We ended last week with a strong employment number for the US Non-Farm Payroll, adding 379,000 jobs, against an expectation of only 200,000.  The US Non-Farm Payroll is a monthly statistic showing how many people are employed in the US by manufacturing, construction, and goods companies.  It is primarily used as an indicator for the number of jobs added or lost in the economy over a one-month period and is a broad indicator of the US economy’s health.

This boost could reflect an increasingly successful vaccine rollout and easing of restrictions in a number of US states.  Texas, for example, has lifted all pandemic restrictions on economic activity, to tackle both the effects of the extreme weather and the fall in the fear of the pandemic.  This will be an interesting test case for policymakers to monitor.

The imminent round of stimulus from the Biden administration looks to add further fuel to growth expectations, with a significant part of the proposed $1.9 trillion fiscal stimulus plan likely to be passed in the coming days. With substantial pent-up consumer demand ready to be spent once restrictions are lifted, it is no surprise that growth expectations for the US continue to be revised up.

This all sounds positive.  However, we have also seen an increase in government bond yields over the past few weeks, as expectations for earlier interest rate hikes are priced.  A strengthening economy could mean the accommodative monetary conditions are tightened sooner than expected.  It was fortuitous then that the Chair of the Federal Reserve was speaking last week.  Jerome Powell’s remarks said very little that was new and gave no indication of easing their monetary policy programme early.  Unemployment, although reducing, is far from their full employment target and bond markets are not being disorderly.

It would seem that as we near the end of the COVID-19 tunnel, we must steel ourselves against the conflicting indicators and trust in robust and appropriately diversified investments.  The budget delivered by Chancellor Sunak shows that a long-term view is needed to navigate out of this crisis, with his ‘spend now, tax later’ roadmap.

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