Photo demonstrating the ups and downs of the current U.S. economic outlook.

June economic outlook: Decoding the news headlines

Quick takeaways

  • No single news story or data point can predict what’s to come for the short- and long-term economic outlook. Focusing on one headline may cause decision-making (such as suspending saving) that you’ll regret.
  • Economists pay attention to their fundamentals such as employment and inflation. You should pay attention to yours, too. Make a budget. Review spending and saving. And celebrate wins—an extra emergency fund or retirement savings deposit, for example.
  • Financial shifts happen. You or your friends, co-workers, or relatives may be re-thinking live-work arrangements or retirement dates. A financial path through life is rarely a straight line; turns and twists offer a chance to adapt short- and long-term goals.

It would be nice to have a clear picture when it comes to the current economic outlook. Take the country’s employment, for example: Jobless claims have been on a downward trend, but April’s jobs report was much lower than expected.

What gives?

It will be messy for the United States (and the globe) to recover from the last 15 months. And the path forward will be different for every person and every country. Here’s what we’re seeing, and why it matters for you.

About those jobless numbers

The positives when it comes to jobs: Postings and wages are up. Unemployment benefit filings are down.1

But April’s unemployment figures shocked economists; expectations of close to a million new jobs turned out to be a measly 266,000 openings. Unemployment ticked back up as well.2

Recovery still has a long road ahead. And lessons from the past may apply differently going forward. A healthy dose of wait-and-see should accompany all forecasting.

“We’ll have months where we have overwhelmingly positive news, and yet you might know someone who can’t find work or their role was eliminated because a business couldn’t get funding,” says Heather Winston, assistant director of financial advice and planning at Principal®.

Your wallet: One day’s headlines may make you feel optimistic, the next day’s not so much. Try not to get too caught up in daily swings for the country and yourself. For example, if an unexpected expense means you had to adjust savings goals for a month or two, that’s OK. Hit the reset button and get back on track as soon as you’re able.

Economic changes often take time.

Let’s look a little deeper at those unemployment numbers. Some governors recently ended the unemployment benefits expansion that was part of the December 2020 pandemic relief package, believing the uptick in unemployment was tied to that support.3 But other factors are at work, too. For example, some schools aren’t fully open, which limits the time that parents and caregivers can be out of the home. (To highlight this point: According to The Washington Post, women made zero job gains in April. Instead, the workforce lost another 64,000 from their numbers.4)

Things you may not think about also impact employment gains or losses. Take supply chains: The current semiconductor shortage temporarily shut down some car factories, taking those employment numbers down with them. Expensive lumber means that construction (and those jobs) slows even with surging home demands.

These unemployment numbers also differ from past recessions in key ways. There are fewer workers competing for every job—just 1.3 now vs. 6.5 in 2008.5 Some sectors that were partially or completely closed are now opening—all at once. It’s not just one restaurant that needs to staff up, it’s every restaurant.

Still, there are a lot fewer jobs—over 8 million less—than there were in March 2020.6 Longer-term unemployment—those people out of work for 27 weeks or more—represents a breathtaking 40% of the unemployed. It will take time to remedy.

But again, long-term unemployment numbers may signal a shift in work in general. Some businesses may move from a storefront to primarily online, so they’ll need different types of employees. Some people may learn new skills to leave an old career behind. Those choices take time and may not reflect positively in any data set for a while.

“Work and the future of what work means are changing,” Winston says. “People are more mobile and more likely to change jobs and industries. If they step away from the workforce, they may be focusing on education, job skills, or planning. Their time away isn't bad but may be a necessity.”

Your wallet: If you’ve had to make a change in any big part of your financial life, from your career to where you live, re-evaluate and adjust your timeline as needed. That may mean accelerating retirement savings for a while if you had a period of unemployment but are now back to work.

People are more mobile and more likely to change jobs and industries. If they step away from the workforce, they may be focusing on education, job skills, or planning.”

Heather Winston, assistant director of financial advice and planning

Keep an eye on prices.

Those weird supply chain issues affecting employment are affecting prices, too. If manufacturers make fewer cars, for example, cars will cost more.8

The economic signals for some price increases don’t come as a total surprise. People who stayed home in unprecedented numbers in 2020 snapped up home improvement must-haves. Supply was expected to be tight going into 2021, and shipping stoppages like the Suez Canal blockage in March 2021 didn’t help.

But unexpected stressors have an impact, too. The May cyberattack on the gas pipeline stretching from Houston to New York City led to increases in fuel prices just as people were thinking about getting on the road or in a plane for summer trips. “There’s a trickle-out effect that can be hard to understand without a crystal ball,” Winston says.

Solutions are also future state. People quit jobs and shift careers. Manufacturers decide to do more in-house to protect supply chains. Post-pandemic, the economy will do a lot of converging, all at once.

“In some ways, the old rules no longer apply,” Winston says. “You’re going to continue to see various parts of the economic picture look different at different times. There’s not going to be just one narrative, but high points and low points.”

Your wallet: Be prepared over the short term for unexpected price changes on the things you want and need. Insulate yourself as best you can by paying down debt and making savings a small habit that you grow. “The best course of action is to be as prepared as you personally can be no matter what may come next,” Winston says.

You’re going to continue to see various parts of the economic picture look different at different times. There’s not going to be just one narrative, but high points and low points.”

Heather Winston

Get the help you need. A financial professional may talk you through how changes to your financial goals can shift your saving, especially for retirement. Check with your HR department or employer to see if your company’s retirement savings plan offers this service. Or, we can help you find one.

1 https://www.dol.gov/ui/data.pdf

2 https://www.nytimes.com/2021/05/07/upshot/jobs-report-surprise.html?action=click&module=Spotlight&pgtype=Homepage, https://twitter.com/bencasselman/status/1390647659921387520

3 https://www.businessinsider.com/republican-states-cutting-unemployment-benefits-expanded-300-weekly-biden-stimulus-2021-5

4 https://www.washingtonpost.com/business/2021/05/07/jobs-report-labor-shortage-analysis/

5 https://www.bloomberg.com/opinion/articles/2021-05-07/april-jobs-report-is-a-big-disappointment-what-happened

6 https://www.washingtonpost.com/business/2021/05/07/jobs-report-labor-shortage-analysis/

7 Principal Global Asset Allocation Viewpoints 2Q 2021

https://www.wsj.com/articles/consumers-adjust-to-higher-prices-11620552601?st=k3ayq8s538ijqjj&reflink=article_email_share

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