U.S. Treasury Secretary Janet Yellen said a rapid U.S. economic recovery would boost overall global growth, but more work was needed to shore up weaknesses the global COVID-19 crisis exposed in the non-bank financial sector, supply chains and social safety nets. Yellen on Tuesday told leaders of the IMF and the World Bank that the Biden Administration had decided to “go big” with its COVID-19 response to avert the negative “scarring” impact of long-lasting unemployment, adding that she hoped the U.S. economy would return to full employment next year. Speaking during the International Monetary Fund and World Bank spring meetings, the former Federal Reserve chair said the crisis had dealt a huge blow worldwide, and it was the responsibility of advanced economies to ensure that years of progress in reducing poverty were not reversed by the crisis. “We are going to be careful to learn the lessons of the (global) financial crisis, which is: ‘Don’t withdraw support too quickly,'” Yellen said, “And we would encourage all those developed countries that have the capacity… to continue to support a global recovery for the sake of the growth in the entire global economy.”
Breaking: US adds 266,000 jobs in April vs. 978,000 expected
Nonfarm Payrolls (NFP) in the US rose only by 266,000 in April, the data published by the US Bureau of Labor Statistics showed on Friday. This reading followed March’s increase of 770,000 (revised from 916,000) and missed the market expectation of 978,000 by a wide margin. Further details of the press release revealed that the Unemployment Rate rose to 6.1%, compared to analysts’ estimate of 5.8%, and the Average Hourly Earnings increased by 0.7% on a monthly basis. The number of unemployed persons stood at 9.8 million, more than in March. The figure for those on temporary layoff also increased since the previous month to 2.1 million. The labor force participation rate remained virtually unchanged, coming in at 61.7%, down by 1.6% year-on-year. Meanwhile, the number of people working from home due to the COVID-19 pandemic decreased to 18.3% month-on-month.
More to come…
Fed: Asset prices vulnerable if risk appetite falls
- Rising asset prices are posing increasing threats to the financial system, the Federal Reserve warned in a report Thursday.
- Fed Governor Lael Brainard said the situation bears watching and points up the importance of making sure the system has proper safeguards.
“Asset prices may be vulnerable to significant declines should risk appetite fall,” the central bank said.Rising asset prices in the stock market and elsewhere are posing increasing threats to the financial system, the Federal Reserve warned in a report Thursday. In its semiannual Financial Stability Report, the central bank said that while the system overall has remained largely stable even through the Covid-19 pandemic, future dangers are rising, in particular should the aggressive run on stocks tail off. Investors have snapped up equities, corporate bonds and cryptocurrencies. They’ve poured billions into blank-check companies called SPACs, and the market has been mostly brisk for traditional initial public offerings. Fed Chairman Jerome Powell and others have been asked repeatedly about whether they’re concerned over the rising prices. Powell specifically has said that as long as interest rates stay low, the valuations are justified. However, the report notes that there’s danger lurking should market sentiment change. “High asset prices in part reflect the continued low level of Treasury yields. However, valuations for some assets are elevated relative to historical norms even when using measures that account for Treasury yields,” the report states. “In this setting, asset prices may be vulnerable to significant declines should risk appetite fall.” In an accompanying statement, Fed Governor Lael Brainard said the situation bears watching and points out the importance of making sure the system has proper safeguards. She specifically mentioned having banks increase their capital requirements during economic expansions as a buffer against downturns. The report also mentions risk at hedge funds and other nonbank financial institutions on several occasions as potential threats to the system. “Vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes have continued to rise from levels that were already elevated late last year,” Brainard said. “The combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event.” The report notes that particular sectors including energy, travel and hospitality have particularly high vulnerabilities because of their sensitivity to the pandemic. The Fed also talks about potential threats from money market and open-end funds. The Fed goes into a few specific scenarios that show potential risks to the system. It specifically talked about the Archegos Capital Management episode, when the firm could not meet margin calls, causing several large banks to take big losses. “While broader market spillovers appeared limited, the episode highlights the potential for material distress at [nonbank financial institutions] to affect the broader financial system,” the report said. Overall, the Fed said the current state of the system is sound, with household balance sheets in good shape, and corporations supported by an improving economy and low interest rates that have allowed default rates to fall. Even the $1.7 trillion in student loans pose “limited” risks to the economy, given that most education debt is held by the top 40% of earners. A survey the Fed conducted across a variety of 24 market contacts showed that the biggest worry is virus-related, specifically focusing on vaccine-resistant variants. That’s followed by a sharp increase in interest rates, a surge in inflation, and tensions between the U.S. and China.
