Hiring, Inflation, Spending, and Travel will Trend Higher
The U.S. will add more than 2 million jobs
Between April and June, our great nation will add about 700,000 jobs per month on average. If I’m wrong, I’ll still have a job since I own my business, and I won’t be laying me off. If I’m right, America will still be down by more than 7 million jobs since the pandemic began.
Inflation will surpass 2%, with commodity prices surging
Actual inflation has trended well below expected inflation since the pandemic began in early 2020, but we’ll see it pick up in the second quarter of 2021. Supply chains are already unsettled, not just by trade disputes, Brexit, and COVID-19, but by a big boat that was stuck in the middle of the Suez Canal.
With a tsunami of demand coming from global consumers during the months to come, shortages of many inputs will worsen and prices will be pushed higher. Some of this has already happened. Softwood lumber prices are up 80% over the past year,¹ driving up the cost of building the typical single-family home by approximately $24,000.² Iron and steel prices are up 22%, and overall construction input prices are up nearly 8%.³
Consumer discretionary spending will expand dramatically
This one is obvious. With the household savings rate bulked up by stimulus and the suppression of many spending opportunities, consumer spending will take off during the months ahead. Retailers would be wise to invest intensely in their inventories in order to take advantage of surging demand.
Leisure travel will quickly return to pre-pandemic levels
It’s been a long year (365 days). If you didn’t need a vacation before, you need one now, and you aren’t alone. Book your flights now. Make your hotel reservations now. People are itching to travel (itchiness, as far as I know, isn’t a COVID-19 symptom), and you don’t want to be left behind.
From March 14-20, U.S. hotel occupancy rates reached 85% of 2019 levels, which means that many people are already on the move.⁴ You saw the pictures from Miami Beach. In some places in Texas and Florida, where pandemic restrictions have been lifted and have stayed lifted, hotel occupancy is already above 2019 levels. Oh, and make your restaurant reservations, too. While reservations are still down about 25% from the same time in 2019, that will change quickly as more people are fully vaccinated.⁵
Business travel won’t
Leisure travel will likely return to normal levels this summer. Business travel won’t. During the week of March 25, TSA headcount numbers were down 37% from the same week in 2019.⁶ Even as pandemic-related restrictions are lifted, many businesses have learned that Zoom calls are easier and cheaper than flying across the country to meet face-to-face. So while business travel will pick up during the months ahead, it will be a long time before it is fully recovered. That means fewer people on their cellphones as you patiently wait in terminals.
What to Watch
Inflation, inflation, inflation. Whether or not the Federal Reserve or the Treasury Department believes it, the inflation risk is every bit as real as the Dodgers winning another World Series.
Anirban Basu, Chairman & CEO
Anirban is a study in contradictions. He has been called an economist with a personality, or alternatively, one with a sense of humor. He has twice been recognized as one of Maryland’s 50 most influential people. He has also been named one of the Baltimore region’s 20 most powerful business leaders. In 2014, Maryland Governor Larry Hogan appointed Dr. Basu as Chairman of the Maryland Economic Development Commission. He teaches global strategy at Johns Hopkins University and serves the Chief Economist function for a number of organizations around the country. He has read every one of Agatha Christie’s novels, is an avid fan of James Bond, English football, Indian cricket, all Baltimore teams, and lives with his wife and two daughters, Kimaya and Kohena