As the United States aggressively rolls out vaccines, the closures and restrictions that crippled the economy for more than a year are being scaled back. This is great news for the economy, full stop. The effect of government stimulus activity, coupled with resilient businesses who deployed new tactics ranging from work-from-home, to outdoor dining, to home delivery has left the consumer economy with pent up demand and cash on hand to spend. Many are projecting a super-heated consumer economy over the next 18 months, with record performance for businesses that survived the pandemic.
However, there will be bumps along the way. For example, the auto industry is facing a significant challenge unrelated to the pandemic. One that hits just as Americans are returning to normal travel patterns and feeling secure enough economically to justify a pricey item like a car. Due to a fire that shut down a critical semiconductor plant in Japan, the global auto industry is caught in the middle of a crippling shortage of the chips that control modern automobiles. One need only visit a dealer lot to feel the impact.
The fire at Renesas’s Hitachinaka factory northeast of Tokyo occurred on March 19 affecting nearly two-thirds of automobiles produced. The company reported last week that operations at the plant had resumed on April 17 at about 10% of capacity and was expected to reach 100% by the end of May, according to the Wall Street Journal.
The semiconductor industry has had to deal with three other major disruptions in the past year, however. The 100-year freeze (and resulting blackout) that hit Texas in February caused several semiconductor makers to shut down production in order to take pressure off local power grids. Taiwan, the leading semiconductor producing nation in the world, is in the midst of what some government officials have caused the worst drought in the nation’s history, resulting in water conservation efforts that have crippled the industry. To complete the perfect storm, the U.S. and China remain in a trade war that shows no signs of mitigating in which semiconductor businesses (most notably Huawei) are front and center.
The problem is most pronounced right now. Ford CEO Jim Farley said last week that, “the semiconductor shortage and the impact to production will get worse before it gets better. Our second quarter will be the trough for this year.” The reduction in car production has a negative multiplier effect, impacting manufacturing plants, distributors, dealers, finance organizations and media outlets who benefit from heavy marketing from brands and dealerships.
And the problem goes well beyond the auto industry. As reported by Yahoo Finance, “an analysis by Goldman Sachs [shows] the semiconductor shortage touches a mind-blowing 169 industries in some way. We’re talking everything from steel product and ready-mix concrete manufacturing to industries that build air conditioning systems and refrigerators to breweries. Even soap manufacturing is impacted by the chip crisis.” In the same article, the Goldman analyst projected that the U.S. could lose one percent of GDP this year to the chip crisis alone. Analysts expect the problem to persist into 2022.
However, if the last year taught us anything about human resourcefulness, perhaps the semiconductor crisis will spur innovation. As the old cliché goes, necessity is the mother of invention. If effective COVID-19 vaccines could be created and rolled out in a record short amount of time, dealing with a chip shortage shouldn’t be insurmountable either.
Headlines of the Week
FIGS Inc is aiming for a valuation of more than $3 billion in its U.S. initial public offering (IPO), as the maker of medical scrubs, face masks and shields sees a jump in demand for its products during the COVID-19 pandemic. About 1% of the 22.5 million Class A shares on offer will be reserved for retail investors through online brokerage app Robinhood, FIGS said, making it the first IPO to be included on the trading platform. Robinhood’s plan to allow its users to snap up shares in IPOs alongside Wall Street funds was reported by Reuters in March. FIGS said it is offering about 5.9 million Class A shares priced between $16 and $19 each, while existing investors will sell about 16.6 million shares. At the top end of the range, it will raise about $427.5 million. Founded in 2013 by Heather Hasson and Trina Spear, FIGS makes medical apparel aimed at combining style with comfort, sold under the tagline, “why wear scrubs, when you can wear FIGS?”
Oat milk company Oatly made its market debut Thursday, after pricing its IPO at $17 a share. The company raised $1.4 billion, valuing it at $10 billion. Oatly has become a popular new alt-milk in the United States. It can be found at Starbucks, and an investment group that includes Oprah Winfrey and former Starbucks CEO Howard Schultz invested $200 million in the company last year. But while Oatly is pretty new to American consumers, the company and its signature product have been around for nearly three decades. Oat milk was invented in 1994 in Sweden by Oatly’s founders, brothers Rickard and Bjorn Oeste, who were researching an alternative to cow’s milk for people with lactose intolerance. “Our founders just figured, OK, if the vast majority of the world population are intolerant to milk why don’t we make something that is actually designed for human beings not baby cows?” Oatly CEO Toni Petersson previously told CNBC. And for decades, that’s where it languished.
