News: Big jobs number expected — But even larger numbers should be ahead

Friday, April 2, 2021

Big jobs number expected — But even larger numbers should be ahead — Real talk on SALT deduction

Apr 02, 2021

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Quick Fix

Welcome to jobs day — Should be a pretty big one at 8:30 a.m. to send the Biden White House into the Easter Weekend on a high note. Consensus is for a gain around 675K with a drop in unemployment to 6.0 percent from 6.2 percent. It's long enough into Biden's tenure now to actually start attributing jobs numbers to his policies.

And the stimulus checks (juicing demand) and vaccination hopes plus warmer weather are obviously starting to heat up demand for hiring. The numbers should actually get significantly better in the coming months assuming variants don't overwhelm vaccinations and inflation doesn't kick in hard.

Thus far there remains little evidence of wage push inflation and it's not likely to show up in the jobs report on Friday. Inflation is popping up in other areas but not ones the Fed would currently look to for any policy changes.

Moody's Mark Zandi emails: "March was a strong month for the job market. Nonfarm employment increased by 800,000 jobs, and the unemployment rate declined to 6%. The economic recovery is kicking back into gear as the end of the pandemic comes into view and fiscal support from the American Rescue Plan takes full effect.

"Employment got a boost from weather-related payback. Awful winter weather (Texas effectively shut down for a few days) subtracted around 100,000 from February payrolls. This should be fully recouped in March. There was also a big increase in restaurant employment …

"The economic benefit of the American Rescue Plan will also be evident in the strong jobs numbers, although the economic tailwind from the ARP will become much clearer in the next few months."

GOOD FRIDAY MORNING — (Literally!) Wishing a meaningful Easter Weekend to all who celebrate. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

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Driving the Day

Jobs report at 8:30 a.m. excepted to show a gain of around 675K jobs and the unemployment rate dropping to 6.0 percent. A number above one million is not impossible given payback from February weather and widespread re-openings …

President Biden is expected to deliver remarks on the jobs report mid-morning before heading to Camp David for the weekend … Stock market is closed for Good Friday; bond market is open half day.

PELOSI EYES SALT RELIEF – Our Bernie Becker: "House Speaker Nancy Pelosi said … she hopes that Democrats can ease the current cap on state and local tax deductions as part of a larger infrastructure package.

"Several House Democrats from New York and New Jersey say they wouldn't back any other tax changes unless the state and local tax cap is repealed. Republicans put a $10,000 limit on state and local deductions in their 2017 tax law … 'I'm sympathetic to their position,' Pelosi said … 'Hopefully, we can get it into the bill."

REAL TALK — SALT deductions are a very tough one for Dems. Pretty well-off Democrats in place like New York, New Jersey and California really want those deductions back.

But the numbers don't look that good given the deductions generally benefit wealthier tax payers. And removing the deduction cap would further blow up math on the infrastructure/tax hike package that is already somewhat tenuous. The authors of the 2017 bill knew it would be seriously tough for Dems to lift the cap. And they knew Dems would want to given how hard they hit many big blue state donors.

THE MAGIC LOOPHOLE — Our Mary Newman: "Many Democrats have come to the conclusion that they're never going to get Republicans to cooperate on anything. But Chuck Schumer seems to think that he has found a magical loophole in the 1974 Budget Control Act.

"It's called Section 304, and you're about to start hearing about it a lot. Playbook co-author Ryan Lizza breaks down how this obscure legislative loophole could work the latest episode of The Breakdown."

CFTC LOOKS FOR MORE REG ON FAMILY OFFICES — Our Kellie Mejdrich: "Democratic CFTC Commissioner Dan Berkovitz … called for more oversight of so-called family offices used to manage wealthy individuals' money, the first move by a U.S. regulator to crack down on market risks posed by the recent blowup of Archegos Capital Management.

"The CFTC plays a key role overseeing financial derivatives traded by funds like Archegos. The firm triggered market volatility in recent days after the collapse of highly leveraged stock bets spilled over to investment banks that were its trading partners."

FEMA PITCHES "EQUITABLE FLOOD INSURANCE" — Our Zachary Warmbrodt:
"FEMA … sought to tamp down growing concerns from Congress that a sweeping overhaul of flood insurance rates would hurt homeowners in the coming years, making the case it's time to end subsidies for high-priced homes in high-risk areas.

"In a briefing with reporters, top FEMA officials said 'transformational' changes in the works for the National Flood Insurance Program would put an end to a system where low-value homes effectively subsidize insurance policies for high-value homes. The changes entail a whole new approach by FEMA to measuring flood danger, by looking at homes through the lens of their specific replacement costs and individual risks, rather than simply whether they sit in a so-called 'flood zone.'"

