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VIRUS UPDATE
- World reports record jump in new cases, deaths
- Texas reports 7th straight record hospitalizations; Arizona reports record jump in cases
- 23 US states seeing rising case numbers
- Florida “has the makings of the next epicenter”
- From NBF:
June 18 COVID-19 Test Results; Most Positive Results Since Early May
Number of tests has flattened but positives are ticking up. (CalculatedRisk)
In the WaPo:
(…) several states central to his reelection chances, including Florida and Arizona, have recently seen sharp increases in new coronavirus cases — increases that, despite the Trump administration’s insistences, are not obviously a function of increased testing for the virus.
Texas, Florida and Arizona all saw highs in the number of new daily cases this week. Since June 1, the seven-day average of new cases in Texas is up more than 50 percent. In Arizona and Florida, it is more than double at around 150 percent. North Carolina’s rate of new cases has increased, too, but at the same rate testing in the state has expanded. In Oklahoma, where Trump is holding a rally Saturday, the number of new cases each day has climbed 150 percent since June 1, while the number of tests being conducted has dropped. (…)
U.S. Unemployment Claims Edge Lower but Remain Historically High Workers filed 1.5 million new unemployment claims last week and 20.5 million people received benefits, signs the pace of layoffs remained high but was stabilizing.
The number of Americans receiving benefits payments fell by 62,000 to 20.5 million in the week ended June 6. Those continuing claims are reported with a one-week lag. A stable level of people on benefit rolls suggested that new layoffs are being offset by employers hiring or recalling workers as states have allowed more businesses to reopen in recent weeks. (…)
Employers added to payrolls in May but only offset about one in 10 jobs lost in April and March. (…)
Unemployment benefits have been expanded to those who were previously ineligible for such aid, including self-employed and gig-economy workers. Last week, 761,000 sought benefits through that program, which is accounted for separately from the regular unemployment insurance program and not adjusted for seasonality. For the week ended May 30, the latest available data, the number receiving payments through the program fell by 445,000 to 9.3 million.
Ms. Holder said having nearly a third of all receiving some form of unemployment benefits falling into that category was significant. How quickly those workers are able to return to employment will influence the speed of the economy’s recovery.
“These are the type of people you want working in a robust economy,” she said. “They start businesses and have an entrepreneurial spirit.” (…)
ING:
Today’s jobless claims numbers suggest the reopening story isn’t having as much of a positive impact on the labour market as hoped. It reinforces the case for more fiscal support to keep the economy on the recovery path. (…)
This means the insured unemployment rate remains at 14.1%, which is higher than the “official” unemployment rate of 13.3% published by the Bureau of Labour Statistics – you have to be actively looking for work to be classified as unemployed by the BLS, whereas due to benefit changes relating to Covid-19, you temporarily don’t have to do this in order to claim benefits. Moreover, if we add in all the unemployment benefit claimants (including those receiving pandemic unemployment assistance) we get a total of 29,140,557 Americans, equivalent to an unemployment rate of 20%.
Today’s numbers suggest that the reopening story may not be generating as much momentum for job creation as the surprise May payrolls number had suggested. It also tallies with comments yesterday from the Cleveland Fed’s Loretta Mester and Atlanta Fed’s Raphael Bostic. Mester implied firms are recalling workers more slowly than originally intended and the initial deterioration was “even steeper” than official statistics implied. Bostic said that after speaking to industry participants, 20-30% of restaurants and entertainment venues may not reopen in the Atlanta region with the labour market experiencing structural change.
So, while recent activity data, particularly surrounding the consumer sector, has been very encouraging we are a long way from returning to “normality”. The extended unemployment benefits including the extra $600 per week payment, have clearly supported incomes and spending. However, the $600 payment is due to end in six weeks and if it isn’t extended in an environment where unemployment remains very high, there is a clear risk spending subsides again. We are also carefully watching the renewed increase in Covid-19 cases in the south of the country. There is clearly the potential for reopening plans to be put on hold or even reversed in some localities and this would obviously have a detrimental impact on the economy.
- Looking back to March, 45.7 million workers in the United States have now filed for unemployment benefits. (Fortune)
Kroger said customers are still grocery shopping more as sales increased 20% in April and May, after a 30% increase in March. (WSJ)
Weekly Economic Index (WEI)
June 18, 2020: Update
- The WEI is currently -8.39 percent, scaled to four-quarter GDP growth, for the week ended June 13 and -9.23 percent for June 6; for reference, the WEI stood at 1.54 percent for the week ended February 29.
- Today’s increase in the WEI for the week of June 13 was driven by increases in electricity output (the highest year-over-year gain since December), fuel sales, railroad traffic, and tax withholdings, as well as a decrease in initial unemployment insurance (UI) claims. The WEI for the week of June 6 was revised upward due to the release of continuing UI claims, which provided a more positive signal than previously available data.
Australians Come Out of Lockdown And Spend Like Never Before
Preliminary retail figures showed turnover rose 16.3% from April, the Australian Bureau of Statistics said Friday in Sydney. Following a record 17.7% slump in April, May’s increase was the largest in 38 years of published surveys, with gains in every industry, the bureau said. (…)
“As lockdowns have eased, retail spending has rebounded strongly. Sales have more than exceeded prior trends, but this signals a shift — rather than a recovery — in household spending. In addition to stimulus support and pent up demand from the lockdown, elevated retail spending reflects a diversion from non-retail activities that remain shut down, and the retention of spending inside Australia that Australians would ordinarily make during offshore travels.” (…)
China to Accelerate U.S. Farm Purchases After Hawaii Talks
(…) On Thursday, U.S. Secretary of State Michael Pompeo said China’s top foreign policy official committed to honor all of his nation’s commitments under the trade deal. (…)
David Stilwell, assistant secretary of state at the east Asian and Pacific affairs bureau, said on Thursday that while China had recommitted to the phase one trade deal – signed in January to rein in their prolonged trade war – Washington was waiting to see what the next few weeks would bring in its relations with Beijing.
