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The Weekly Bottom Line: U.S. Small Businesses Struggle to Hire Workers, Despite High Unemployment

U.S. Highlights

  • Consumer and producer price inflation surprised on the upside on the back of rebounding energy prices, supply disruptions and strong fiscal-stimulus fueled demand.
  • Despite inflation overshooting 2%, several Fed officials reassured markets that there won’t be any tapering of asset purchases any time soon since the spike in inflation is viewed as transitory.

Canadian Highlights

  • Canada is slowly emerging out the third wave of the pandemic. As we look ahead to a summer with less restrictions, there are signs of rising inflation on the horizon.
  • Strains to the supply chain and a strong recovery in consumer demand could boost price growth, similar to what was observed in the U.S. in April. As supply chain kinks are smoothed out, these pressures should dissipate.

Special Feature – U.S. Small Businesses Struggle to Hire Workers, Despite High Unemployment

  • Unfilled job openings among U.S. small businesses rose to a new record high in April. But, finding qualified workers is proving difficult and expectations that these openings will be filled lag behind.
  • Small businesses are boosting pay to try and attract talent. The share of firms raising compensation rose to 31% in April, one of the better historical showings. Another 20% plan to raise compensation in the next three months.

U.S. – Inflation is Here but Don’t Let it Get to You

George Bernard Shaw, once famously quipped: “If all economists were laid end to end, they would not reach a conclusion.” This week’s inflation data gave economists plenty of fodder for debate and disagreement: How transitory will inflation be? How much of the rise in producer prices will pass through to consumer prices? When will the Fed react?

Consumer prices surprised on the upside this week. The consumer price index (CPI) rose by 0.8% month-on-month (m/m) in April. That boosted the headline inflation rate to 4.2% year-on-year (y/y), the fastest increase since 2008. Meanwhile, core inflation rose to 3% y/y. Naturally, these data have raised concerns about a more sustained increase in prices. Digging into the data, many of the biggest price hikes were in areas that had seen the biggest disruptions during the pandemic – travel-related areas like airline fares, car rentals and hotels. As Americans are vaccinated, these industries are now seeing demand pick up sharply. Still, amid this demand resurgence there are worries that other pandemic-related factors – supply-side bottlenecks, higher energy costs, and rising wage pressures – could cause a sustained surge in pric