesses surveyed in February by the National Federation of Independent Business said they had jobs they couldn’t fill — the highest percentage since its first survey released in 1974.
Last month, 91% of owners trying to hire workers reported few or no "qualified" applicants for the positions they were trying to fill.
According to economist Joseph Brusuelas at RSM, hiring is breaking down along the lines of the K-shaped recovery.
He said, "While lower-paid workers are plentiful, firms are going to find it difficult to recruit workers unless they are willing to pay higher wages" —something many companies have shown they are unwilling to do.
Thus, Brusuelas argues, firms then choose between keeping a lid on wage costs or substituting technology for labor. “Either way, it results in historically low labor force participation rates and employment to population ratio.”
Hilary Russ of Reuters says this mismatch is already clear in fast-food and restaurant hiring.
"Total nightmare" is the way FAT Brands CEO Andy Wiederhorn described the staffing situation to Russ for franchisees of his company’s restaurants like Johnny Rockets and Fatburger.
(Ah, just what we overweight, undernourished Americans need — a successful greasy-food joint promoting fatness! But I digress...)
All this is coming as median pay for CEOs of the largest public companies in the U.S. inched closer to $14 million last year ($13.7) — up from $12.8 million in 2019.
Pay rose for nearly two-thirds (64%) of the CEOs in the Wall St. Journal study that also showed the median raise was about 15%.
Salary cuts that CEOs took at the peak of the pandemic were more than offset by growth in their equity options, thanks to stock market gains (there’s little shame in the Never Say Die — or is it “I” — economy).
HOUSING SHOWS SIMILAR STORY
Then zoom in on housing, where Salmon says bidding wars, soaring prices, and fears that homeownership is becoming out of reach for millions of Americans.
We're now in a housing feeding frenzy, driven by a massive shortage of inventory and surging lumber prices — and neither buyers nor sellers are too pleased.
But, as Salmon reminds us, not all bubbles burst. “Real estate, in particular,” he says, “tends to rise in value much more easily than it falls.
Besides, says economist Lawrence Yun of the National Association of Realtors, we’re not in a bubble. “It is simply lack of supply."
America has a record-low number of homes available for sale — just 1.03 million — compared to a peak of more than 4 million at the height of the last housing bubble in July 2007.
The total number of active listings at the end of last week is down a record 54% from the same week a year ago. That’s helped to drive prices up 17% over the past year.
Still, Redfin reports that almost half of homes across the country now sell within one week of being listed.
Salmon reports that prices are being driven up by a combination of factors — ultra-low mortgage rates, a construction slowdown, buyers’ desire for more space as people work increasingly from home, and a stock market-driven increase in money available for a down payment.
He adds that an increase in large corporations buying up homes to rent them to employees and others — is only making the housing market tighter.
Thus, another mixed signal in an ironic, dysfunctional market where, despite record low interest rates, affordability is compromised because of surging sales prices.
THE PANDEMIC ROLLS ON
And, then there’s the pandemic itself. Although the pace of vaccinations is strong in most parts of the U.S., health officials fear it's about to slow down and get ugly again.
In some parts of the country, Axios’ Sam Baker reports, particularly the South, demand for shots has already dropped.
University of Minnesota epidemiologist Michael Osterholm calls the pandemic “a brand new ballgame,” with mutations starting to infect more adults and kids, even as schools are on the fast track to reopening.
New research confirms that our existing vaccines don’t work as well against the South African variant.
And the U.K. variant is driving another surge in Michigan, where embattled Gov. Gretchen Whitmer has resisted reimposing lockdown measures.
Michigan's struggle shows why managing this stage of the pandemic is so difficult,frustrating and providing another mixed signal.
It’s hard enough to be an effective Governor or Mayor these days, much less a private citizen who just wants to be left alone to get on with their lives (ah, if it were that easy).
But if we don’t get the virus under control now, we could spend the next year — or more — living through these and newer variants, some of which may be more deadly and resistant to vaccines.
So, circling back to the economy, specifically jobs, most mainstream economists agree that the conundrum facing employers in the coming months and few years is coming into focus:
They’re going to pay higher wages current employees or recruit new workers — either out of unemployment or from another company.
Or, the scary alternative, they’re going to get ready to expedite a decade's worth of productivity- enhancing capital expenditures — i.e., human-replacing robots — into the near term.
“Either way,” one warns, “the pre-pandemic status quo ante is not returning…” but a new normal certainly is.
Sports and life coaches — and, it appears, economists — like when they can say, “The whole (team/organization/ economy) is greater than the sum of its parts.” In other words, 1+1=3 (or more).
But, for once, wouldn’t it be great if one plus one just equaled two?