Apparel & Footwear
Next to sustainability, size inclusivity is one of the biggest conversations in the fashion industry right now. With the average woman in the U.S. wearing a size 16, retailers are being encouraged by customers to expand their offerings past the usual size 12. According to a report published by Allied Market Research, the plus-size clothing market garnered $481 billion in 2019 and is anticipated to reach $697 billion by 2027. For Selkie, the key to connecting with plus-size consumers was offering its whimsical clothing in sizes XXS-5X almost from the start. Selkie’s figure-flattering Puff Dress quickly became a staple on influencers of different body types. When Revolve started stocking Selkie in 2018, the retailer only sold its styles through a size large. Four years later, Selkie has become the first brand to stock up to 2X (approximately a size 16) on Revolve, with plans to expand to 5X on select styles.
Victoria’s Secret parent L Brands on Wednesday reported first-quarter earnings and sales that topped analysts’ estimates, driven by momentum across its business and more people paying full price for its products. Total sales surged more than 80% to $3.02 billion from $1.65 billion a year earlier. That topped estimates for $3.01 billion. Total same-store sales were up 21% year over year, compared with a 4% increase in the year-ago period. Same-store sales at Victoria’s Secret rose 25%, compared with a 15% drop a year earlier. Same-store sales at Bath & Body Works climbed 16%, compared with a 41% jump a year earlier, when many consumers were stocking up on hand sanitizers at the onset of the Covid pandemic. L Brands said sales rose throughout the quarter thanks to stimulus checks and relaxed pandemic-related restrictions in stores. While it is difficult to quantify the exact benefit from government stimulus, the company estimated that the payouts boosted sales by about $125 million — a $50 million benefit at Bath & Body Works and $75 million at Victoria’s Secret.
J.Crew Group has hired a streetwear design vet to breathe new energy into its menswear division. The clothing retailer named Brendon Babenzien as creative director of J. Crew’s Men’s, effective immediately. He is the co-founder of menswear brand Noah and the former design director at Supreme, the ultra-hip streetwear brand. Babenzien spent 14 years at Supreme, where he elevated a niche skate wear brand to the global stage, according to J. Crew. Babenzien will work alongside J.Crew CEO Libby Wadle to redefine the iconic brand, “merging the vitality and creativity of today’s style subcultures with an innovative appreciation of classic menswear,” the company said. His first full collection for the brand is scheduled to debut in the second half of 2022.
Athletic & Sporting Goods
Nike, fresh off of suing MSCHF for its blood-filled Air Max 97 sneakers, is in the midst of another trademark dispute, this time with Puma. Per The Fashion Law, there’s no specific shoe in question — instead, Puma is attempting to block Nike from trademarking the term “footware,” which refers to tech-driven sneakers. Although it’s not clear yet which silhouettes Nike wants to use the term for, the brand’s FlyEase line utilizes its “Adapt” technology for easy on and off access. Select models even offer 100 percent hands-free wear, while others’ motorized laces are controlled via an app. We already know Nike is trying to patent these features — perhaps the “footware” label is part of that.
Sportswear giants Adidas and Nike saw sales plunge on China’s largest e-commerce platform, Alibaba’s Tmall, in April, according to Bloomberg. Following calls for a boycott of international brands avoiding Xinjiang cotton and other raw materials from the region in northwest China, sales on Adidas’s Tmall store collapsed by 78 per cent in April from the same period a year ago, while Nike’s dropped by 59 per cent over the same period. In contrast, local sportswear brands Li Ning and Anta saw a jump in revenue as China’s consumers turned to the domestic sportswear manufacturers who back the use of materials sourced from the controversial region. According to US investment research firm Morningstar, Li Ning saw its sales on Tmall surge by more than 800 per cent in April.
Cosmetics & Pharmacy
Ro, a digital elective care and telemedicine provider last valued at $5 billion, announced that it has acquired Modern Fertility, a reproductive health company founded in 2017. Axios estimates it sold for $225 million in a majority-stock deal. TechCrunch has learned that the deal was “north” of $225 million. Ro, also founded in 2017, has spent the past few years growing its business to be far more than its launched purpose: a solution for men with erectile dysfunction. It has since expanded into women’s health, smoking cessation, and treats over 20 conditions, including sexual health but also into weight loss and allergies. The acquisition of a business that focuses on women’s health will likely fit squarely into Rory, Ro’s women’s healthcare business that focuses on online visits, contact-free delivery and “healthcare without the waiting rooms.”
