Economy

In this report, we look at data releases over the last month and implications for currency markets.

This week’s <i>Special Report</i>, written by Miroslav Aradski, highlights the worrisome deterioration in health trends in the US, which began before the pandemic. Over the long haul, this could weigh on labor supply and productivity, put upward pressure on bond yields, and hurt equity multiples.

China’s labor market is polarized between high unemployment among university graduates and an acute shortage of blue-collar labor. The high jobless rate among young workers is structural and will not decline a lot even during an economic recovery. Given the structural scarcities of blue-collar workers, the authorities will be less inclined to resort to their old playbook of stimulating infrastructure, construction, and manufacturing.

The combination of collapsing energy inflation and cooling wage inflation means that euro area core inflation will slump later this year. We discuss the consequences.