“Overall, given all the current circumstances with the relationship, the PRC [People’s Republic of China] side could not be described as really forthcoming in this,” he said, according to a State Department statement.
“I’m not going to go into detail on exactly what was discussed, but whether or not they were productive or not, I will look at what comes up in the next couple of weeks: do we see a reduction in aggressive behaviour or not?” (…)
“If we have words of peace but we have aggressive actions, then we’re going to have to increase the pressure to manage that,” Stilwell said, adding that the Group of 7 had released a statement urging China to reconsider its national security laws for Hong Kong.
“The best way we do that is not just the US alone. This is not a US-China event. It’s not a US-China issue. This is China versus lots of others.” (…)
(…) In a tweet Thursday, Trump refuted comments a day earlier by U.S. Trade Representative Robert Lighthizer, who said a full decoupling of the world’s two biggest economies was not “a reasonable policy option.” (…)
Trump has also ramped up his rhetoric against Beijing as the coronavirus pandemic continues to spread in the U.S. Trump refers to the illness as the “plague from China,” and has accused the country of withholding important information in the early days of the outbreak.
“I think the trade deal is a great deal. But ever since we got hit with the Chinese plague, I feel different toward everything having to do with China. And I’ve always been hardline on China,” he told the Wall Street Journal during an interview on Wednesday. (…)
Trump considering reinstating tariffs on Canadian aluminum and steel imports
Not good just before an election:
DEFLATION … INFLATION
From John Authers’ column in Bloomberg:
(…) As Albert Edwards of Societe Generale SA points out in this chart, core inflation in the U.S. would now actually be negative, if the country’s counter-intuitive method for calculating the change in housing costs were replaced with the definition used by the euro zone:
(…) The Covid-19 lockdowns have changed consumption patterns, and the goods that are being consumed more have started to gain in price. The following chart, taken from a research paper for the National Bureau of Economic Research by Alberto Cavallo of Harvard University, shows what U.S. inflation numbers would look like if the basket of goods used to calculate it were adjusted to reflect what consumers are actually buying.
This is concerning research as it suggests that “the cost of living for the average consumer is higher than implied by the official CPI. The welfare implications are particularly relevant for people losing their jobs” during the pandemic. In other words, it looks nastily as though the effect of differential inflation in goods will have served to increase inequality still further. It also suggests that inflationary pressures are greater than they seem. (…)
SENTIMENT WATCH
Most stocks, industries, sectors, and world indexes are unhealthy: A good way to determine whether a market environment is healthy or not is by watching how many stocks and indexes are holding above their 200-day moving averages. Healthy markets see most of them holding above, with dips below quickly getting bought. So far, we’re seeing the opposite among stocks, industries, sectors, and worldwide indexes.
Investors could be looking at a ‘lost decade’ in the stock market, the world’s biggest hedge fund warns
‘Even if overall profits recover, some companies will die or their shares will devalue along the way. Left with lower levels of profits and cash shortfalls, companies are likely to come out on the other side of the coronavirus more indebted.’ (…)
“Globalization, perhaps the largest driver of developed world profitability over the past few decades, has already peaked,” Bridgewater’s Ray Dalio said in a note obtained by Bloomberg News. “Now the U.S.-China conflict and global pandemic are further accelerating moves by multinationals to reshore and duplicate supply chains, with a focus on reliability as opposed to just cost optimization.”
Main Street investors bank profits on rally that Wall Street doubted
Main Street investors who have reaped windfall gains from the steepest stock market rebound on record now seem to be making for safety, brokers say, just as Wall Street experts are advising clients to dip their toes into riskier assets again. (…)
Customers at Saxo Markets in Singapore have been reducing long positions at gathering pace this month. Asian investors with TD Ameritrade are selling soaring tech companies for banks, while other brokers report demand for blue chips.
The moves flip the image of retail investors as “moths,” as they are called in Thailand for their reputation of being drawn to bright lights only to get burned, since small traders appear to have led rather than lagged professionals this time. (…)
TD Ameritrade said its Asia clients sold Apple (AAPL.O) and Tencent (0700.HK) last month, and bought Berkshire Hathaway (BRKa.N) and J.P. Morgan (JPM.N). Singapore’s PhillipCapital said its customers, even in the 18-25 year-old bracket, were buying dividend-paying blue chips or cashing out.
Australia’s biggest retail broker, CommSec, reported a shift away from volatile stocks such as Treasury Wine Estates (TWE.AX) and into big banks and miners.
To be sure, retail traders are still placing incredibly risky bets, such as on bankrupt car-rental company Hertz (HTZ.N). (…)
“Retail investors had missed out on the long-term big rally since the 2008 global financial crisis,” said Taye Shim, president director of Indonesia’s Mirae Asset Sekuritas.
“I think they are more encouraged to not let this one pass,” he said.
LIVES DON’T MATTER
Two Canadians Detained in China Indicted on Espionage Charges Chinese prosecutors formally indicted the two men more than 18 months after they were first detained, advancing a pair of cases widely seen as retribution for Canada’s arrest of a Huawei executive.
BORDERING ON….
A man dressed as the border wall was among those lined up in Tulsa yesterday ahead of tomorrow’s Trump rally. Photo: Tom McCarthy/AP
