Wentz Weekly: Consumer Confidence Surges in March

Wentz Weekly Insights
Consumer Confidence Surges in March

President Biden revealed the first phase of his infrastructure proposal last Wednesday. The proposal’s priorities include transportation improvements, investing more in domestic manufacturing and supply chains, improving the electric grid, high speed broadband across the country, and housing and schooling infrastructure improvements. The total cost of the first phase is estimated to be a little over $2 trillion and be broken down as follow: $621 billion for transportation infrastructure improvements, $480 billion for domestic manufacturing, $400 billion for healthcare infrastructure, $313 billion for public housing repair, housing credits and school improvements, and $311 for modernizing the water, electric and broadband systems. The plan calls for adjustments in corporate tax laws to offset some of the costs of the proposal. The plan would include increasing the corporate tax rate to 28% from 21%, increasing the rate on overseas profits, implementing a minimum tax on book income for larger corporations, and eliminating certain subsidies and deductions.
The administration will attempt to gain bipartisan support but after adjustments is likely to have enough support from all Democrats in the Senate to pass with a 50-50 vote via reconciliation (similar process to how the latest stimulus bill was passed since there was no support from Republicans). The timeline is uncertain, but House Speaker Pelosi is targeting a deadline of July 4 for drafting and passing the bill in the House. If the legislation is delayed into the second half of the year Congress will have to worry about the appropriations process which has a deadline of October 1 where things could get more dicey. The second phase of the infrastructure plan is expected to focus more on social issues, and early thoughts see changes to individual taxes wrapped into this package to help offset the costs.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies announced following its meeting last Thursday it had agreed to gradually raise oil production from May through July by 2 million barrels/day by the end of the period. The decision suggests the group is growing more confident in the recovery in the global economy and demand for oil. Since the pandemic began, OPEC+ has cut production on about 7 billion barrels/day of oil, with Saudi Arabia voluntarily cutting another 1 million barrels/day. The Saudis said they will also gradually add more supply from its voluntarily 1 million bbl/day cutback. The group will continue to assess the oil markets and decide whether to adjust production up or down on a monthly basis.
A Covid vaccine for individuals as young as 6 months old could soon be available after recent data showed encouraging results. Pfizer and BioNTech said last week that in a Phase 3 trial in adolescents age 12 to 15 the vaccine demonstrated 100% efficacy with robust antibody response, exceeding the levels in an analysis of the age 16-25 age group. The trial included 2,260 adolescents where 18 cases of Covid were reported in the placebo group and zero were reported in the vaccinated group. The companies plan to submit the data to the FDA for emergency use approval for this age group. In addition, the companies said it has begun dosing healthy children in a Phase 1/2/3 trial to evaluate safety and efficacy in the 6 month to 11 year old age group. The companies are also moving into a Phase 3 study to evaluate a lyophilized formula of their Covid vaccine which does not require the stringent storage requirements of the original formula.
March was expected to be a large month for jobs gains in the labor market thanks to the continued reopening of our economy with the acceleration of the vaccine rollout surely a contributing factor. Actual data from the Department of Labor did not disappoint, with 1.3 million nonfarm payrolls added in the month and 917,000 nonfarm payrolls added on a seasonally adjusted basis. The headline unemployment rate fell to 6.0% in March from 6.2% in February, which may be a little misleading because there are less individuals in the labor force and almost 6 million people who are working part time that would rather have a full time job. A more appropriate figure is the U-6 unemployment rate which includes these individuals and stands at 10.7%, which improved from 11.1% in February and down from 22.9% last April. Despite the strong March payroll figures, there still remains close to 10 million fewer employed than pre-pandemic levels and 2.1 million more permanent jobs lost compared to pre-pandemic levels. However, with much of the job losses having been in lower paying and lower skilled jobs, as the economy continues to reopen we expect strong employment reports in the months ahead.

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