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Economic Outlook post 4-26-21

June 7, 2021

Economic Outlook: Week of June 7, 2021

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Phil Levy

Chief Economist, Flexport

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Every week, Flexport Chief Economist Phil Levy gathers the most relevant news for the global trade community.

Track major world economies, see what the latest indices reveal, and keep up with the facts and figures that could impact your business.

Here’s the economic news you need for the week of June 7, 2021.

Let’s start with a chart. This week, it's US Labor Market Measures.

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Source: Bureau of Labor Statistics and St. Louis Fed FRED.

Other than a few kinks, these lines look like mirror images and tell consistent stories about what has happened to the US labor market through the Covid pandemic. The red line is the familiar unemployment rate, using the right-hand scale. The May rate was announced at 5.8%, down from 6.1% in April.

The other headline number was 559K jobs created. While the unemployment rate was better than the expected 5.9% number, the jobs created fell substantially short of the 671K expected.

So how do we explain the discrepancy? The two big numbers are coming from different surveys. The unemployment rate is from a household survey, and the jobs (nonfarm payrolls) come from an establishment survey.

The virtue of the employment to population ratio (green line, left-hand scale) is that it also accounts for workers who have stopped looking for employment, and thus do not count as unemployed. The green line shows the “prime age” (25-54) ratio, which increased to 77.1% in May, from 76.9% in April. This age limit controls for demographic effects, in which older workers retire.

The consistent story, then, is of a labor market that is strengthening, but not at the rapid rate of the middle of 2020.

By any of these measures there is a substantial gap from February 2020 levels: an unemployment rate of 3.5%; prime age ratio of 80.4%; and 7.6m more jobs than in May 2021.

While there is no guarantee of returning to those pre-Covid levels, the shortfall has been the motivation behind vigorous fiscal and monetary stimulus efforts.

Economic Developments

Eurozone Inflation Up in May

The estimated Eurozone inflation rate for May was 2.0%, notable both because it was up from 1.6% in April and because it hit the European Central Bank’s target rate. The figure was heavily driven by surging energy prices.

Global Prices Rise

For an even broader group of countries, one month earlier, the OECD measured inflation at 3.3% in April among its members, the highest rate since October 2008. Separately, a UN index of world food costs hit its highest level in almost a decade.

US Cost Measure Increases

Unit labor costs rose substantially more than first estimated for Q1. Broad nonfarm costs rose 1.7% at an annual rate, while manufacturing costs rose 10.7%.

EU Retail Sales Drop

EU retail sales dropped in April, following a March increase. Retail trade was down 3.1% in the Eurozone and EU, but 5.5% in Germany and 6.0% in France.

Chinese Trade Grows

Both exports and imports were up substantially year-over-year in May, but fell short of expectations. The lofty numbers—imports up 51.1%, exports up 27.9%—reflect a low base in 2020 and fell short of predictions.

Political Developments

G7 Settles on Tax Aspirations

The large countries agreed to seek a minimum 15% corporate tax rate. All that remains is to agree on controversial details, convince other countries, and persuade national legislatures.

For more economic insights, follow @philipilevy on Twitter or check out Flexport’s The State of Trade webinars.

Please note that the information in our publications is compiled from a variety of sources based on the information we have to date. This information is provided to our community for informational purposes only, and we do not accept any liability or responsibility for reliance on the information contained herein.

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