Graeme Wearden 

US economy only added 266,000 April jobs; markets rally; UK construction surges despite soaring costs – as it happened

Rolling coverage of the latest economic and financial news, as the recovery in the US labour market slows unexpectedly
  
  

The sun rises behind the Empire State Building and Chrysler Building in New York City this week
The sun rises behind the Empire State Building and Chrysler Building in New York City this week Photograph: Gary Hershorn/Getty Images

Closing summary

With European stock markets closed for the week, it’s time to wrap up.

A quick recap....

Job creation in the US has slowed sharply, with payroll growth falling far short of expectations. Just 266,000 jobs were added to payrolls last month, missing forecasts of a million new jobs, with the unemployment rate pushing up to 6.1%.

The Non-Farm Payroll also showed that 8.2m fewer Americans were working compared with February 2020, highlighting the ongoing economic damage caused by the pandemic.

The NFP report also showed a sharp jump in people working in leisure and hospitality jobs, but a drop in manufacturing - led by a car industry struggling to get components - and in couriers and messengers, as online shopping eased off.

President Joe Biden said the report showed that the US economy still has a long way to go to reach recovery:

“We knew this wouldn’t be a sprint; it would be a marathon.

Quite frankly, we’re moving more rapidly than I thought we would.”

Stocks rallied on Wall Street, with the Dow and S&P 500 hitting record highs, as traders took solace that the labor market wasn’t strong enough to merit higher interest rates.

In Europe, the markets also closed at a new record, while Britain’s FTSE 100 ended the day at a new 14-month high.

Commodity prices jumped again, lifted by a surge in demand as more economies reopen after pandemic lockdowns. Both copper and iron ore hit record levels.

Both China and Germany reported a jump in trade, highlighting how the global economy is recovering this year.

UK building firms are also busy, with output growth running near to its highest levels since 2014 last month. With new orders booming, construction firms are hiring more staff.

But construction bosses are also suffering from longer delays, stretched supply chains, and a record jump in input costs. Steel, timber and cement is all much pricier - if you can get it at all.

Here are more of today’s stories:

Goodnight! GW

The weaker US dollar helped to push the pound back to $1.40 this afternoon, for the first time in over two weeks.

It’s hovering at $1.3990 right now, up a cent today.

Sterling traders will be watching the results of yesterday’s elections roll in.

In Scotland, Scottish National party leader Nicola Sturgeon has played down the prospects of winning an overall Holyrood majority as early Scottish results showed significant levels of tactical voting in favour of pro-UK parties across the country.

Scotland editor Severin Carrell explains:

The first minister and Scottish National party leader told reporters in Glasgow “a majority has always been a very, very long shot” as the first vote counts showed surges in support for many sitting Labour, Conservative and Liberal Democrat constituency candidates.

With voters barraged by Conservative warnings that Sturgeon would press for a second independence referendum if she wins a majority, there was a record turnout in polling stations across the country as shy Tory voters turned out in larger than normal numbers.

The truth behind the unemployment benefits myth

At restaurants across the country – from Albuquerque, New Mexico, to Forth Worth, Texas – the same sign is popping up:

“We are short staffed. Please be patient with the staff that did show up. No one wants to work anymore.”

The implication is that the federal government’s expanded unemployment benefits of $300 each week are keeping people at home instead of behind cash registers and in fast-food kitchens.

It’s a concern shared by independent business owners in interviews with local and national media, worried that their efforts to bump wages and increase benefits aren’t luring in the workers they need as Covid-19 restrictions fall and consumer spending soars.

Unfortunately for them, what’s happening is a feature, not a bug, of the US economic system and the blame can’t entirely be placed on a $300 weekly check.

The University of Pennsylvania economist Ioana Marinescu said:

“In the absence of the benefits there would probably be a little bit more applications and hiring would be a little bit easier, but the main drive of the recent change in sentiment is that hiring is accelerating.”

Updated

Yellen: We've made remarkable progress

U.S. Treasury Secretary Janet Yellen heralded the progress the economy has achieved to escape the grip of the coronavirus pandemic but said more action was needed to “build back better.”, Reuters reports.

“We’ve made remarkable progress,” Yellen told reporters at the White House. But she said jobs data for April showed that “we’re not yet finished.”

She added:

“As our economy continues to heal, it’s important to consider ways in which we can build back better,”.

Yellen also pushed back against suggestions that increased unemployment benefit are deterring people from getting a job:

Instead, childcare issues are keeping some parents back from the jobs market, she suggests, along with concerns about catching Covid - and the supply chain problems hitting many economies.