Firmenich will acquire a significant non-controlling interest in Essential Labs, LLC. Essential Labs, LLC’s founders will continue to lead the company together with its colleagues. The transaction remains subject to customary conditions, including regulatory approval, and is expected to close before the end of September 2021. Patrick Firmenich, chairman of the board, said, “I am thrilled that we are partnering with Essential Labs LLC, combining our unique know-how and shared spirit of innovation for the benefit of entrepreneurs. We share a common vision, values and commitment to providing customers with services tailored to their needs.” Firmenich president of global perfumery, Ilaria Resta, said, “We have always supported businesses large and small, and Essential Labs, LLC is a great partner to help bring Firmenich capabilities and innovation to an even broader community. We look forward to working with Essential Labs, LLC to support entrepreneurs on their journey to build the brands of tomorrow.”
Discounters & Department Stores
Kohl’s Q1 net sales grew nearly 70%, with total revenue just shy of $3.9 billion, as it made rapid headway toward recovery from last year’s trials in the sector. Kohl’s CEO Michelle Gass said in a press release that profits and sales beat company expectations. “We saw momentum build through the quarter, especially in our stores where we continue to elevate the experience,” Gass said. Kohl’s gross margin more than doubled from last year. That helped the retailer return to the black, with net income of $14 million after posting a $541 million loss in Q1 last year, when its stores were temporarily shuttered due to COVID-19.
COVID-19’s unprecedented impact on Walmart’s growth last year was tough to beat, but the retailer continues to report robust first quarter growth with e-commerce sales up 37%, market share gains in grocery and U.S. comp sales rising 6%. Sam’s Club comp sales also increased 7.2% and e-commerce rose 47%. As consumers looked to spend their stimulus checks, total revenue growth of 2.7%, to $138.3 billion, beating expectations. However, revenue was negatively impacted by $4.2 billion due to overseas divestitures, according to a Tuesday press release. Given the retailer’s figures in Q1, Walmart raised its outlook for the fiscal year. The retailer expects a high single-digit increase in its U.S. operating income and earnings per share.
Macy’s on Tuesday signaled recovery from the pandemic, reporting a 56% year-over-year first quarter sales bump to $4.71 billion and a revised outlook that CFO Adrian Mitchell said reflects “cautious optimism.” E-commerce grew 34% over 2020 and 32% over 2019. The company benefited from the comparison to a year defined by the pandemic. Comp sales soared 63.9% on an owned-plus-licensed basis over last year, but dropped 10% compared to 2019, according to a company press release. Thanks in part to its pullback on expenses, net income in the quarter was up more than 100% to $103 million, from its brutal $3.6 billion loss in the year-ago quarter.
Despite a tough comparison against last year’s gains, Target grew its sales and market share significantly in the first quarter. First quarter comparable sales grew 22.9%, with store comps up 18% from last year’s 10.8%. Operating income rose 407% to $2.4 billion in Q1. As consumers become more comfortable going out and gathering, events like Mother’s Day drove sales, Target said Wednesday. Target’s total Q1 revenue grew 23.4% to $24.2 billion, driven by apparel sales increasing more than 60%, and home and hardline sales both up over 30%. Target’s private label blitz also reaped rewards this quarter. Sales for its owned brands grew 36% — the strongest the retailer has recorded.
Walmart’s inventory was up 16% YoY in its first quarter as the company tries to keep up with high sales levels and avoid the out-of-stocks that plagued the retailer last year, executives said on the company’s earnings call Tuesday. The retailer is navigating multiple delays in the supply chain, specifically noting port delays, by extending lead times for orders, CFO Brett Biggs said Tuesday. “Our inventory level is up, which is a good thing,” President and CEO of Walmart U.S. John Furner said. “Last year we had big stock-outs in grocery and in general merchandise, so I feel much better about our inventory position.”
Emerging Consumer Companies
Intimates DTC brand Knix has closed on a $40 million funding round led by private equity firm TZP Group, which received a minority stake in the company, according to an emailed release. Existing investors including Acton Capital and a new investor, the model and entrepreneur Ashley Graham, also contributed to the funding round. Knix said the new investment round will support product innovation, brand building, its virtual fit program and expanding its North American retail fleet, though it did not disclose specific real estate plans. Knix entered its latest funding round with major growth behind the brand, which says it sells 2 million pairs of underwear a year and touts its patented leak-proof products across the intimates category. According to the company, it has a five-year average annual growth rate of 150%, is “highly profitable” and will soon surpass $100 million in revenue.
