Friends and Colleagues,

Our travels through this Covid-impacted world continue. This week our friends at Wells Fargo Securities (WFS) share with us some positive news on the demand side and some challenges on the supply side. Please read on to see what is happening with the economy.

Increasing Employment (per U.S. Department of Labor and Wells Fargo Securities)

Economic activity increased in March thanks to reduced restrictions resulting from increases in vaccinations and declining COVID numbers.

  • Firms’ need for labor has increased to meet demand.
  • Employers added 916,000 jobs last month as the recovery gained momentum.
  • This was a significant pickup from the first two months of the year.
  • Leisure & hospitality posted a solid gain (+280,000), as in-person activity continues to recover.
  • Construction payrolls also jumped 110,000 last month after severe winter weather weighed on the industry in February.
  • Overall, hiring was broad based with nearly every major industry reporting gains.
  • Unemployment declined 0.2% to 6.0% in March.

Constrained Supply (per Institute for Supply Management and Wells Fargo Securities)

A surge in durable goods spending by consumers and core capital goods spending by businesses has occurred alongside a worsening shortage of key materials and goods.

  • The inventory-to-sales ratio has dropped to a 15-year low.
  • Delivery times have surged.
  • The supplier deliveries component of the March ISM manufacturing survey jumped to its highest level since 1974.
  • Major factors include: the Suez Canal blockage, severe winter weather across the country and continued congestion at U.S.
  • Nevertheless, manufacturing sentiment is at its highest level in 37 years.
  • Despite growing backlogs and supply problems, orders continue to roll in and companies are experiencing some pricing power.

Increasing Raw Materials Pricing

Increasing demand and constrained supply have resulted in increasing prices of raw materials.

  • Trans-Pacific shipping rates have tripled since 2019.
  • Most industrial metals prices are up by double digit percentages this year.
  • The ISM Prices-Paid index remains near the highest level since 2008. 

WFS Projection

WFS projects the upward pressure on prices to be sharp but temporary. If that is the case, they predict the Fed will call these price pressures transitory and not raise interest rates. Once global supply chains normalize and businesses can obtain the input components they need, WFS forecasts a faster rebound for manufacturing than after the past two recessions.

Federal Spending and Taxes

Per WFS, the recently enacted $1.8 trillion American Rescue Plan supercharged growth and inflation expectations, because it was deficit-financed and spent almost entirely over a 1–2-year period.

In contrast, the proposed $2.25 trillion infrastructure package is projected to be spent evenly over 8 years, which is $375 billion per year. The economic impact from that new spending would be partially offset by $150 billion per year in new taxes, mostly on corporations including:

  • Increased corporate income tax rate to 28% from 21%
  • New 15% minimum tax on corporations’ “book income”
  • Increasing minimum rate on global intangible low-taxed income (GILTI) to 21% from 10.5%
  • Elimination of the qualified business asset investment (QBAI) exemption.

Interest Rates

The 2021 WFS forecast was for longer-term yields to rise throughout the year as the economic recovery progressed and markets digested longer-dated Treasury issuance needed to fund the federal budget deficit. The upward pace has been sharper than they expected.

They project longer-term Treasury yields will continue rising to their year-end target for the 10-year of about 2%.

As always, the best way to keep on top of things is to remain informed, so stay tuned…..




Our Covid journey has taken us through valleys of uncertainty, anxiety, and concern for our loved ones. It has also shaken up our lives and given us new opportunities to grow.

Where is our focus today?

If we dwell on the darkness it may consume us.

If we focus on the opportunities, then they will grow.

How have our lives been enhanced over the last year?

  • More time with family and loved ones?
  • Less time spent getting from here to there?
  • More exercise?
  • More connections with old friends?
  • More quiet time to reflect and prioritize?

While the pandemic has taken its toll on us, it has also given us room to grow.

In the days and weeks ahead, may we choose to focus on the unique good from this unusual time.

May we seize the opportunity to reconsider some of the patterns of our lives.

May this time allow us to live consciously and choose wisely.

In the years to come, may we look back on this time as a time when we embraced our own personal growth and development.

Make it a great week!

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.

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