Treasury secretary Janet Yellen is now discussing the jobs report too:

Biden: We still have a long way to go after jobs report miss

President Joe Biden has said the American Rescue Plan, his $1.9 trillion coronavirus relief package, would help the US economy return to pre-pandemic levels, my colleague Joan E Greve reports.

Speaking a little while ago, Biden insisted the country is “moving in the right direction”, despite today’s jobs report severely missing expectations.

Biden said:

“We knew this wouldn’t be a sprint; it would be a marathon.

Quite frankly, we’re moving more rapidly than I thought we would.”

However, his American Jobs Plan and American Families Plan are necessary to get the US on even better economic footing than what the country saw before the pandemic, the president argued.

“The American Rescue Plan is just that, a rescue plan,” Biden said.

“It’s to get us back to where we were, but that’s not nearly enough. We have to build back better.”

Biden added,

“This month’s job numbers show we are on the right track. We still have a long way to go.”

Joe Biden took a few questions from reporters after concluding his prepared remarks about the April jobs report.

A reporter asked the president whether he believed the enhanced unemployment benefits provided by his coronavirus relief package has had a negative impact on jobs numbers, as many Republicans have argued.

“No, nothing measurable,” Biden replied.

Joan’s US Politics Liveblog has all the details:

Updated

European markets at new record

The Europe-wide Stoxx 600 index has closed at a new record high, up around 0.9% at 444.93 points.

All the main markets closed higher, led by Germany’s DAX, with investors still appearing confident about the economic recovery.

Jitters about a possible early rise in US interest rates have also receded, after a brief wobble earlier this week.

Chris Beauchamp, Chief Market Analyst at IG, explains:

Today’s ‘huge miss’ on the headline NFP figure, and the downgrade to last month’s blowout figure, contributed to a general relaxation of nerves regarding any changes to Fed policy. Risk assets took off, the dollar fell, and gold built on its strong rally in yesterday’s session.

In normal times a 200,000+ job print would be good news, but these are not normal times, and the high expectations preceding today’s number set investors up for disappointment, at least in terms of the continued economic rebound. Stocks have been in search of a catalyst to resume their move higher, and it looks like today’s number has provided the spark. It will certainly take the pressure off the Fed to discuss any changes in policy, at least for another month, and thus is likely to be taken as good news both on Wall Street and in the corridors of the Federal Reserve building.

Some good points here:

FTSE 100 closes at new post-pandemic high

Back in London, the FTSE 100 index has closed at its highest level in over 14 months.

The blue-chip share index ended the day 53 points higher at 7129.71 points, up 0.75%.

That’s its highest close since late February 2020, early in the market crash last year.

For the week, the FTSE 100 has gained around 2.3% - its best week in a month.

Online grocer Ocado ended as the top riser today, up almost 4%, followed by mining giants Anglo American (+3.5%) and Glencore (+3.3%) following the surge in iron ore and copper to record highs today.

Hospitality group Compass, who do catering for companies, schools and sporting events, gained 3.3%. Airline group IAG (+3%) and jet engine maker Rolls-Royce (+3.2) also finished higher, ahead of the government’s announcement on lifting travel restrictions.

That announcement’s just started - you can track it in our main Coronavirus liveblog:

Here’s some more reaction:

Another point to note from the jobs report: the US labor force participation rate was little changed at 61.7% percent in April, and is 1.6 percentage points lower than before the pandemic.

That shows that many people are still out of the jobs market (neither in work or looking).

Robert Alster, CIO at wealth manager Close Brothers Asset Management points out that the Fed will look at more nuanced data to ensure the recovery is ‘inclusive’, rather than just the headline jobless rate.

That would include a rise in employment for black American workers, who bore the brunt of Covid-19’s economic, as well as wage growth among low-paid workers, and more jobs for those without a college education, Alster explains:

“Every piece of the economic puzzle was building a picture of strong recovery and thriving growth in the US, but the employment data has proved a shocking outlier. With both nonfarm payrolls and unemployment coming in much worse than expected, the combination of a rapid vaccine rollout, hefty fiscal stimulus and ultra-easy monetary policy has not yet pushed the US economy into the clear.

“What’s more, the devil is in the detail. The Fed is keen to monitor inclusive employment, to ensure that the US doesn’t fall into the ‘K-shaped’ recovery trap.

Average US hourly earnings jumped 21 cents to $30.17 last month, following a four cent fall in March.

That’s better than forecast -- but it could be a sign that fewer low-paid jobs were created than expected, rather than simply bosses lifting wages to attract staff.

Analyst Edward Moya of OANDA explains:

This wage increase is temporary, over the next few months wage pressure will struggle to rise as lower paying jobs return and drag down the average.

