Four Factors to Watch
1. Infrastructure Bill
Talks between President Biden and Senator Shelley Moore Capito broke off last week, as Biden was seeking more new spending than the $330 billion Capito was willing to deliver. With a sizable gap still remaining between Republicans and Democrats, a bipartisan group of 10 senators reached an agreement on an infrastructure proposal that would be paid in full without tax increases. According to the Wall Street Journal, sources close to the deal report that the bill calls for $579 billion above expected future federal spending on infrastructure. The overall proposal would total $974 billion over five years and $1.2 trillion if it continued over eight years.
Some Democrats, however, don’t believe legislation that favors certain measures (such as a gas tax over tax increases on the wealthy) will result in a large enough package, unless that legislation violates Biden’s commitment to not raise taxes on those earning less than $400,000.
2. COVID-19 Case Numbers
In the last week, the seven-day average of daily COVID cases dropped from 15,000 to 14,000; however, Florida stopped reporting cases, so the daily cases may have plateaued or even increased a small amount. The seven-day average of daily fatalities increased slightly from 430 to 438—again, not including Florida. Seven-day averages of COVID cases rose in California and Texas:
- California: from 930 to 1,000
- Texas: from 1,270 to 1,970
First-time jobless claims fell from 385,000 to 376,000 last week and were roughly in line with economists’ projections of 370,000. It is the second week in a row that jobless claims have been under 400,000 since the early days of the pandemic. Just prior to the pandemic, the U.S. average on unemployment claims was approximately 211,000.
According to the Labor Department, consumer prices for May rose at their fastest pace since 2008. The consumer price index (CPI) is up 5% from the same period last year. The CPI increase is the largest since the 5.3% increase in August 2008, just prior to the Great Recession. Thus far, the Federal Reserve’s stance is that the factors driving inflation are temporary and will subside in time, and inflation appears higher because of comparisons to a year ago when the economy had ground to a halt because of the pandemic. The Fed is not expected to react with any measures when the Federal Open Market Committee meets next week. The belief is that supply chain challenges are a major driver of what is seen as a shorter-term issue and that other indicators of longer-lasting inflation will remain in check—at least for now.
5. COVID Vaccine Update
More than 141 million Americans (about 43% of the population) have been fully vaccinated, up from 136 million last week. The Food and Drug Administration began discussions on the use of COVID-19 vaccines in children as young as six months old, while Moderna reports it requested the U.S. agency to extend the emergency use of its COVID-19 vaccine to children between the ages of 12 and 17.