Kaiyo, a New York-based online furniture marketplace for gently-used furniture committed to great design, exceptional customer care, and a more sustainable planet, announced that it has raised $5M in funding led by Moderne Ventures, with full participation from Lerer Hippeau and Max Ventures. The capital injection will be used to continue the brand’s domestic growth beginning with Washington D.C., and to create impactful relationships within the Northeast’s real estate market. Kaiyo makes buying and selling furniture simple and sustainable by providing deep discounts on top brands to its buyers and by handling the moving, pickup, photography, cleaning, and delivery for its sellers. Kaiyo currently serves and provides white-glove delivery to the New York metropolitan area which includes New York, New Jersey and Connecticut, as well as the Philadelphia metropolitan area. The funding brings the total raised by the company to $7.1 million.
Daring, the plant-based chicken brand, announced that it has raised a $40M Series B funding round led by D1 Capital Partners. Global entertainer Drake has also joined the round, along with existing investors Maveron and Palm Tree Crew. Daring will use this round of funding to triple its internal team by the end of 2021, dramatically scale its rapid retail and foodservice growth, and set the stage for future innovation and product development. Since the brand’s $8M Series A raise in October 2020, Daring has added more than 1000 retail locations, including Costco, Wegmans, Kroger, Imperfect Foods, and more. The company was founded in 2018 with a clear goal in mind: to remove chicken from the food system. It launched in the U.S. in 2020 with its mission to create a more sustainable, delicious, and nutritious plant-based protein option for an audience that consumes chicken multiple times per week.
Grocery & Restaurants
Atlanta-based private equity firm Roark Capital — majority investors of Inspire Brands (Dunkin’, Arby’s, Sonic Drive-In) and Focus Brands (Auntie Anne’s, Jamba, Cinnabon) — announced Friday the acquisition of Addison, Texas-based, 390-unit bakery chain, Nothing Bundt Cakes from Levine Leichtman Capital Partners. Nothing Bundt Cakes was founded in 1997 and specializes in bundt cakes and generates $470 million of system sales across the U.S. and Canada. The brand is now positioned for continued growth in existing and new markets.
Sambazon, an acai-based food and beverage company, secured a $45 million investment from Nextworld Evergreen LP, the consumer-focused growth equity fund of San Francisco-based Nextworld LLC. Headquartered in California with operations in Brazil, Sambazon offers a range of certified organic products, including ready-to-eat acai bowls, frozen super fruit packs and sorbet, energy drinks, juice and frozen desserts including vegan chocolate acai bites. The company has a national presence with distribution in more than 25,000 locations across the natural and conventional grocery and club channels. It also has a growing foodservice business and international distribution in more than 45 countries.
The Hershey Co. has entered into a definitive agreement to acquire Lily’s, a maker of low-sugar chocolate products. Based in Boulder, Colo., Lily’s markets an assortment of stevia-sweetened chocolate bars, baking chips and other confections such as peanut butter cups and coated nuts and popcorn. A broad offering of flavors spans dark, extra dark, milk and white chocolate style varieties. Products are available in more than 24,000 retail outlets nationwide. The brand was founded by Cynthia Tice, previously a natural foods store owner who had sworn off sugar but couldn’t kick her daily chocolate cravings. A longtime user of stevia in home cooking and baking, she began experimenting with the sweetener to create a healthier take on her favorite indulgence. The initial products debuted nationally at Whole Foods Market in 2012. The addition to Hershey’s portfolio builds on the company’s multi-pronged approach to offer better-for-you snacks and confections.
Home & Road
The Home Depot crushed analysts’ first-quarter estimates as net sales surged almost 38% amid consumers’ ongoing spending on home improvements and a booming housing market. The chain did not give an outlook for its current fiscal year. Some analysts have questioned whether the pandemic-fueled boom in home spending will last as the economy reopens. Also, soaring prices in lumber and other materials are putting a dent in homebuilding, which fell more than expected in April. On an earnings call with analysts, Home Depot president and COO Ted Decker addressed lumber prices, which have surged 127% this year. “This was another record-setting quarter for lumber prices,” Decker said on the call. Let me give you an example of what that means for one of our core lumber SKUs. At the end of the first quarter last year, a sheet of seven sixteenths OSB [or plywood] was approximately $9.55. As we exited the first quarter of this year, that same sheet of OSB more than quadrupled in price to $39.76.”