The average workweek increased slightly by 0.1 hour to 35 hours last month, but was unchanged in manufacturing at 40.5 hours.

Updated

One glimmer of good news: February’s nonfarm payroll was revised up by 68,000, from +468,000 to +536,000.

But that was more than countered by the 146,000 downward revision to March’s NFP flagged earlier, from +916,000 to +770,000.

So overall, employment in February and March combined was 78,000 lower than previously reported.

Today’s US Non-Farm Payroll report is “one of the largest downside misses on record”, according to Bloomberg.

That’s based on the Wall Street forecast for around 1m new hires last month -- not the mere 266,000 reported.

Bloomberg adds:

The disappointing payrolls print leaves overall employment more than 8 million short of its pre-pandemic level and is consistent with recent comments from company officials highlighting challenges in filling open positions.

“It’s a lot faster to lay off workers than it is to hire them back,” said Sarah House, senior economist at Wells Fargo & Co. “While we are seeing some workers come back into the labor force it just isn’t fast enough.”

While job gains accelerated in leisure and hospitality, employment at temporary-help agencies and transportation and warehousing declined sharply.

More here: U.S. Job Growth Disappoints in Challenge to Economic Recovery

Bloomberg’s Matthew Boes has been tweeting some neat charts too:

Updated

A year ago, we were writing about the biggest plunge in US employment on record, when over 20 million people lost their jobs in April 2020 and the unemployment rate hit its highest since the Great Depression.

So while jobs creation was weak last month, and eight million jobs are still lost, Covid-19 vaccines do mean the picture is less grim 12 months on.

As Charles Hepworth, investment director at GAM Investments, says:

What a difference a year makes with an effective vaccine rollout.

This time last year US non-farm payrolls recorded its largest ever decline on record with over 20m dropping out of the workforce in the month of April 2020 as the economy ground to a sudden stop. Fast forward to today and the employment change last month saw only 266k people (re)join the jobs market. This was a huge miss against expectations of nearer to 1m new jobs priced into markets.

Wall Street hits record high

In New York, traders have responded to the disappointing jobs report by driving stocks to new peaks in early trading.

Both the Dow Jones industrial average (which contains 30 of America’s largest and best-known companies) and the broader S&P 500 have hit record highs - extending their recent rally.

  • Dow: up 169 points or 0.5% at 34,718 points
  • S&P 500: up 32.6 points or 0.78% at 4,234 points

Footwear and sportswear maker Nike are leading the Dow risers, with a 3.8% jump.

Tech firms are also stronger, with Cisco gaining 2%, Microsoft up 1.5%, Salesforce.com rallying by 1.4% and Intel 1.2% higher.

An odd reaction to a disappointing jobs report? Well, not if you remember that the market has been supported by the large stimulus packages since the pandemic began. Weak employment growth means the Fed won’t be rushing to pull away the punchbowl.

Plus, other US economic data has been more robust recently, with PMI surveys showing strong company growth, and weekly jobless claims hitting their lowest since the pandemic began.

The US dollar dropped when the jobs report came out, briefly hitting its lowest level since late February against a basket of currencies.

Traders will be calculating that weak jobs growth lowers the possibility of an early tightening by the Federal Reserve.

The slowdown in hiring last month appears to vindicate the Federal Reserve’s cautious approach this year.....and the White House’s stimulus package.

Although the Fed has forecast strong growth and falling unemployment this year, it has resisted calls to slow its bond purchase program or consider raising interest rates soon.

Chair Jerome Powell has warned that the recovery is “uneven and incomplete” - which today’s jobs report rather bears out.

It also highlights why president Joe Biden pushed for the $1.9trn stimulus package earlier this year to spur growth and spending, and now wants to spend billions more on the American Jobs Plan, to rebuild US infrastructure.

Josh Lipsky, director of the Atlantic Council’s GeoEconomics Center, says the recovery has a long way to go.

“For those who feared the US economy would overheat, the bigger risk may be that it is undercooked. Today’s report shows there won’t be an overnight fix for millions who remain unemployed.

The US economy still has a long way to go in its recovery. It also means the Federal Reserve’s policy of near zero interest rates and Congress’ push for more fiscal spending will continue in the months ahead. For the rest of the world, it means they can’t rely solely on the US to power a global economic recovery in 2021.”

Updated

Glassdoor’s Senior Economist Daniel Zhao says today’s report is ‘a bit of a head scratcher’ - denting hopes of a sharp recovery in employment.

The recovery “hit a speed bump in April” he says, adding that it may indicate that labor shortages are affecting the US economy:

Amid concerns of labor shortages, the data in today’s report isn’t wholly consistent with the idea that labor shortages have crimped the recovery.

