The U.S. Lost 20.4 Million Jobs in April… The worst jobs report in history! The unemployment rate soared to 14.7%.
What it means— Another 3.17 million people filed for initial jobless claims this week, bringing the six-week total to 33.5 million. The past three weeks of jobless claims, totaling around 10 million, came in after the unemployment tally for April, which explains why the unemployment rate for last month shows only 20.4 million jobs lost.
Buckle up for the May numbers. It going to get uglier. Many investors and media are assuming employment numbers will quickly return with the reopening of the economy.
There are still many unknown issues. How many workers will rush back to their jobs if they’re making more on unemployment?
How many customers want to stand in lines with strangers?
Can department stores to restaurants survive on 25% or 50% of normal sales?
With so many unknowns, it seems the markets are well ahead of the economy. Underscoring that point, equity futures jumped higher when the unemployment figures were released.
March Factory Orders Down 10.3%… Durable goods orders fell 14.7%, while orders for nondurable goods dropped 5.8%.
What it means— March seems like a million years ago, which makes these and most other numbers irrelevant. It is reasonable that consumers purchased fewer big appliances and didn’t stop their grocery store shopping. We did spend less on gasoline. The desire to drive one’s own car is increasing. AutoNation, the largest car dealer, reports improving an market with preference for domestic models.
May re-openings are slow. These numbers should rebound a bit, but not likely to be known for another month. Governmental fear of a virus resurgence may result in renewed restrictions with a revival of mandated closures. Another unknown.
More Than 7.5% of Borrowers Have Requested Forbearance on Home Loans… More than 3.8 million borrowers are already in forbearance.
What it means— Who will end up taking the pain? Mortgage servicers are on the hook to pay investors who own mortgage-backed bonds when borrowers don’t pay. They count on just a few borrowers at a time either needing forbearance or outright defaulting. When homeowners resume payments or the home is sold, the servicer recoups its money, plus hefty fees.
With so many people needing (or taking) a break from mortgage payments, there’s a question whether servicers can remain solvent. The Federal Housing Finance Agency issued guidance that servicers only need to make up four months of missed payments. That’s still quite a bit of cash. Then what? If the downturn deepens, this could tear through the mortgage industry and wreak havoc on the mortgage-backed bond business. It was a different catalyst in 2008, but this would be damage just the same.
Number of Oil and Gas Rigs Operating in U.S. Expected To Fall Near 400, Lowest on Record… Given oversupply and falling demand, oil and gas companies are capping wells.
What it means— Baker Hughes began tracking the number of operating oil and gas rigs in the U.S. in 1940. If the number in operation comes in near the expected 400 mark this afternoon, it will be the lowest count ever recorded.
It will get worse. Investment firm Raymond James expects the rig count to drop to near 200 by the end of 2020 and to average just 225 next year. Cheap gas is great, unless you work in the oilfield and lose your job. Frackers have production requirements in debt covenants which is keeping sub-economic oil flowing in a market that does not need it. Expect the pain in the energy industry to last a long time and ripple through the high yield bond market.
Healthcare Workers Who Answered the Call for Help in New York Get a Surprise as They Leave… A Tax Bill… New York Governor Andrew Cuomo said that he can’t afford to give subsidies to out-of-state healthcare workers who answered his plea for help in dealing with the pandemic. Like everyone else, if they worked in the state for 14 or more days, they will have to pay state income taxes which involves filing a New York State income tax form. Such gratitude.
Data supplied by HS Dent Research
“When the facts change, I change my mind.
What do you do, sir?” ~ John Maynard Keynes
Our plan is “the plan will change.”
What is your plan?
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