A big roadblock has appeared in the sale of At Home Group to a private-equity company. As reported last week, the fast-growing value home-décor retailer has agreed to be acquired by Hellman & Friedman for $36 per share in an all-cash transaction valued at $2.8 billion. But in a letter to At Home’s board, CAS Investment Partners LLC — the retailer’s largest shareholder with about 17% of the company’s shares — said that it plans to vote against the sale, saying that while it looks like “a great deal for H&F, it represents a slap in the face to stockholders.” CAS noted in the letter that the share price “grossly undervalues the company and deprives stockholders of anything resembling a fair premium.” CAS is looking for a more realistic valuation at $70 per share or more.
Purple Innovation, direct-to-consumer sleep products company, posted net income of $20.9 million for the first quarter ended March 31 compared with $28 million reported in the first quarter of last year. Net revenue for the quarter increased 52.3% to $186.4 million, compared with $122.4 million in the previous year quarter. The company said its direct-to-consumer sales increased 54.8%, and its wholesale sales increased 47.6%. EBITDA for the first quarter 2021 was $27.8 million compared with $30.8 million in the first quarter 2020. Based on its first quarter results Purple is raising its 2021 outlook and expects full year 2021 net revenue to be between $860 million and $900 million, up from its previous range of $840 million to $880 million.
Sales from furniture and home furnishings stores came in at $45.1 billion during the first four months of 2021, which is a 45.3% increase over last year, according to the Department of Commerce’s monthly report on retail sales. Furniture sales in April continued to climb with the advanced estimate for the seasonally adjusted number coming in at $11.9 billion in April 2021 compared with $3.97 billion in April 2020, taking into consideration that many retail stores were closed during this time last year due to the pandemic. Year-over-year growth in the furniture and home furnishings store category may reflect ongoing consumer demand in the category and interest in home-related projects with people spending more time at home and may lessen now that some pandemic restrictions have been lifted allowing people to spend money on travel, dining and other options.
Jewelry & Luxury
Swiss watchmaker TAG Heuer continues to add to its stable of world class athlete ambassadors with the announcement that Jimmy Butler has joined its roster. The 31-year-old NBA talent joined the Miami Heat in 2019, helping take the team to the 2020 NBA Finals in his first season with the franchise. Butler, known to basketball fans as “Jimmy Buckets,” was drafted into the NBA in 2011 and was the 30th overall pick.
The diamond mining industry has joined forces with China’s largest jeweler to help it promote natural stones, as concerns rise about the threat from lab-grown diamonds. Hong Kong-listed Chow Tai Fook, which has more than 4,452 stores in mainland China, said it had signed a “strategic partnership” with the industry lobby group the Natural Diamond Council to promote mined diamonds in China. “The partnership aims to convey the value of natural diamonds to Chinese consumers and enhance their confidence and desire for natural diamonds,” Chow Tai Fook said. It added that the council was aiming to “fully reveal the core values and emotional significance of natural diamonds underlined by their preciousness, rarity, and uniqueness”.
The global personal luxury goods market started its path toward recovery in the first quarter, primarily due to the robust demand from China and Chinese nationals combined with an expected rebound of the U.S. market, according to an industry report released this week. In the first three months of the year, global personal luxury goods sales grew between zero and 1% compared to 2019, viewed as the last comparable year, according to the Bain & Co. Luxury Study 2021 Spring Update in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation. “It’s clear that consumers still want to buy luxury goods, and this, along with the brands’ ability to adapt and innovate, is driving a return to growth in the market,” Claudia D’Arpizio, a partner at Bain, a global management consultancy headquartered in Boston, said in a statement.
LVMH Chairman Bernard Arnault has spent about 440 million euros ($538 million) in recent months acquiring shares of the world’s largest luxury-goods maker, a sign of confidence that demand for $39,000 Louis Vuitton handbags and Dom Perignon champagne will thrive after the pandemic. Arnault bought the stock through companies that he and his family control, with the latest transactions disclosed in regulatory filings this week. An LVMH spokesperson didn’t respond to requests for comment. LVMH reported first-quarter sales growth last month that beat analysts’ estimates, fueled by China and other Asian nations. Shares in the Paris-based owner of Christian Dior have surged more than 20% this year, helping Arnault, 72, to briefly overtake Elon Musk as the world’s second-richest person.