Labor shortages were most commonly reported in leisure & hospitality, but the industry also saw the strongest job growth in April. While it’s possible that gains would’ve been even higher without these labor shortage challenges, it is unusual that they would show up in other industries more severely.

The report is a bit of a head scratcher that tempers recent projections of a smoothly accelerating economic recovery. By all accounts, the improving public health situation should drive faster job gains, but the report is a humbling reminder that the road to recovery is not a straightforward one in a pandemic. While vaccine distribution and an economic reopening should still drive significant job gains in the summer, today’s report tempers optimism with caution.”

The number of people working as couriers and messengers in the US fell by 77,000 in April, the jobs report shows.

That looks to be a sign that the boom in e-commerce deliveries has faded as Americans return to the shops, as pandemic restrictions lift.

Within professional and business services, employment in temporary help services declined by 111,000 in April.

Retail lost 15,000 jobs, driven by a 49,000 drop in employment at food and beverage stores.

Economist James Foster has tweeted the key points from today’s jobs report:

More details from the Bureau of Labor Statistics:

Among the major worker groups, the unemployment rates for adult men (6.1%), adult women (5.6%), teenagers (12.3%), Whites (5.3%), Blacks (9.7%), Asians (5.7%), and Hispanics (7.9%) showed little or no change in April.

There was little change in the number of people classed as either temporarily or permanently laid off either -- both were sharply higher than before the pandemic.

The BLS says:

Among the unemployed, the number of persons on temporary layoff, at 2.1m, changed little in April. This measure is down considerably from the recent high of 18.0m in April 2020 but is 1.4m higher than in February 2020.

The number of permanent job losers, at 3.5m, was also little changed over the month but is 2.2m higher than in February 2020.

The big picture is that nonfarm employment across the US is still down by 8.2 million compared to its pre-pandemic level in February 2020, following April’s disappointing jobs report.

This chart shows how the initial recovery from the shock of the pandemic last year has faded:

The Washington Post’s Heather Long says April’s jobs report is a ‘big disappointment’:

Updated

Manufacturing jobs fell

US manufacturing employment fell last month, with an 18,000 drop in jobs in April.

That includes a 27k drop in jobs in the auto industry, where carmakers have been hit by the global shortage of semiconductors.

The Non-Farm Payroll Report says:

In April, job losses in motor vehicles and parts (-27,000) and in wood products (-7,000) more than offset job gains in miscellaneous durable goods manufacturing (+13,000) and chemicals (+4,000).

Employment in manufacturing is 515,000 lower than in February 2020.

Economist Dean Baker of the Center for Economic and Policy Research tweets:

BLS: Leisure and hospitality added jobs

The Bureau of Labor Statistics says:

Notable job gains in leisure and hospitality, other services, and local government education were partially offset by employment declines in temporary help services and in couriers and messengers.

The NFP report shows that employment in leisure and hospitality rose by 331,000 in April, as pandemic-related restrictions continued to ease in many parts of the US.

More than half of the increase was in food services and drinking places, where payrolls increased by 187,000.

In another blow, March’s Non-Farm Payroll has been revised down too.

It now shows that 770,000 new jobs were created in the US in March, down from the 916,000 estimated a month ago.

US economy only added 266,000 new jobs in April

Newsflash: The US economy added just 266,000 new jobs in April, missing expectations.

That’s a lot weaker than expected -- way shy of the Wall Street consensus of nearly one million new jobs.

The unemployment rate has gone up, to 6.1% in April - from 6.0% in March.

That has dashed hopes for a sharp increase in employment last month, as the rapid Covid-19 vaccination program helped the US economy to reopen

Details and reaction to follow....

As usual, there’s a broad spread of forecasts for the Non-Farm Payroll report, but the consensus is for roughly one million new jobs in April.

Updated

It’s nearly time to learn how many new jobs were created in America last month.

Economists are expecting a strong Non-Farm Payroll report - with many predicting at last a million fresh hires, which would be the best since last August.

We’re also expecting a drop in the unemployment rate, to 5.8% from 6%, as the labor market recovers.

A strong NFP report will boost confidence in the recovery.. but possible reignite chat about how long the US Federal Reserve will maintain its stimulus programs.

Fawad Razaqzada, market analyst at ThinkMarkets, says:

After a volatile week, brace yourself for more fireworks as we look forward to the release of the April 2021 non-farm payrolls report.

In recent days, investors have been piling into risk-sensitive assets, including commodities and value stocks and anything that relies on economic growth.

Indeed, the Dow surged to a fresh record high as more signs of an improving economy emerged, with applications for unemployment benefits falling last week to a fresh pandemic low. But on Thursday, the tech sector also found renewed strength as yields dipped on the back of dovish remarks from several Fed officials who have moved to alleviate speculation over monetary tightening amid rising inflationary pressures.

