The expectation for the number of new jobs created last month was very high, given the strides made in fighting the pandemic and the lifting of many restrictions during the month. The confidence in this expectation made it even more surprising when results disappointed. The actual addition of 266,000 new jobs was far below the expectation of 1 million, while the increase in the unemployment rate from 6.0% to 6.1% was certainly unexpected. The explanations for these disappointing results vary, but raise questions about the pace of recovery in the economy and future wage inflation.
Given the limited goods resulting from the chip shortage, the increase in commodity prices and the difficulties faced by some businesses in hiring workers, the odds of a more significant rise in inflation continue to grow. This week’s Consumer Price Index report will be closely watched, especially by a bond market that is wary of any change in inflationary expectations.
Such a change in the intermediate term could potentially create significant volatility in asset prices over the next few months.
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