Data released on Thursday reflected a positive momentum in the US economy. Among those, was the ISM service index rising to the highest in decades. Analysts at Wells Fargo point out the service sector activity has never been so strong and broadly based. They warn that as the reopening of the services economy shifts into a higher gear, demand is outstripping scarce supply pushing the prices paid component to the second-highest reading on record.
Key Quotes:
“The reopening of the services economy shifted into a higher gear in mid-May after the CDC announced on May 13 that fully vaccinated people do not need to wear a face mask in most settings. While this milestone is good news in the context of our expectation for a surge in services related spending this summer, the demand surge is further lengthening wait times for deliveries.”
“Contributing to upward price pressures are ongoing challenges to restaff after the pandemic. The hiring index slipped 3.5 points. At 55.3, the sagging employment index looks at odds with buoyant measures of activity and orders. Like its manufacturing counterpart and yesterday's Beige Book, comments reflected that hiring would be even stronger if businesses could find more workers.”
“Tomorrow's employment report comes with an extra degree of uncertainty. Demand for labor is clearly strong, as evidenced by record job openings and elevated hiring plans and a leap in consumers viewing jobs as plentiful. But getting workers back to the jobsite as soon as businesses are ready for them remains a clear hurdle to hiring. We have pared back our expectations for tomorrow's employment report as a result and look for an increase of 700K jobs.”