Holiday Inn parent InterContinental Hotels Group has seen a pick-up in demand in recent weeks as economies have started to reopen.

Keith Barr, Chief Executive Officer, says it was led by the Americas and Greater China:

There was a notable pick-up in demand in March, particularly in the US and China, which continued into April.

While the risk of volatility remains for the balance of the year, there is clear evidence from forward bookings data of further improvement as we look to the months ahead.

IHG is anticipating higher demand as vaccine rollouts becomes more established, travel restrictions lift, and economic activity rebuilds.

For the first quarter of this year, occupancy levels were 40.0%. Revenue per room (revPAR) was just half its level in Q1 2019, and 33% lower than in 2020.

Europe is lagging, due to the current lockdown restrictions. In the UK, revPAR was down 75% in Q1 compared to 2019’s levels, while in Continental Europe it was 87% lower.

Elsewhere in the markets, MSCI’s emerging market currency index has hit a record high today.

It’s been lifted by gains in the Chinese yuan, following today’s better-than-expected trade figures, and the ongoing weakness of the US dollar.

Reuters has the details:

The benchmark jumped 0.3% and is on track for a 0.4% advance over the past seven days, its fifth straight week of gains.

China’s yuan has strengthened 0.25% in offshore trading on Friday to hit its best level in 2-1/2 months.

The jump in commodity prices is also pushing the currencies of some producer countries; Bloomberg recently explained that Brazil, Mexico, Malaysia and Indonesia are particular beneficiaries. And in the longer term - faster growth could create inflationary pressures which force central banks to lift interest rates.

The FTSE 100 is pushing higher too, lifted by mining giants.

It’s now up 54 points or 0.75% at 7130 points, a fresh 14-month high.

Anglo American (+3.5%) and Glencore (+3.2%) are top risers, with investors expecting them to profit from the surge in iron ore, copper and other commodities.

Jet engine maker/services Rolls-Royce are up 3%. Ocado have gained 2.7%, having yesterday dropped to £19 for the first time in a year (they were £28 back in February, before the tech selloff began).

Barclays are still 3% higher, after activist investor Edward Bramson sold his stake.

The Europe-wide Stoxx 600 index has hit a new record peak as well, today.

Sophie Griffiths, market analyst at OANDA, says there’s an optimistic mood in the markets, ahead of the US jobs report in 90 minutes.

Robust earnings and yet more upbeat data from the Eurozone indicates the economy has turned a corner.

German industrial production numbers printed ahead of forecasts, following in the footsteps of a string of data points across the week. In addition to German factory orders, Eurozone retail sales, Eurozone services and composite PMIs all came in ahead of consensus estimates, which bodes well for Q2 growth.

While the Dax is leading the charge in Europe, the FTSE has also put in a notable effort across the week, heading for its best weekly performance in a month. Energy stocks and industrials are dominating the upper reaches of the UK index. Miners are also on the rise as copper trades at an all-time high.

Updated

Mid-cap FTSE 250 index at new record

Britain’s FTSE 250 index of medium-sized companies has hit a new record high today, thanks to the economic recovery and some takeover talk.

The FTSE 250, which is more domestically focused than the blue-chip FTSE 100, has jumped 1% to a new peak of 22,724 points.

It had already made up all its pandemic losses, after a vertiginous tumble back in February and March 2020 when it fell to just 13,000 points.

The rally is being led by property and logistics developer St Modwen, who are still up 19% after this morning’s takeover approach from Blackstone.

British engineering company Meggitt are up 9% -- Reuters attributes this to a report on the Dealreporter website that U.S. group Woodward Inc was looking at a potential deal.

Other top risers include challenger bank Virgin Money (+6%), Sports Direct owner Frasers (+6%) (it began a £60m share buyback this week), and airport and high street retailer WH Smiths (+3.5%).

AJ Bell investment director Russ Mould says recent takeover interest shows that UK companies may still look cheap to overseas buyers:

“Two private equity approaches in two days – one for John Laing from KKR and one for St Modwen from Blackstone – add to a growing list of takeover offers for UK-listed companies, to suggest there is still value to be had, even as the FTSE 100 tries to pull away from the 7,000 mark,

“Granted, KKR is yet to table a formal bid for John Laing, but St Modwen’s board seems minded to recommend the 542p-a-share cash offer and the 21% premium that represents, should a firm offer be made.

