The World Is About Halfway Back to Normal

The Markets 

The Economist developed the Global Normalcy Index (GNI) to measure the post-pandemic return to normal. In March 2020, the GNI was 35 overall, with 100 being the normal pre-pandemic level. At the end of the second quarter, the worldwide GNI was 66, or about halfway back to normal. 

Activity in the United States has been recovering faster than in other nations. The U.S. GNI was 72.8 on June 30. However, recovery in the U.S. has been uneven. For instance, 

Employment is improving, but more slowly than anticipated. Last week’s jobs report showed a better-than-expected gain of 850,000 jobs in June. However, April and May jobs reports were below economists’ expectations, reported Randall Forsyth of Barron’s. In June, the unemployment rate was 5.9 percent, which is an improvement on the double-digit pandemic unemployment rate, but above the pre-pandemic level of 3.5 percent. 

Employers are having trouble filling positions. Despite the fact that 9.3 million people remain out of work, trucking companies, airlines, restaurants, hotels, shipyards, factories, banks and other employers report having difficulty filling open positions, reported Julia Horowitz of CNN News. 

In a Barron’s commentary, Suzanne Clark, the CEO of the U.S. Chamber of Commerce, stated that solving the worker shortage should be the nation’s top priority. She suggested expanding access to childcare, supporting employer-led skills training, ending supplemental unemployment benefits, welcoming global talent and prioritizing second-chance hiring. 

Workers are leaving jobs. Hidden among the employment data was a surprising trend that some have dubbed ‘The Great Resignation.’ In June, 942,000 Americans – 9.9 percent of those who were unemployed – were job leavers. They had resigned from their jobs. For comparison, the number of people leaving jobs during the entire second quarter of 2019 was 809,000. 

“As pandemic life recedes in the U.S., people are leaving their jobs in search of more money, more flexibility and more happiness. Many are rethinking what work means to them, how they are valued, and how they spend their time,” reported Andrea Hsu of NPR. 

Prices are rising more quickly than anticipated. Anyone who shopped for groceries for a Fourth of July barbecue or made an above-asking-price offer for a house (and waived the inspection), knows that prices have moved higher. 

Core Personal Consumption Expenditures (PCE without food or energy), which is the Fed’s favored measure for inflation, rose steadily during the second quarter. In May, core PCE was up 3.4 percent. When food and energy were included, PCE was up 3.9 percent. 

Inflation concerns consumers. Consumer sentiment was up year-over-year from May 2020 to May 2021. However, inflation dampened sentiment and expectations declined from April 2021 to May 2021, according to the University of Michigan’s Surveys of Consumers. 

“Twice as many consumers expected that the inflation rate would be 5% or more in the year-ahead rather than 2% or below (44% versus 22%). Importantly, consumers still anticipated declining inflation over the longer term,” reported Director of Surveys Richard Curtin.

The Delta variant is a wild card. At the end of last week, about 182 million Americans (64 percent of the population age 12 or older) had received at least one dose of a COVID-19 vaccine, and 157 million were fully vaccinated (55 percent of the population age 12 or older), per the Centers for Disease Control and Prevention. That helped reduce the number of COVID-19 cases and deaths, so the country could begin to move back toward ‘normal.’ 

Last week, the number of coronavirus cases in the U.S. began to creep higher as the highly contagious Delta variant spread. It was responsible for about 20 percent of new U.S. cases. Tanya Lewis of Scientific American reported, “Several experts said they do not expect the Delta variant to cause a nationwide surge here in the U.S. like the one that occurred last winter. But they do anticipate localized outbreaks in places where vaccination rates remain low.” 

U.S. equity markets continued to move higher during the second quarter. The Standard & Poor’s 500 Index, “…gained 8.2% during the second quarter of 2021, its fifth consecutive quarterly gain, which is the longest streak since the fourth quarter of 2017. Its first-half gain of 14.4% was the best since 2019 and the second-best since 1998,” reported Ben Levisohn of Barron’s. 

(The one-year numbers in the scorecard below remain noteworthy. They reflect the strong recovery of U.S. stocks from last year’s coronavirus downturn to the present day.)