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January’s employment report was a disappointment as the rolling effects of the pandemic continue to play out. Nonfarm payrolls increased by only 49,000 and the prior two months were revised downward by 159,000 jobs. Especially worrisome was the minute increase in private payrolls of only 6,000 positions. These statistics indicate the fragile and uneven trajectory of the recovery.
The Commerce Department reported that GDP growth for the final quarter of 2020 came in at an annualized rate of 4.0%, which was welcome news, but down dramatically from the 3rd quarter, which due to statistical quirks, showed a 33.4% jump as the economy reopened following the near shutdown in the spring.
At its January meeting, the Federal Reserve’s (the “Fed”) Open Market Committee cautioned that economic growth had moderated, as had the jobs market, as new restrictions were enacted in various regions of the country. Chairman Jerome Powell reiterated that the Fed would continue to ensure that financial conditions remained accommodative while urging further fiscal stimulus on the part of the Congress and the new Administration.
The outlook for such stimulus is not clear at the moment. Despite the Democrats controlling both chambers, the ability to force legislation through is extremely limited, especially in the Senate. While it is quite likely that further stimulus will eventually be approved, the scope and timing will depend on the Byzantine mechanics of Beltway politics.
The heroic development and approval of vaccines in record time shows that the virus can be contained. While the rollout of the vaccination implementation has been haphazard at best, those logistical issues will eventually be sorted out. We believe this will encourage people to feel comfortable in going about their day to day routines. That, in turn, will allow much of the economy to bounce back and permit policymakers to focus their attention on specific areas that may bear the scars of the pandemic for some time to come.
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