“That 21% premium is below the 36% average premium offered by bidders, across successful, ongoing and even failed approaches, over the past six months, when some 40 predators have stalked their prey. The number of bids, and the premium, suggests that someone, somewhere – be they trade or financial buyers – feel UK companies are still going cheap, with overseas buyers potentially attracted by how the pound still stands below the levels reached just ahead of the Brexit vote five years ago.

Back in the markets, commodity prices continue to climb -- implying another rise in raw material costs....

Overall, April’s surveys of purchasing managers suggest that the UK economy grew strongly last month as it emerged from the pandemic lockdown.

The manufacturing PMI hit its highest level in 27 years on Tuesday; yesterday, service sector growth hit a seven-year peak, lifting overall private sector growth to the fastest since October 2013.

Now construction has reported solid growth too, near last month’s 6.5 year high.

PMI surveys can overstate swings in the economy (they basically ask whether conditions improved or got worse each month), and also rise when prices or delays increase. But they’re a decent gauge of the direction of the economy - and right now, they’re pointing upwards.

The impact of those stretched supply chains on builders can be seen here:

This scramble for raw materials means construction firms need to consider different ways to deliver projects, says Michael O’Shea, construction partner at law firm Gowling WLG.

Here’s his take on the rapid UK construction growth last month:

This is very positive news for the industry and the wider economy. Indeed, it confirms the views and experiences that construction professionals and contractors have been reporting.

It will also focus the industry to continue to develop alternative ways of delivering projects with the use of modular and prefabricated construction in order to balance the increasing demand on traditional supply chains to ensure they can deliver on the market demands.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, says supply chains are struggling to cope with the surge in demand from busy construction firms.

This means builders face hefty price hikes for materials -- from aggregates and timber to steel, cement and concrete.

Brock says:

“Issues around supply chain performance acted as a drag on capacity however as supply constraints on essential materials increased to one of the third highest levels since 1997 when the survey began.

Brexit issues remained a factor affecting deliveries from the EU and suppliers generally were struggling to meet the sudden rush in demand leading to shortages of basic materials.

This inevitably led to the sharpest rise in cost inflation in a generation as builders scrambled to catch up on projects but the biggest rise in job creation since December 2015 also followed, signalling sustainable growth in the sector this summer.”

UK construction output has now grown for 10 of the last 11 months, since returning to growth last June after the first lockdown (January 2021 was the exception).

Firms are “highly upbeat” about their growth prospects too, IHS Markit says:

More than half of the survey panel (57%) expect a rise in business activity during the next 12 months, while only 7% forecast a decline.

This chart show how construction activity remained strong in April, with builders taking on staff at the fastest rate since December 2015.

UK construction output surges... as raw material prices rocket

Britain’s construction sector grew strongly in April as the economy emerged from lockdown... with builders facing a record surge in raw material costs.

Construction firms have reported that output jumped in April, across civil engineering, commercial work and house building.

New orders leapt at the fastest rate in six and a half years, which led to the steepest rate of job creation across the construction sector since December 2015 as firms scrambled to hire more workers.

That’s according to IHS Markit’s Construction PMI, just released. It came in at 61.6 in April, showing a robust jump in activity, and only fractionally from March’s six-and-a-half year peak of 61.7.

Markit says commercial work grew fastest last month, although a little slower than in March, while civil engineering growth was the highest since September 2014.

But, this jump in demand is leading to longer delays...with some builders also blaming trade frictions after Brexit too:

A rapid rise in demand for construction products and materials continued to stretch supply chains in April. The latest lengthening of suppliers’ delivery times was the third-greatest since the survey began in 1997, exceeded only by those seen during the lockdown in April and May last year.

Construction firms mostly cited demand and supply imbalances, but some suggested that Brexit issues had led to delays with inputs arriving from the EU.

And raw prices are surging at the fastest since the survey began 24 years ago.

The jump in commodities is clearly hitting the building sector, with steel (made from iron ore, of course) and timber (where prices have rocketed) singled out:

Higher prices paid for a wide range of construction items contributed to the fastest overall rate of cost inflation since the survey began in April 1997 (index at 84.6, up from 77.8 in March).

Steel, timber and transportation were among the most commonly reported items up in price.

Updated

After a three-year fight to overhaul Barclays.....the activist investor Edward Bramson has withdrawn from the battle by selling his 6% stake in the company.

My colleague Mark Sweney explains:

Sherborne Investors, Bramson’s New York-based investment vehicle, said it was selling the stake to focus on a new unnamed investment target instead.

The British-born lawyer first took a stake in Barclays in 2018, criticising Barclays’ underperforming investment bank and saying its strategy had failed to benefit shareholders.

“Sherborne Investors has informed the company that it believes that the risk of and rewards from a new investment opportunity that it has identified offers a better return to the company’s shareholders than a continuing investment in Barclays,” it said.

