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Presented by Aon: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Ben White and Aubree Eliza Weaver | Presented by Aon | Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our s each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. | | | Big week for jobs and the Fed — We finally get to find out on Friday if April’s putrid 266,000 jobs gain (against expectations of around 1 million) was in fact a one-off distorted by seasonal issues and other quirky factors. Chances are good it will turn out to be just that, with expectation for the May jobs number on Friday at about 633K. That would be a relief, especially to the Biden White House, and a strong number. But not really strong enough to wipe out the big gap in jobs that remains from the Covid-19 pandemic. Unemployment is expected to dip to 5.9 percent from 6.1 percent with wages up 0.2 percent. The problem at the moment appears to be very much labor supply rather than demand with tons of employers desperate to hire as the economy reopens. Supply should increase with more people getting vaccinated and feeling comfortable returning to public workplaces. But employers are going to have to keep goosing wages, which means even more inflation on top of recent sharp price increases and thus issues for the Federal Reserve. Via Pantheon’s Ian Shepherdson: “It is now abundantly clear from hard data … that the reopening has triggered a big spike in prices—mostly across the Covid-hit services sector—it's no longer a forecast. “So policymakers now have just one burning question to answer: Will this spike become embedded into higher medium-term inflation, via an increase in the rate of growth of wages? If the answer is no, then the main effect of the surge in services prices will be a hit to real incomes for a time … And the most the Fed will do over the next couple years is taper their asset purchases down to zero” New this am from the White House: Targeting the wealth gap — President Joe Biden visits Tulsa, Okla., to mark the 100th anniversary of the white supremacist mob attack on the Black community of Greenwood, known as “Black Wall Street.” Biden will roll out a number of new initiatives aimed at addressing the racial wealth gap including using “the federal government’s purchasing power to grow federal contracting with small disadvantaged businesses by 50 percent, translating to an additional $100 billion over five years … “A new $10 billion Community Revitalization Fund to support community-led civic infrastructure projects that create innovative shared amenities, spark new local economic activity, provide services, build community wealth, and strengthen social cohesion” among other things. GOOD TUESDAY MORNING — Hope everyone had a restful and reflective weekend. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver. | | | | A message from Aon: Our world is more volatile than ever before. We are also more interconnected and interdependent. This dynamic has caused client need to outpace industry innovation. Read more about how Aon will focus on closing that growing gap. | | | | | | BIG DC FIGHT BREWING OVER CRYPTO CURRENCY — Our Kellie Mejdrich: “A strong push by Wall Street to open up access to Bitcoin investment is meeting resistance from a bipartisan group of lawmakers and regulators in Washington, setting up a lobbying fight over the future of digital currency. “Major financial industry players including Fidelity Investments and Anthony Scaramucci’s SkyBridge Capital are pressing the [SEC] to approve their plans to launch funds on public stock markets that would let small investors tap into the rise of Bitcoin prices. “Wall Street says it’s getting in the game and trying to launch so-called exchange-traded funds linked to cryptocurrency in response to surging demand, with the market for Bitcoin alone exceeding $670 billion. Firms are pouring money into lobbying to shape regulation and to convince skeptical policymakers that digital currency is viable for wider adoption for the masses” | | | |   | | | | | | REOPENING BETS PAY OFF BIG FOR STOCK PICKERS — WSJ’s Michael Wursthorn: “Investors are amassing hefty gains by loading up on economically sensitive stocks that have flourished during this year’s explosion of business activity. “More than two dozen actively managed exchange-traded funds have surged at least 20 percent so far this year, outpacing the S&P 500’s 12 percent climb. Goldman Sachs analysts say 56 percent of stock-picking large-cap mutual funds are beating their benchmarks, the highest percentage in more than a decade.” WORLD STOCKS SET FOR ANOTHER MONTH OF GAINS — Reuters’ Saikat Chatterjee: “World equities were firmly on track to post a fourth straight month of gains on Monday, while the dollar struggled broadly ahead of a slew of European and U.S. data this week that will provide a clearer picture on the global economy's recovery path. “MSCI's broadest index of world stocks drifted 0.1 percent higher, putting the gauge on track for a 1.4 percent gain for May. It is the longest monthly rising streak for the index since August 2020, when it marked a five-month run of gains, according to Refinitiv data.” | | | | A message from Aon: To meet the growing challenges our clients face from long-tail risks, like climate change and cyber threats, we are focused on collaborating with our partners in the public and private sectors across the US. By working closely together we can address some of society’s greatest challenges. | | | | | | RESURGENT WORLD ECONOMY SEEN LEAVING MANY BEHIND — Bloomberg’s William Horobin: “A strengthening