March Private Sector Jobs and February Pending Home Sales

KEY DATA:  ADP: +517,000; Manufacturing: +49,000/ Pending Sales: -10.6%; Over-Year: -0.5%

IN A NUTSHELL: “The reopening of the economy is good news for workers, and job gains should be robust for quite some time.”

WHAT IT MEANS:  The combination of warmer weather and the lessening of restrictions on business activity looks like it is the balm the labor markets needed.  On Friday we get the government’s reading of March payroll gains and unemployment and it looks like it could be a really good one.  The private sector likely hired back an awful lot of furloughed workers, if the ADP estimate is anywhere near being correct.  The employment services report points to broad based gains in just about every segment of the economy.  On the goods side, manufacturers and builders rebounded from the February doldrums and hired like crazy.  Only the mining sector was weak.  On the services side, it wasn’t just leisure and hospitality.  Almost every area posted solid gains.  Only information services, which has been soft, continued to shrink. Similarly, the gains were spread evenly across business size.  In other words, the recovery tidal wave is lifting all ships.

The housing market has been burning brightly, but the February freeze may have set things back, at least temporarily.  The National Association of Realtors’ Pending Home Sales Index tanked, a result that mirrors most of the February housing numbers.  Every region, including the West, was down sharply, which does create a little doubt in my mind that we just might being seeing a little cooling in sales. Yet from all I have heard, it’s a total lack of inventory, not a deficiency of demand that is at work.  It is hard to buy something that is not being sold.  IMPLICATIONS:  I have put a new record on the turntable, but as usual, it is broken.  So, I will keep repeating that the economy is recovering at a rapid pace and it should continue to do so.  Friday’s jobs number should be huge: The consensus, which I agree with, is for about 600,000 additional workers added to payrolls and an unemployment rate that should decline to 6% from 6.2%.  The issue for investors is not what will happen to earnings – they should be really good.  It is what will happen to inflation, interest rates and taxes.The Biden administration is ready to propose a massive infrastructure program.  Infrastructure is like the weather: Everyone loves to talk about it, usually positively, but no one is willing to do anything about it.That is because we need to spend colossal amounts of money in order to modernize our dilapidated, deteriorating infrastructure.  Republicans like the concept but not the cost.  Democrats don’t care about the cost and are willing to pay for it with taxes, which, of course, Republicans hate. The result is usually grid lock.  This time is no different.  Expect Republicans to object to paying for the programs, which they will claim will cost too much, with taxes, but they will not offer alternatives.  The Democrats will continue to propose spending as much as they possibly can and try to tax the rich and corporations.  Anyone want to bet this works out well this time?  As the saying goes, insanity is doing the same thing over and over and expecting a different outcome.  Come to think of it, insanity is a good word to describe Washington.