The scale of his stake made him the third-largest shareholder in Barclays, after the investment fund BlackRock and Qatar’s sovereign wealth fund, but his plans failed to gain much traction with other investors. In 2019, fewer than 13% of shareholders voted in favour of a resolution to have Bramson appointed to the board of Barclays.

Barclays are still in the FTSE 100 risers today, up nearly 2%.

St. Modwen shares jump after Blackstone approach

Takeover news: Private equity firm Blackstone Group has made a £1.21bn proposal for acquire St. Modwen Properties, the UK housebuilder and warehousing firm.

It’s worth 542p per share in cash -- a 21.1% premium to last night’s closing price.

And that might well be enough to clinch the deal.

St Modwen says:

Having considered the Possible Offer, the Board of St. Modwen has indicated to Blackstone that the Possible Offer is at a value the Board would be willing to recommend unanimously, should a firm intention to make an offer pursuant to Rule 2.7 of the [takeovers and mergers] Code be announced on such terms.

Shares in the firm have jumped almost 19%, to 532p, to the top of the FTSE 250 leaderboard.

Birmingham-based St Modwen builds “industrial and logistics spaces” such as warehouses -- which have been in growing demand since Covid-19 triggered a surge in web shopping.

The Evening Standard has more details:

The property developer has a housing arm, a land and regeneration division, and it has a large logistics real estate business.

Warehousing firms have seen bumper demand during the pandemic as retailers sought space to cope with high online orders. St Modwen has a 19 million square feet pipeline of logistics projects.

The company also built 948 homes last year - and is aiming for 1,500 per year by 2023.

Updated

Germany has followed China’s lead, and reported solid trade growth as its manufacturers also benefit from the global rebound.

German exports grew 1.2% month-on-month in March to €126.5bn, the 11th month of growth in a row. They were 16.1% higher than a year ago (when the pandemic was forcing the global economy to shut down).

Imports jumped strongly -- up 6.5% month-on-month to €105.9bn. That’s 15.5% higher than the dark days of March 2020.

The annual increases are both records, Destatis says:

Compared with March 2020, exports increased by 16.1%, and imports by 15.5% in March 2021. These are the highest nominal values ever recorded for monthly exports and imports in foreign trade statistics.

On a calendar and seasonally adjusted basis, Germany’s trade surplus dropped to €14.3bn, which is the lowest since last May:

Statistics body Destatis also reports that German exports to the UK fell in March, for the third month in a row, compared to the previous year.

However, imports into Germany from the UK rose slightly in March compared with a year ago.

Destatis says:

Compared with the same month last year, exports to the United Kingdom fell by 13.2% to €6.5bn in March 2021. German imports from the United Kingdom increased by 1.6% to €3.1bn over the same period.

And over 2021 so far... German exports to the UK are down 17.6% compared to January-March 2020, while imports from the UK into Germany are down 27.7% year-on-year (full details here).

IAG posts another loss

The owner of British Airways, International Airlines Group, has reported a €1.2bn pre-tax loss for the first quarter and reiterated the need for the rollout of digital vaccine passports to enable the beleaguered aviation industry to get passengers back in the skies.

IAG said passenger capacity slumped to less than a fifth of pre-pandemic levels in the first three months of 2021, and it expects only a slight improvement in the second quarter to 25% of 2019 levels.

The airline group, which made a €1.8bn (£1.6bn) pre-tax loss in the first quarter last year, said its forecast on passenger numbers remains “uncertain and subject to review”.

Luis Gallego, the chief executive of IAG, said:

“We’re doing everything in our power to emerge in a stronger competitive position. We’re absolutely confident that a safe restart to travel can happen as shown by the scientific data. We’re ready to fly but government action is needed.”

Later today the UK government is due to announce which countries will be classed as low-risk for travel, meaning people can travel without needing to quarantine.

Iron ore and copper have helped to push Bloomberg’s index of commodities prices to its highest since 2011.

Bloomberg says:

Copper soared to an all-time record on expectations that rebounding economies will spur a boom in global demand, and the Bloomberg Commodity Spot Index jumped to its highest level since 2011.

Elsewhere, spot iron ore broke $200 a ton for the first time, and WTI crude oil approached $65 a barrel.

As things stand, the FTSE 100 is on track for its best week in a month (since 5th-9th April).

Up we go....

Updated

FTSE 100 hits new pandemic high

The UK’s blue-chip share index has hit a new 14-month high in early trading.

The FTSE 100 jumped 37 points to 7113 points, as it continues to rally on hopes of an economic rebound this year.

