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Quick Fix
Welcome to jobs day! — Expectations are for a jump back to 711K in the BLS June jobs report out at 8:30 a.m., up from 559K in May. The jobless rate is expected to decline to 5.6 percent from 5.8 percent. That would be a solid number but still short of the pace needed to get the economy back to its’ pre-pandemic level within the next year or so.
But some of the whisper numbers are significantly higher, closer to 1 million jobs. That figure would come as a relief to a White House fearful about the pace of job growth slowing and deeper problems in the labor market.
Moody’s Mark Zandi emails: “The job market continues to rev up as the pandemic winds down. Nonfarm employment is expected to increase by 750,000 jobs in June. This compares to an average monthly gain of 540,000 over the prior three months and it would be the largest job gain since last August.
“Approximately one-half of the increase in jobs will be in the leisure and hospitality industry … Early evidence suggests that ending expanded unemployment insurance early in some states has had only a small impact on the job market, at least so far. This is based on Google Trends searches to see if job search intensity in states that ended expanded unemployment insurance is greater than in those states that haven’t”
Pantheon’s Ian Shepherdson: “Our June payroll forecast is 1,050K, based largely on the Homebase small business employment data, which were dead right in May and pretty close in April. For June … the Homebase numbers are consistent with unadjusted private payrolls rising by about 1,700K. …
“Even if we're right, though, the data will be nothing like strong enough to signal that the acute shortage of labor supply is easing to a meaningful extent. The record — and rising — level of job openings captured in both official and private survey data makes it clear that labor demand is not the short-term constraint on payrolls.”
GOOD FRIDAY MORNING — Happy Fourth of July weekend everyone! See you back here on Tuesday. Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.
Driving the Day
June jobs report at 8:30 a.m. expected to show a gain of 711K with the jobless rate down to 5.6 percent from 5.8 percent and hourly earnings up 0.3 percent … Biden is expected to speak about the jobs number at 10:15 a.m. from the Eisenhower Executive Office Building, South Court Auditorium … The L.A. Dodgers are schedule to visit the White House at 11:40 a.m. but the Trevor Bauer allegations hang over the visit …
CBO EXPECTS BUDGET DEFICIT TO SWELL — Our Caitlin Emma: “The federal budget gap will widen to $3 trillion this year, nearly triple the shortfall recorded just two years ago as the pandemic continues to grow the deficit, the Congressional Budget Office said in its latest 10-year projections … The shortfall is significantly wider compared with earlier projections, due to enactment of … Biden’s $1.9 trillion pandemic relief package which Democrats approved in March without Republican support.
“The gap totals about 13.4 percent of GDP, making it the second-largest discrepancy relative to the size of the economy since World War II and exceeded only by the 14.9 percent shortfall logged last year. After this year, the deficit is expected to average about $1.2 trillion through 2031.”
TRUMP ORG CHARGED — Our Betsy Woodruff Swan, Quint Forgey and Erin Durkin: “Prosecutors in New York … charged the Trump Organization with running a years-long off-the-books payment scheme allowing certain top employees — including its chief financial officer — to avoid paying taxes on that compensation.
“That executive, Allen Weisselberg, also faces charges alleging financial crimes, including grand larceny in the second degree. That crime alone could bring a 15-year prison sentence.
Weisselberg has pleaded not guilty. Manhattan District Attorney Cy Vance brought the charges, in concert with attorneys from New York Attorney General Letitia James’s office. Both officials are Democrats, and former President Donald Trump has claimed their investigation is politically motivated.”
JUSTICE SYSTEM PICKS UP WHERE DEMS LEFT OFF — Our Andrew Desiderio: “Now that Weisselberg faces grand larceny charges as part of an alleged tax-evasion scheme, congressional Democrats who poured years into oversight of the Trump administration are acknowledging that in many ways the criminal justice system picked up where they failed.
“The case against Weisselberg, they say, exposes glaring flaws in the Hill’s oversight machinery and the legislative branch’s weak mechanisms for enforcing its subpoenas. Weisselberg can stiff-arm Congress but ‘doesn’t ignore’ the courts, said Rep. Gerry Connolly (D-Va.), a top House oversight committee member, as the Trump ally turned himself in on Thursday.”
$400K TAX PLEDGE HAUNTS DEMS — Our Brian Faler: “Republicans are famous for their anti-tax pledge, but Democrats have one too that is complicating their infrastructure plans.
… Biden’s promise not to increase taxes on people earning less than $400,000 is making it hard for lawmakers to figure out how to finance their next big spending package because it’s taking many of the usual methods — such as a hike in the gas tax — off the table.
“‘It makes it more challenging for sure,’ said House Ways and Means Committee Chair Richard Neal (D-Mass.). ‘There’s no question it limits your options.’ At the same time, it’s sparking disputes over the administration’s interpretation of the pledge, with some complaining that while it is a bright line, it's a fuzzy one as well.”
