Worsening Labor Shortage and Shrinking Trade Deficit... US Treasury Prices Soar

Stronger After Employment Indicators and Trade Balance Announcements

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] U.S. Treasury yields are showing a strong upward trend as news emerges that the U.S. trade deficit has decreased for the first time this year while labor shortages persist.

According to MarketWatch, as of 11 a.m. local time on the 8th, the 10-year U.S. Treasury yield stood at 1.539%, down 0.033 percentage points. A decline in Treasury yields indicates a rise in bond prices. The 10-year Treasury yield had earlier dropped to as low as 1.515%.

Despite ongoing concerns that the Federal Reserve (Fed) may decide to taper asset purchases or raise interest rates faster than expected due to persistent inflation increases in the U.S., Treasury yields have continued to decline since the release of May employment data last week.

The plunge in Treasury yields on this day was notable following reports that the U.S. trade deficit had decreased for the first time this year.

The U.S. Department of Commerce announced that the trade deficit in goods and services for April was $68.9 billion (approximately 76.9 trillion KRW), down 8.2% from the previous month.

This is a significant reduction compared to the record-high trade deficit of $75 billion in March. The decrease is attributed to increased exports of U.S. goods alongside a reduction in consumer goods imports.

Exports rose 1.1% to $205 billion, the highest since January last year before the COVID-19 pandemic. Imports fell 1.4% to $273.9 billion. The trade deficit with China also shrank by 6.7% from March to $25.8 billion.

The Wall Street Journal reported that supply chain issues and reduced consumption have driven down the scale of U.S. imports.

In fact, imports of finished vehicles, parts, and home appliances were on a downward trend. Consumer goods imports such as clothing and toys, which had surged in March due to government cash payment policies, also saw a sharp decline.

The normalization of economic activities among Americans, leading to pre-COVID-19 consumption patterns, is also cited as a reason for the reduced trade deficit. Analysts suggest that consumers have shifted spending toward services such as travel and dining.

However, the prevailing view is that the trade deficit will increase again as the U.S. economic recovery accelerates.

The employment data released on this day confirmed that labor shortages continue. While employment is increasing, the number of workers returning to workplaces falls short of expectations.

According to the April Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Department of Labor, there were 9.3 million job openings in April, significantly exceeding the forecast of 8.3 million.

The gap between job openings and actual hires (6.1 million) reached a record high of 3.2 million.

The surge in job openings in the food service and leisure sectors is cited as a reason. The Wall Street Journal noted that while job openings increased last year in manufacturing, distribution, and home construction sectors, this year’s employment reflects the normalization of consumption.

Earlier, the Department of Labor reported that new hires in May fell short of expectations at 550,000.

Following the May employment data release, U.S. investment banks forecasted that the Federal Reserve would find it difficult to begin tapering early.

In the face of weak employment, the market is focusing on the Consumer Price Index (CPI) for May, to be released on the 10th. Experts predict that the May CPI will rise by 4.7%, further heightening inflation concerns.

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