Top risers include engineering firms Melrose (+2.1%) and Rolls-Royce (+2.1%), catering firm Compass (+1.3%) and Barclays bank (+1.3%) -- firms who will benefit as Covid-19 vaccinations allow economies to reopen.

Mining giant Anglo American is up 0.8%, while rival BHP Billiton is 0.5% higher.

The FTSE 100 is now at its highest since 25th February 2020 (when the first lockdowns in Italy had triggered a global market crash). But it has yet to recover all its pandemic losses (unlike the US and European markets, which have hit new peaks)

Iron ore and copper hit new peaks

Commodity prices are surging again today, as the economic recovery creates a scramble for raw materials.

Both iron ore and copper prices have hit record levels today, extending a rally in commodities.

The strong trade data from China overnight, and the prospect of a very strong US jobs report later today, are boosting demand.

The benchmark S&P Global Platts IODEX, which tracks the spot price of ‘iron fines’ delivered to China, hit a record high of $202.65 per dry metric ton.

Iron ore futures in Asia have hit a peak this morning, with strong demand for the steelmaking industry and fears of supply shortages.

Reuters explains:

The most-liquid September iron ore on China’s Dalian Commodity Exchange leapt 5.3% to 1,214 yuan ($187.94) a tonne by 0330 GMT, after earlier touching a high of 1,217.50 yuan.

Copper - seen as a bellwether of the health of the global economy - is also surging. London copper prices hit a record high on Friday, over $10,200 per tonne, and again, tight supplies and expectations of strong demand.

Here’s the details:

Three-month copper on the London Metal Exchange was up 1.2% at $10,209 a tonne by 0503 GMT, after rising 1.4% earlier to hit an all-time high of $10,232. The contract has leapt 133% since March last year, when demand was hit by the coronavirus pandemic.

China posts rapid trade growth

China has reported strong trade growth today, highlighting how its economy is strengthening.

Chinese exports rose 32.3% year-on-year in April to almost $264bn, slightly faster than in March.

Imports jumped too, up 43.1% compared with a year ago to $221.1 billion, accelerating from March’s 38.1% expansion.

These year-on-year figures are distorted by the impact of the pandemic - a year ago, many economies were in lockdown to tackle the first wave of Covid-19.

Julian Evans-Pritchard of Capital Economics reckons that “Demand is probably close to a cyclical peak.”

But other economists are more optimistic, as Reuters flags:

“China’s export growth again surprised on the upside,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, adding that two factors - the booming U.S. economy and the COVID-19 crisis in India, causing some orders to shift to China - likely contributed to the strong export growth.

“We expect China’s export growth will stay strong into the second half of this year, as the two factors above will likely continue to favour Chinese manufacturers. Exports will be a key pillar for growth in China this year.”

Updated

Introduction: It's US Non-Farm Payroll day

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

After the Bank of England hiked its growth forecasts yesterday, investors are looking to the latest US jobs report for confirmation that the economic recovery is gathering pace.

And today’s Non-Farm Payroll is expected to be strong, with perhaps one million Americans finding work in April. That would be the strongest jobs growth since last August, up from the 916,000 hired in March.

Economists also predict the US unemployment rate will tick down to 5.8%, from 6%, as the labor force recovers. Yesterday, weekly US jobless claims dropped to a pandemic low

Analyst Alvin Tan of RBC Capital Markets says US companies are scrambling to find workers as they reopen.

After a surprisingly large jobs gain last month, we think the US is poised for a repeat performance as the economic re-opening gathers momentum. We are forecasting an April non-farm payrolls increase of just north of 1 million.

We know per recent qualitative data that companies are starved for employees at the moment, and that is evident in both ISM reports and in the Fed’s Beige Book.

Other economists are also expecting a very strong jobs report, with NFP forecasts ranging from around 700,000 new jobs to over two million.

Yahoo Finance flags:

But on average, economists are expecting a blowout payrolls number of at least 1 million.

Nomura chief economist Lewis Alexander said market participants should brace for a “monster U.S. payroll number” this week, driven in large part by advances in some of the industries hardest-hit by the pandemic. Leisure and hospitality payrolls are still down by 3.3 million compared to February 2020 levels, but have been making some of the largest gains over the past several months to try and lessen this deficit.

However... economists have estimated that US economy was still roughly eight million jobs short of its pre-pandemic levels, so the recovery isn’t complete.

Economic optimism pushed the UK’s FTSE 100 to its highest level since February 2020 yesterday. We’re expecting further gains today, with European stock markets called higher.

The agenda

  • 7.45am BST: French industrial production figures for March
  • 9.30am BST: UK construction PMI for April
  • 1pm BST: US Non-farm Payroll report for April
 

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