Markets
WALL STREET HITS ANOTHER RECORD — AP’s Damian J. Troise and Alex Veiga: “Stocks are closing modestly higher Thursday, adding to the gains that helped the market close out its best first half of a year since the dotcom bubble. The S&P 500 gained 0.5 percent and posted its fourth-consecutive record high. Investors have been encouraged by data that show the economy continues its recovery from the pandemic.
“The latest weekly unemployment report showed the lowest number of claims for unemployment benefits since the pandemic walloped the economy. The highly anticipated jobs report for June comes out Friday. Oil rose more than 2 percent, giving a boost to energy companies. Bond yields edged higher and helped lift bank stocks.”
ROBINHOOD IPO FILING SHOWS POWER OF THE MEME-STOCK BOOM — WSJ’s Peter Rudegeair and Corrie Driebusch: “Robinhood Markets Inc. unveiled the paperwork for its long-awaited initial public offering Thursday, detailing how the flood of everyday investors into the stock market has supercharged the trading app’s growth.
“Robinhood, which plans to list on Nasdaq under the ticker symbol HOOD, generated $522 million of revenue in the first quarter, mostly from trading activity, more than quadruple its level from the first quarter of 2020. More than $4 out of every $5 Robinhood earned in first-quarter revenue stemmed from payments it received from high-speed trading firms to which it routed customers’ stock, option and cryptocurrency trades, a controversial practice known as payment for order flow.”
GHOSTS OF CRISES PAST HAUNT POLICYMAKERS, MARKETS — Reuters’ Dhara Ranasinghe and Sujata Rao: “A hawkish turn by the Fed … has woken up world markets to the prospect that policymakers might soon start withdrawing monetary and fiscal stimulus — and the risk of too-hasty action that could choke off the economic recovery before it is secured. Fed officials have brought forward expectations for U.S. interest rate rises to 2023 from 2024 and opened talks on how to end crisis-era bond buying.
“Norway could lift rates as early as September, while strong New Zealand data has prompted economists to bring forward rate hike expectations there. Germany's Jens Weidmann and Austria's Robert Holzmann this week became the first European Central Bank officials to openly debate winding down its 1.85 trillion euro ($2.2 trillion) pandemic emergency stimulus.”
FED’S HARKER SUPPROTS START OF BOND BUYING PULLBACK LATER THIS YEAR — WSJ’s Michael S. Derby: “Federal Reserve Bank of Philadelphia President Patrick Harker said Thursday that while an interest rate rise lies some ways in the distance, he is ready for the U.S. central bank to begin slowing the pace of its asset buying stimulus this year.
“‘I am in the camp of starting the tapering process,’ Mr. Harker said in an interview with The Wall Street Journal, referring to slowing the pace of the Fed’s $120 billion a month in bond purchases, which aim to augment the central bank’s near zero short-term interest rate target range.”
Fly Around
IMF RAISES U.S. GROWTH PREDICTION — Reuters: “The International Monetary Fund raised its 2021 U.S. growth projection sharply to 7.0 percent on Thursday from a 4.6 percent forecast issued in April, due to unprecedented fiscal and monetary support.
“The IMF, in its annual ‘Article IV’ assessment of U.S. economic policies, said the revised forecast represents the fastest pace of growth in a generation for the United States. It raised its 2022 U.S. GDP growth forecast to 4.9 percent, up from its previous 3.5 percent April forecast.”
The IMF also expects that the Fed will likely need to raise rates as soon as late 2022 — Bloomberg’s Eric Martin: “The Federal Reserve probably will need to begin raising interest rates in late 2022 or early 2023 as increased government spending keeps inflation above its long-run average target, according to the International Monetary Fund.
BETS RAMPING UP FOR LOWER TREASURY YIELDS IN THE SECOND HALF OF YEAR — Reuters’ Kate Duguid: “Some investors are betting that U.S. government bond yields will stay subdued or continue weakening in the second half of the year, a sharp departure from the first quarter, when an unexpected surge in yields prompted many analysts to raise their forecasts.
“Since peaking at pre-pandemic levels in March, yields on U.S. Treasuries have broadly moved lower as weaker-than-expected employment reports in April and May have raised questions about the strength of the reopening economy. The federal jobs report for June will be published on Friday morning.”
BANKER’S PORTRAIT OF RACISM AT HSBC PROMPTS INTERNAL PROBE — Bloomberg’s Harry Wilson and Sridhar Natarajan: “The uncomfortable conversations began the moment the 48-page report landed in senior managers’ inboxes at HSBC Holdings Plc last month. Soon, attention turned to the unlikely author who was emailing it.
“A junior manager had invited more than 100 colleagues to talk with him about diversity and racism at the firm and then distilled their responses into a Wall Street-style presentation. It opens with a poem he wrote about hoping for change, before laying out his scathing conclusion: The bank is unlikely to meet its diversity goals because of discrimination and racism in the workplace, which is prompting recruits to leave.”
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