world recovery from the Covid-19 pandemic risks leaving behind many regions, fueling inequalities across and within borders, the Organization for Economic Cooperation and Development said Monday. “As the Paris-based group revised up its 2021 global growth forecast to 5.8 percent from 5.6 percent, it warned of gaping differences that mean living standards for some people won’t return to pre-crisis levels for an extended period. In countries including Argentina and Spain, more than three years will elapse between the onset of the pandemic and a recovery of per-capita economic output, according to the new projections. That compares to just 18 months in the U.S. and under a year in China.” GLOBAL ECONOMY REBOUNDING, FACES MULTIPLE THREATS — AP’s David McHugh: “The global economic rebound from the pandemic has picked up speed but remains uneven across countries and faces multiple headwinds. Most worrisome: the lack of vaccines in poorer nations, which could lead to new virus variants and more stop-and-go lockdowns. Those were key points from the latest economic outlook published Monday by the Paris-based Organization for Economic Cooperation and Development.” HOW TO KNOW WHEN INFLATION IS HERE TO STAY — WSJ’s James Mackintosh: “Inflation is here already, and in the long run there is a lot of upward pressure on prices. But between now and then lies a big question for investors and the economy: Is the Federal Reserve right to think that the price rises we’re seeing now are temporary and will abate by next year? "Some at the Fed are already having vague doubts, starting to talk about when to discuss removing some of their extraordinary stimulus even as they continue to push the idea that inflation is likely to fall back of its own accord.” G7 TO BACK MINIMUM GLOBAL CORPORATE TAX, SUPPORT ECONOMY — Reuters’ Jan Strupczewski: “Finance ministers from the group of seven rich nations (G7) will vow this week to support their economies as they emerge from the pandemic and reach an ‘ambitious’ deal on a minimum global corporate tax in July, a draft communique showed. G7 officials, set to meet in London on June 4-5, will also say that once the recovery is well established, they will need to ‘ensure long-term sustainability of public finances’, which is understood to be code for a gradual withdrawal of stimulus. The G7 comprises the United States, Japan, Britain, Germany, France, Italy and Canada. “‘We commit to not withdrawing policy support too soon and investing to promote growth, create high-quality jobs and address climate change and inequalities,’ the draft communique, seen by Reuters, said.” | | | | SUBSCRIBE TO WEST WING PLAYBOOK: Add West Wing Playbook to keep up with the power players, latest policy developments and intriguing whispers percolating inside the West Wing and across the highest levels of the Cabinet. For buzzy nuggets and details you won't find anywhere else, subscribe today. | | | | | JOBS REPORT COULD BE PIVOTAL FOR FED — WSJ’s Paul Kiernan: “Friday’s jobs report is shaping up to be a pivotal data release for the Federal Reserve as it charts a plan for ending the easy-money policies that have propped up the economy and markets for more than a year. The May report will help central bankers understand two key questions that now dominate their attention. “First, how quickly is the labor market recovering jobs shed during the Covid-19 pandemic? Second, do the supply bottlenecks fueling a recent inflation upswing show any sign of diminishing? The answers will help determine when the Fed begins scaling back its large bond-buying programs and how it thinks about future interest-rate increases.” CRYPTO SHAKEOUT STIRS DEBATE ON ETHER VS. BITCOIN — Bloomberg’s Joanna Ossinger: “The relative resilience of Ether in May’s cryptocurrency rout has put the spotlight back on the idea that the second-largest digital token could one day overtake Bitcoin by market value. "Right now the largest virtual currency is more than twice as big as Ether but the gap narrowed by about $350 billion in May, courtesy of one of Bitcoin’s worst drops and a smaller retreat in Ether. Fans of Ether cite its popularity for blockchain-based financial services and digital collectibles, as well as an ongoing upgrade to boost the efficiency of the affiliated Ethereum network.” OVERDRAFT FEES FELL IN THE COVID-19 ECONOMY — WSJ’s Allison Prang: “Legislators slammed banks last week for the money they made from overdraft fees. It turns out, though, that overdraft revenue fell in 2020 for the first time in six years. The reasons? With nowhere to go when Covid-19 hit, many people curbed their spending. Stimulus money helped them pad their bank accounts. And banks were also more lenient about waiving the fees. “Financial firms brought in an estimated $31.3 billion in consumer overdraft revenue in 2020, according to financial-data firm Moebs Services Inc., down nearly 10 percent from the year before. The number of overdraft transactions in 2020 fell to less than 1 billion after topping that mark for about two decades, Moebs found, and the median fee last year was $30.” | | | | JOIN TUESDAY FOR A TALK ON ECONOMIC RECOVERY AFTER COVID-19: The U.S. economy is picking up speed, sparking fears of inflation and financial bubbles even as millions are still out of work following the Covid recession. Join us for an interview with Federal Reserve Vice Chair of Supervision Randal Quarles to discuss the U.S. economic outlook, how the nation's banks are holding up, and what to expect from the Fed on interest rates and regulations. REGISTER HERE. | | | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