ECON FORECASTS GOING UP — Per release: "The Peterson Institute for International Economics raised its forecast for global and US growth for this year and next. The global economy is poised to expand faster, buoyed by vaccinations, with global output on track to expand 5.6 percent in 2021.

"In the US, PIIE projects GDP will surge by more than 6 percent this year and an additional 3.5 percent in 2022, while unemployment will decline to 5.0 percent by yearend and 4.4 percent by the end of 2022."

Markets

WALL STREET CLOSES HIGHER — AP's Damian J. Troise and Alex Veiga: "Stocks [closed] broadly higher on Wall Street, pushing the S&P 500 past 4,000 points for the first time. Big Tech companies like Microsoft led the gains.

"The benchmark index climbed 1.1 percent, and the tech-heavy Nasdaq added 2.6 percent. Smaller companies continued to outpace the rest of the markets. Companies that would benefit from greater sales of electric vehicles rose after … Biden outlined various measures to support their use as part of his massive infrastructure plan."

WALL STREET'S $100B SPAC BOOM UPENDS THE LEAGUE TABLES — Bloomberg's Ben Scent: "The blank-check listings craze is shifting fortunes on Wall Street, knocking some of the world's biggest banks off their perches and bringing unexpected bragging rights for others unaccustomed to competing for league table glory.

"Cantor Fitzgerald LP, long one of the top SPAC underwriters, has been the biggest beneficiary of the boom and ended the first quarter as the No. 10 adviser on initial public offerings globally. The boutique, which hasn't ranked that high for any full year in the past decade, got 99 percent of this year's deal credit from blank-check work, data compiled by Bloomberg show. Without those deals, it would be 155 places lower."

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Fly Around

JOBLESS CLAIMS REMAIN NEAR LOWEST LEVELS OF PANDEMIC — WSJ's Amara Omeokwe: "Filings for unemployment benefits rose last week but remained near their lowest levels since the pandemic's onset, amid signs of a broader U.S. economic recovery.

"Workers filed 719,000 initial jobless claims, on a seasonally adjusted basis, in the week ended March 27 … The increase followed a downward revision to 658,000 initial claims the prior week, the lowest point since the pandemic hit in March 2020. The four-week moving average, which smooths out volatility in the numbers, fell to 719,000, also a low during the pandemic."

U.S. GROWTH STIRS FEARS OF NEW 'TAPER TANTRUM' — WSJ's Paul Hannon: "The red-hot U.S. economy is drawing billions of dollars in capital from emerging markets, stirring concerns that investor flight may destabilize poor countries where Covid-19 infections remain high and the prospect of a robust economic recovery seems distant.

"According to figures compiled by the Institute for International Finance, a research body for international banks, developing countries saw an outflow of capital in March of $5.16 billion. This week, Turkey, which raised official interest rates to contain a rise in inflation and a drop in its currency, saw the biggest weekly outflow of capital since 2015."

ARCHEGOS BLOWUP PUTS SPOTLIGHT ON GAPS IN SWAP REGULATION — WSJ's Alexander Osipovich and David Benoit: "The blowup of Archegos Capital Management is spurring calls for tougher regulation of the shadowy swap trades that fueled billions of dollars of losses at global investment banks.

"Former regulators and financial-reform advocates say one rule change, in particular, could have prevented the debacle: requiring greater disclosures of the bets that investors such as Archegos place on companies using swaps."

POLL: U.S. ECONOMIC OUTLOOK RISES AFTER RELIEF LAW — AP's Josh Boak and Hannah Fingerhut: "Views of the nation's economy are the rosiest they've been since the pandemic began more than a year ago, buoyed by Democrats feeling increasingly optimistic as … Biden's $1.9 trillion relief package is distributed across the country.

"A new poll from The Associated Press-NORC Center for Public Affairs finds 46 percent of Americans overall now view the economy as good, up from the 37 percent who felt that way last month." … But can Biden recreate the economy he grew up with?

CRYPTO FIRMS GOT MORE FUNDING LAST QUARTER THAN IN ALL OF 2020 — Bloomberg's Olga Kharif: "Venture capitalists are pouring money into cryptocurrency-related companies at the faster clip in years. In the first quarter, 129 startups focusing on the digital technology known as blockchain raised about $2.6 billion, according to CB Insights.

GOLDMAN PROMOTS FLURRY OF FEMALE PARTNERS TO EXEC ROLES — Reuters' Elizabeth Dilts Marshall: "Goldman Sachs Group … promoted four female partners to senior leadership roles at the firm"

TRANSITIONS — Per TalkingBizNews: "The Financial Times announce[d] … the appointment of Matt Vella as editor of FTWeekend Magazine."

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