What's going on?
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 8 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 10 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.
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.
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 (tweet this). 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.