Office & Leisure
Congress has voted to let large cruise ships sail directly from Washington state to Alaska without stopping in Canada, a step that could clear the way for cruises later this year. The legislation approved by the House on Thursday goes to President Biden, who is expected to sign it. “This legislation is literally a lifeline for so many of Alaska’s small businesses that were struggling, and it means jobs for more Alaskans this summer,” said Sarah Leonard, president of the Alaska Travel Industry Association. Carnival Corp. said it expects to resume sailing to Alaska in late July and running until early October. The company said its Carnival, Holland America and Princess lines will each operate one ship on round-trip voyages between Seattle and Alaska for fully vaccinated passengers. A longstanding federal law prohibits foreign-flagged ships — typically the big cruise liners — from carrying passengers between two U.S. ports without stopping in another country. With Canada forbidding any cruise operations through next February, the law threatened to eliminate Alaskan voyages on large ships this year.
Riding on the boom the pet sector has experienced this past year, Petco on Thursday reported “record” Q1 sales and the tenth consecutive quarter of growth at the retailer. The retailer’s net revenue increased 27% to $1.4 billion, driven by a 28% comp sales increase. The pet retailer reported positive net income of $6.1 million from a loss of $33.4 million in the year-ago period, according to a company press release. The company also reduced its debt in the quarter by 52% to $1.7 billion, driven by the proceeds generated from its initial public offering, recapitalization related to the IPO and free cash flow generation. Following the strong results, Petco raised its full year financial guidance: The retailer expects revenue to be between $5.5 billion and $5.6 billion, up from previous estimates of $5.3 billion and $5.4 billion and adjusted EBITDA to be between $550 million and $560 million.
Technology & Internet
Google announced it’s partnering with Shopify, giving the e-commerce platform’s more than 1.7 million merchants the ability to reach consumers through Google Search and its other services. The integration will allow merchants to sign up in just a few clicks to have their products appear across Google’s 1 billion “shopping journeys” that take place every day through Search, Maps, Images, Lens and YouTube. Google made its pitch to online advertisers describing how its so-called “Shopping Graph” would now begin to pull together information from across websites, price reviews, videos and product data pulled directly from brands and retailers, to help better inform online shoppers about where to find items, how well they were received, which merchant has the best price, and more. But before any of this Shopping Graph functionality can really work, Google needs consumers to find shopping for products via Google actually useful. That’s partly why Google made it free for merchants to sell their products across Google this past year — a change that Google says drove an 80% increase in merchants on Google, with the “vast majority” being small to medium-sized businesses.
Bitcoin’s price tumbled Friday following an intensified call from Chinese authorities to crack down on mining and trading of the cryptocurrency. Chinese Vice Premier Liu He and the State Council said in a statement that tighter regulation is needed to protect the financial system. The statement, released late Friday in China, said it is necessary to “crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.” Concerns in China centered on a number of issues. Much of bitcoin mining is done there by computers that use massive amounts of energy to solve complex math problems to unlock the cryptocurrency. Authorities around the world have expressed worries over how bitcoin and its counterparts are used in illicit ways. As part of its efforts to streamline the burgeoning digital currency space, China’s central bank has been one of the first in the world to develop its own digital currency backed by the yuan.
Finance & Economy
The procession of Americans heading to the unemployment line fell last week, with jobless claims totaling a fresh pandemic-era low of 444,000, the Labor Department reported. Economist surveyed by Dow Jones had been expecting 452,000 new claims as the jobs picture improves thanks to an accelerated economic reopening across the country. The total represented a decline from the previous week’s 478,000. Still, the numbers overall help provide some optimism after April’s stunning disappointment in which nonfarm payrolls grew by just 266,000 against estimates for 1 million. The strong pace of Covid-19 vaccines has spurred the economic rebound, with the U.S. still administering 1.8 million shots a day.
Sky-high home prices mean demand for ever bigger mortgages, but those prices may also be causing a pullback in homebuying overall. Mortgage applications to purchase a home fell 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was just 2% higher than the same week one year ago, when the housing market was just starting to come back after the pandemic shut it down. The extreme shortage has prices continuing to climb at the fastest pace in over 15 years, and as a result, average purchase loan balances are climbing in tandem. Last week, that average hit $411,400 — the highest since February.