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Tuesday, April 6, 2021

Jobs growth soars, service activity hits a record, and it is still only April.

For months, we've written here at The Morning Brief about the coming surge in economic activity this year.

And the days of realizing this growth are just beginning.

On Monday, data from IHS Markit and the Institute for Supply Management on activity in the services sector blew the doors off analyst expectations as the ISM's activity index surged to a record high. IHS Markit's reading was the best in seven years.

"The Services PMI registered an all-time high of 63.7%, 8.4 percentage points higher than the February reading of 55.3 percent," said Anthony Nieves, chair of the ISM's services business survey committee. "The previous high was in October 2018, when the Services PMI registered 60.9%. The March reading indicates the 10th straight month of growth for the services sector, which has expanded for all but two of the last 134 months." The only two months of contraction were March and April 2020.

Nieves added that the report reflected a "substantial increase in the rate of growth in the services sector in March. Respondents’ comments indicate that the lifting of coronavirus (COVID-19) pandemic-related restrictions has released pent-up demand for many of their respective companies’ services. Production-capacity constraints, material shortages, weather and challenges in logistics and human resources continue to cause supply chain disruption."

Chris Williamson, chief business economist for IHS Markit, said Monday that the "recent surge in service sector growth shows no sign of abating, with another impressive performance in March rounding off a quarter in which the PMI surveys indicate that the economy grew at an annualized rate of approximately 5%."

These reports also follow last Friday's March jobs report which likewise topped expectations, showing that 916,000 jobs were added back to the economy last month with the unemployment rate falling to 6%. Including revisions to job growth in January and February, about 1 million more Americans were employed at the end of last month than had been previously reported.

And these reports sit at the bleeding edge of what is expected to be just a blockbuster summer for growth in America. Last month, we noted that Wall Street was having trouble keeping up with the economy and the stock market's continued rally. And with three major economic data points all coming in well above expectations over the last two business days and stocks hitting a record to start the week, it seems this trend continues.