[Good Morning Market] Rising Confidence in Economic Recovery Amid Strong US Employment Data

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[Asia Economy Reporter Minji Lee] The strong employment indicators in the U.S. market are reinforcing expectations that the economy will recover to pre-COVID-19 levels.

◆ Jinhyeok Na, Researcher at Hana Financial Investment = The optimistic outlook on the economy seems to have been emphasized following the strong U.S. employment data released in March. Nonfarm payrolls increased by 916,000 in March, and the unemployment rate dropped to 6%. Despite a significant upward revision of 156,000 jobs for January and February, the figures far exceeded Bloomberg’s forecast (580,000 jobs, 6%) and marked the largest job creation since August last year.

Vaccination distribution and inoculation rates have increased to 47.1% and 30.4%, respectively, and the $1.9 trillion pandemic relief package began disbursement in mid-March. The proportion of long-term unemployed and permanently laid-off workers, which had been a concern, is now more likely to represent evidence of qualitative growth in the labor market going forward. If President Biden’s large-scale infrastructure stimulus package passes Congress within the year, a return to full employment levels seen before COVID-19 would no longer be a distant prospect.

However, the optimistic economic outlook combined with historically abundant liquidity could, with the base effect, lead to excessive inflationary pressures in the second quarter of this year. With rising long-term U.S. Treasury yields, there is potential for changes in U.S. Fed policy, so continuous attention to related indicators is necessary.

◆ Miseon Lee, Researcher at Bookook Securities = Although the U.S. has announced stimulus plans, the $2.25 trillion infrastructure investment is expected to stimulate interest rate increases. Given the inevitable expansion of U.S. Treasury issuance, the strong U.S. growth could accelerate the timing of interest rate normalization, so it is necessary to keep the upper bound of the 10-year yield open. However, since the scale of infrastructure investment has been finalized, it is not expected to immediately trigger bond yield increases.

◆ Kwanghyun Kim, Researcher at Yuanta Securities = As the first quarter earnings season approaches, the operating profit forecast for this year has been significantly revised upward to 190 trillion won from the 170 trillion won estimated six months ago. The semiconductor and equipment sectors increased by about 5.3 trillion won, and other industries grew by about 14 trillion won. Considering the profit scale, the sectors with the largest increases include chemicals (3.5 trillion won), steel (2.5 trillion won), shipping (2.1 trillion won), and display (1.5 trillion won).

Domestic listed companies have shown seven consecutive quarters of negative growth rates since Q4 2018. This year, they are expected to post record-high profits surpassing those of 2018. Compared to 2018, Samsung Electronics and SK Hynix’s profits are expected to decrease by about 21 trillion won. Instead, sectors such as automobiles (7.8 trillion won), chemicals (4 trillion won), shipping (3.5 trillion won), banking (2.9 trillion won), and securities (2.8 trillion won) are expected to compensate for the reduced profits. The sectors anticipated to record the highest profits ever this year include banking, chemicals, electronics & components, internet & gaming, construction, and food & beverage. The Q1 earnings season will provide an opportunity to gauge their potential. Overall operating profits in the stock market are expected to grow by 49% year-on-year, with Q1 growth rates reaching 83.6%.

This content was produced with the assistance of AI translation services.