Several states are removing emergency era unemployment benefits and the impact of this should start showing up in the weekly continuing unemployment claims (green box below) in the next few weeks, and through the rest of the summer, until the program ends in September.
Source: Department of Labor.
The intention of these changes is to encourage a return to the labor force and to fill the large amount of reported job openings.
Source: FRED.
This reported demand for labor should also lead to higher wages and serve as a positive for other consumer data.
The May personal income data was positive in the areas outside of the slowing government support component.
As more states remove these benefits, we will be watching to see what happens to employment data (continuing claims, payroll reports, labor force participation, unemployment, and hires) and consumer data (income, spending, and sentiment). At the current moment, these indicators are making varying degrees of positive progress.
Source: Hedgeye.
Source: FRED.
Source: FRED.
Source: FRED.
Source: FRED.
Source: FRED.
How they progress from here will likely have important ramifications for how the economy and financial markets should perform in the second half of 2021.
The market signals continue to price in a positive environment as defensive equity industries are lagging, equity volatility is declining, oil volatility is declining, and high yield OAS is at the lowest level since 2007.
Source: Koyfin.
Source: Koyfin.
Source: Koyfin.
The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance. The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.
Senior Vice President, Investment Strategy
Boyd Watterson Asset Management, LLC
