3.84 Million Americans File Initial Jobless Claims… The additional jobless claims bring the six-week total to 30 million.
What it means—The estimate was for 3.5 million claims. There was a time, way back in BC (Before Coronavirus), when a 300,000 miss on jobless claims would’ve sent the economic world into a panic. Now, we sort of roll past it, because no one knows what to expect week-to-week. The key is the trend, which is still moving up at a rapid clip.
Next week we’ll get unemployment numbers for April, which should be around 10% because the survey is taken mid-month. The figures for May, which will be reported the first Friday in June, should show unemployment above 15%. With the self-employed who are not eligible for unemployment benefits, the total will probably hit 50 million.
Shutting down the economy was an event. Reopening it will be a process. The recovery speed in employment will inform everything else. Expect it to be long and drawn out.
February S&P Case-Shiller Home Price Index Up 4.2% Over Last Year… Home prices accelerated from January to February.
What it means—This was good news, even if it’s considered ancient news by coronavirus standards. The pricing shows that home buyers were willing to step into an expensive market, taking advantage of low interest rates and steady paychecks.
With buyer paychecks in question and unable to tour homes, real estate sales are in a freefall during the important spring selling season. Hopefully, we can recover some lost ground as things open up.
U.S. First-Quarter GDP Down 4.8%… Economic activity fell like a rock in March, pulling down first-quarter GDP and, according to the Atlanta Fed President, starting a recession.
What it means—A massive decline in consumer and business spending led to falling GDP, even though the economic shutdown only covered part of one month. Consumer spending, which accounts for roughly two-thirds of GDP, fell 7.6%, the biggest drop since 1980. Oddly, healthcare spending fell 2.3%. While the world focused on COVID-19, patients needing other treatments were told to reschedule for later dates.
The MarketWatch estimate for second-quarter GDP is -27.7%. Others think that might be optimistic and expect GDP to fall between 40% and 50%. Whatever the ultimate decline, the real question is still what will be the speed of the recovery.
In a bit of good news, housing spending increased. Residential investment was up 21%, as homebuilders put up more units to meet demand. The numbers will fall in the second quarter, but it was good to see something in the green.
March Consumer Spending Falls Faster Than Income… Income dropped 2% in March. Spending fell 7.6%!
What it means—The difference in the rate of change led the savings rate to shoot up from a relatively high 8% in February to an incredible 13.1% in March, the highest savings rate in 39 years. Services spending fell across the board, while grocery spending increased 19.1% during the month.
Hopefully consumers will use their built-up savings to supercharge spending as the lockdown ends. Whether or not they will have a place to spend it is a different question. With many tourism locations closed, there’s no way to gauge what the all-important summer travel and spending season will look like.
The Federal Reserve Announced No Change in Monetary Policy… In a regularly scheduled meeting, the Fed decided to hold rates near zero and to maintain its bond buying and easy-money stance.
What it means—The central bank is printing money like crazy, will guarantee up to $4.5 trillion in loans, and is holding interest rates so low that 30-Year U.S. Treasury bonds trade at 1.2%, less than inflation. Maintaining the current stance simply means still shoveling money into the economy as fast as possible.
But there’s a problem. The Fed is a lending institution designed to address liquidity issues. Our present situation is a solvency problem. Without revenue, there are no funds to pay expenses, and taking out loans doesn’t change that.
We’re still looking at millions of businesses closing their doors for good. They would need grants well in excess of the current Payroll Protection Program to stay in business, and so far, nothing like that is in the works.
A Tale of Two States: Michiganders Protest Gov. Whitmer’s Extended Emergency Declaration, While South Dakotans Throw a Parade for Governor Noem… Michigan Governor Whitmer used executive orders to extend several emergency measures when the state legislature refused to do so. Protestors continue to gather at the capitol to protest her statewide lockdown measures.
In South Dakota, first responders and citizens threw a small parade for Governor Noem, driving by her house flashing lights and honking horns, celebrating that she resisted statewide economic shutdowns or orders beyond school closings.
Data supplied by HS Dent Research
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What do you do, sir?” ~ John Maynard Keynes
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