Initial jobless claims in US down 92,000 to 498,000 US job cuts down to 22,913 in April
Initial jobless claims in US down
The number of initial jobless claims in the United States for the week ending April 30 declined 92,000 compared to the previous week’s revised figure of 590,000 to 498,000, beating market expectations, the US Labor Department unveiled on Thursday. The reported level is the lowest since March 14 of last year, where it stood at 256,000. The previous week’s level was upped to 590,000, an increase of 37,000. Meanwhile, the 4-week moving average dropped 61,000 from the previous week’s revised average to 560,000. The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending April 24, remaining unchanged from the previous week’s unrevised rate. Insurance unemployment during the same week increased by 37,000 from the week-over-week revised level to 3,690,000.
US job cuts down to 22,913 in April
Job cuts in the United States in April decreased 25% when compared to the previous month to 22,913, a report published by Challenger, Gray & Christmas Inc. on Thursday showed. This is the lowest monthly total since June 2000 and equates to a year-on-year decline of 96.6%. Senior Vice President Andrew Challenger stated: “The good news is that employers are no longer undergoing massive cuts, consumers are beginning to feel safe traveling and spending, and the number of job openings is edging higher. The bad news is we’re experiencing a labor shortage despite millions of Americans still out of work.”
US private payrolls up by 742,000 in April – ADP
The number of jobs in the United States private sector increased by 742,000 in April compared to the previous month, below analyst’s expectations, data in the ADP National Employment Report showed on Wednesday. Employment in large businesses contributed the most to the increase in April with 277,000 new jobs added. At the same time, midsized and small businesses added 230,000 and 235,000 new jobs respectively. The services-providing sector once again recorded the largest increase with 636,000 new jobs, while the goods-producing sector added 106,000 jobs. ADP’s chief economist Nela Richardson commented on the report saying: “Service providers have the most to gain as the economy reopens, recovers, and resumes normal activities and are leading job growth in April. While payrolls are still more than 8 million jobs short of pre-COVID-19 levels, job gains have totaled 1.3 million in the last two months after adding only about 1 million jobs over the course of the previous five months.”
US service sector activity expands at record pace in April
Activity in the service sector in the United States expanded at a record pace in April, according to the latest release from IHS Markit published on Wednesday.
The seasonally adjusted final IHS Markit US Services PMI Business Activity Index was reported at 64.7 in April, up from the 60.4 registered in March and above the previously announced flash estimated.
Commenting on the latest survey results, Chief Business Economist at IHS Markit Chris Williamson said that vaccine rollouts coupled with accommodative monetary policy and fiscal stimulus have led to the “strongest surge in demand seen for at least a decade.” However, the biggest threat to the outlook remain new strains of the coronavirus which could hinder growth “for some time to come,” according to Williamson.
Fed has “powerful tools” in case of high inflation – Kashkari
Neel Kashkari head of the Federal Reserve Bank in Minneapolis puts out fire Janet Yellen started
- says Fed doesn’t want to cut off recovery prematurely
- says if raise taxes to pay for new spending, that won’t be inflationary
- not concerned that fiscal packages so far will create inflation
- once the labour market is recovered, inflation back to target, will normalize monetary policy
- full employment may take a few years
The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari,said that the bank has “powerful tools” to push inflation down in case it surprises higher. Kashkari says he is not indicating hikes any time soon. He told CNN that the bank will normalize its monetary policy once the labour market is recovered, adding that the Fed doesn’t want to cut off recovery prematurely which is in line with the bank’s goal to, not only restart the economy but also avoid the virus flaring back up and potentially taking back all the progress that was made. With the rescue packages approved by global economies and the pent-up consumer demand, which is expected to drive prices up, worries remain that the lack of policy adjustments could lead to halting the overall economic recovery from the health crisis.
Yellen backing up she now says: Not predicting or recommending rates increase
US Treasury Secretary Janet Yellen at the WSJ CEO Council NOW says that she’s not predicting or recommending rates increase.
Clarifying her earlier comments, Yellen stated that she doesn’t “recommend nor predict” interest rate increases and that while she believes that “inflation will not be a problem” there are tools available, primarily by the Federal Reserve, to help mitigate any potential fallout. She also asserted that due to “structural reasons” interest rates will remain low in the future. She doesn’t see the rescue package overheating the economy.
