Negotiating Stimulus 3.0 & January Jobs Numbers

With the Biden Administration settling into its third week on the job, attention will turn to gauging the outlook on their proposed $1.9 trillion Stimulus 3.0 package. The administration is showing increasing signs they don’t want to retreat from the price tag which Republicans, and a couple Democrats, are balking at. The question is becoming do they cleave off pieces that can get bipartisan support, like the stimulus checks and extended unemployment benefits, and package those for a vote while leaving more contentious items like hiking the minimum wage and package those into a budgetary reconciliation bill that requires only a simple majority and not the 60-vote filibuster-proof majority? Hopefully, some clarity will appear on this issue this week.  Away from Washington, it will be a busy week of economic data headlined by the January employment report on Friday. Expectations are for a gain of 55 thousand jobs which would mean nearly 10 million remain jobless from the pandemic nearly a year later and that speaks to the long and grinding nature that will be this recovery if job growth doesn’t accelerate markedly. A weak or mediocre report could also add emphasis to the debate over Stimulus 3.0. The January ISM Manufacturing (today) and Services (Wed.) indices are expected to be near repeats of December’s solid results.


Treasuries
Treasury Curve Today Week Change
3 Month 0.05% -0.02%
6 Month 0.07% -0.01%
1 Year 0.08% -0.01%
2 Year 0.11% -0.01%
3 Year 0.17% -0.01%
5 Year 0.43% +0.01%
10 Year 1.08% +0.01%
30 Year 1.84% +0.02%

 

Short-Term Rates
Fed Funds 0.25%
Prime Rate 3.25%
3 Mo LIBOR 0.20%
6 Mo LIBOR 0.22%
12 Mo LIBOR 0.31%
Swap Rates
3 Year 0.259%
5 Year 0.531%
10 Year 1.12%

 

Economic Calendar
Date Statistic For Briefing Forecast Market Expects Prior
Feb 1 ISM Manufacturing Index Jan 60.0 60.0 60.7
Feb 3 ADP Employment Change Jan 60k 60k -123k
Feb 3 ISM Services Index Jan 56.8 56.6 57.7
Feb 4 Nonfarm Productivity 4Q P -3.2% -2.9% 4.6%
Feb 5 Change in Nonfarm Payrolls Jan 55k 50k -140k
Feb 5 Unemployment Rate Jan 6.7% 6.7% 6.7%
Feb 5 Average Hourly Earnings MoM Jan 0.3% 0.3% 0.8%
Feb 5 Labor Force Participation Rate Jan NA NA 61.5%
Feb 5 Trade Balance Dec -$65.8b -$65.7b -$68.1b

calendar icon Top 5 Events for the Week

Feb. 1 — 5, 2021

1. Biden Stimulus 3.0 Outlook — All Week
2. January Employment Report — Friday
3. January ISM Manufacturing — Monday
4. January ISM Services — Wednesday
5. December Trade Balance — Friday

 

1.  Biden Stimulus 3.0 Outlook — All Week

With the Biden Administration settling into its third week on the job attention will turn to gauging the outlook on their proposed $1.9 trillion Stimulus 3.0 package. The administration is showing increasing signs they don’t want to retreat from the price tag which Republicans, and a couple Democrats, are balking at. The question is becoming do they cleave off pieces that can get bipartisan support, like the stimulus checks and extended unemployment benefits, and package those for a vote while leaving more contentious items like hiking the minimum wage and package those into a budgetary reconciliation bill that requires only a simple majority and not the 60-vote filibuster-proof majority. Because there was not a budget passed last year there are some who believe the Democrats have two opportunities to use reconciliation this year (it typically is a once-a-year procedure): one for the COVID response items and perhaps a second for an infrastructure bill later in the year. In reconciliation the Democrats would have to keep all 50 of their senators together, and a couple have already balked at the $1.9 trillion price tag.  We should start to get some clarity on the approach and outlook for passage this week.

 

2.  January Employment Report — Friday

The December Employment surprised the market with a loss of  140 thousand jobs but nearly 500 thousand were lost in the hospitality sector reflecting the narrow nature of the job losses as virus cases mounted and lockdowns returned in some areas. Outside of that sector it was a decent report. For January expectations are for a gain of 55 thousand jobs which means nearly 10 million remain jobless from the pandemic after almost a year and that speaks to the long and grinding nature that will be this recovery if job growth doesn’t accelerate markedly. A weak or mediocre report could add emphasis to the debate over Stimulus 3.0.

 

3.  January ISM Manufacturing Index — Monday

In addition to the employment numbers we get two other big January economic reports in the form of the ISM Manufacturing Index later this morning, and the ISM Services Index on Wednesday. Combined with the jobs report on Friday these three reports will give us a good idea of January activity. The ISM Manufacturing Index is expected to be 60.0 versus 60.5 in December indicating the manufacturing sector is expected to remain in solid expansionary territory which has been the case since June.

 

4.  January ISM Services — Wednesday

The ISM Services Index on Wednesday is expected to print a 56.6 nearly matching the level in December. So in all, the pair of reports, ISM Manufacturing and Services, are expected to show solid expansion in both sectors with little change in activity between December and January.

ISM Manufacturing and Services

 

5.  December Trade Balance — Friday

The December Trade Balance Report is due Friday so it will get lost in the attention over the jobs report. For December, the trade balance (goods and services) is expected to be -$65.7 billion versus November’s -$68.1 billion deficit. Over the past year the trade deficit was the widest in November and the smallest deficit was -$37.0 billion in February, right before the pandemic hit our shores. The widening deficit since speaks to the somewhat quicker rebound in our economy compared to the slower and shallower rebound in other global economies.

 

 


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Published: 02/01/21 Author: Thomas R. Fitzgerald