Yellen says interest rates may have to rise ‘somewhat’ to keep economy from overheating
https://youtu.be/3uj_3K3EaIE
Treasury Secretary Janet Yellen said interest rates may have to increase somewhat in order to keep the U.S. economy from overheating. In an interview with the Atlantic that was recorded Monday and aired Tuesday, the Treasury chief said, “It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy.” Yellen was discussing the Biden administration’s $2.3 trillion infrastructure proposal and its $1.8 trillion American Families Plan. She acknowledged that those proposals have “high price tags,” but stressed that they are long-term programs. If approved by Congress, those plans would come on top of the $1.9 trillion COVID relief bill President Joe Biden signed in March. On Monday, Senate Republican Leader Mitch McConnell said Democrats should expect “zero” support from his party for Biden’s new big-ticket infrastructure and social spending proposals. Biden’s party faces a variety of choices on how to proceed, including whether to use a process called budget reconciliation, which would allow Democrats to pass a bill without GOP votes in the Senate. On Sunday, Yellen said that Biden’s proposed spending on infrastructure and families would not fuel inflation, because the planswould be phased in gradually over 10 years. Last week, the Federal Reserve after its latest meeting stuck to its strategy of helping the U.S. economy with ultra-low interest rates even as it saw broad signs of faster growth. The central bank held a key short-term interest rate near zero and maintained monthly purchases of $120 billion in Treasury and mortgage-backed bonds.
Pfizer’s revenue jumps 45% to $14.6B in Q1
The company said its vaccine generated $3.5 billion in revenue in the first three months of this year.
Last year, racing to develop a vaccine in record time, Pfizer made a big decision: Unlike several rival manufacturers, which vowed to forgo profits on their shots during the Covid-19 pandemic, Pfizer planned to profit on its vaccine. On Tuesday, the company announced just how much money the shot is generating. The vaccine brought in $3.5 billion in revenue in the first three months of this year, nearly a quarter of its total revenue, Pfizer reported. The vaccine was, far and away, Pfizer’s biggest source of revenue. The company did not disclose the profits it derived from the vaccine, but it reiterated its previous prediction that its profit margins on the vaccine would be in the high 20 percent range. That would translate into roughly $900 million in pretax vaccine profits in the first quarter. Pfizer has been widely credited with developing an unproven technology that has saved an untold number of lives. But the company’s vaccine is disproportionately reaching the world’s rich — an outcome, so far at least, at odds with its chief executive’s pledge to ensure that poorer countries “have the same access as the rest of the world” to a vaccine that is highly effective at preventing Covid-19. As of mid-April, wealthy countries had secured more than 87 percent of the more than 700 million doses of Covid-19 vaccines dispensed worldwide, while poor countries had received only 0.2 percent, according to the World Health Organization. In wealthy countries, roughly one in four people has received a vaccine. In poor countries, the figure is one in 500. Pfizer has said it is committed to making its vaccine accessible globally. It announced on Tuesday that it had shipped 430 million doses to 91 countries or territories. A Pfizer spokeswoman, Sharon Castillo, would not say how many of those doses have gone to poor countries, where Pfizer has said it is not profiting on vaccine sales. The World Health Organization figures make clear that Pfizer has provided minimal help to the world’s poorest countries. The company pledged to contribute up to 40 million doses to Covax, a multilateral partnership aimed at supplying vaccines to poor countries. That represents less than 2 percent of the 2.5 billion doses that Pfizer and its development partner, BioNTech, aim to produce this year. The doses that Pfizer pledged to Covax are “a drop in the ocean,” said Clare Wenham, a health policy expert at the London School of Economics. Johnson & Johnson and AstraZeneca both vowed to sell their vaccines on a nonprofit basis during the pandemic. Moderna, which has never made a profit and has no other products on the market, decided to sell its vaccine at a profit. Unlike Moderna’s vaccine, Pfizer’s shot is not crucial to the company’s bottom line. Last year, Pfizer earned $9.6 billion in profits, before the Covid vaccine had any discernible impact on its results.
Pfizer frequently points out that it opted not to take federal funds proffered by the Trump administration under Operation Warp Speed, the initiative that promoted the rapid development of Covid-19 vaccines.
But BioNTech received substantial support from the German government in developing their joint vaccine. And taxpayer-funded research aided both companies: The National Institutes of Health patented technology that helped make so-called messenger RNA vaccines possible. BioNTech has a licensing agreement with the N.I.H., and Pfizer is piggybacking on that license.