Business Leaders Survey Covering service firms in New York, northern New Jersey, and southwestern Connecticut
Activity in the region’s service sector declined at an accelerated pace, according to firms responding to the Federal Reserve Bank of New York’s January 2021 Business Leaders Survey. Nineteen percent of respondents reported that conditions improved over the month, while 51 percent said that conditions worsened.
The employment index moved down six points to -17.6, indicating that employment levels fell at a faster pace than last month. However, wages increased at a faster pace, with the wages index rising nine points to 19.9, its highest level since the onset of the pandemic.
Price increases picked up: The prices paid index rose six points to 38.9, and the prices received index rose eight points to 7.4, the first sign of any significant selling price increases since the pandemic began.
Yellen Makes Case for Sweeping Stimulus Package Biden’s choice for Treasury secretary urged lawmakers in her confirmation hearing to think big to avert a protracted economic downturn and put aside concerns about the mounting national debt.
(…) If she is confirmed by the Senate as expected, Ms. Yellen will become the administration’s top economic-policy spokesperson responsible for selling President-elect Joe Biden’s $1.9 trillion proposal, which includes another round of stimulus payments, extended jobless benefits, grants for small businesses and a nationwide vaccination program. After that, Ms. Yellen said, long-term investments will be needed in areas such as infrastructure and workforce training to help make the U.S. economy more competitive and productive. (…)
Like the other nominees, Ms. Yellen sounded a hawkish note on China, calling it “our most important strategic competitor” and promising to address its “abusive, unfair and illegal practices,” including undercutting American companies by dumping products, erecting trade barriers and stealing intellectual property. (…)
Ms. Yellen affirmed the U.S.’s commitment to market-determined exchange rates, and she made clear the U.S. doesn’t seek a weaker dollar for competitive advantage (…).
Ms. Yellen acknowledged the government’s mounting debt load, which stands at $21.6 trillion—or roughly 100% of a year’s economic output. But she urged lawmakers to put those concerns aside for now. Interest rates are at historic lows and expected to remain there for some time, making borrowing more affordable, she said. (…)
She assured senators that the Biden team doesn’t immediately plan to pursue tax increases but would consider them as part of a later package that focuses on long-term investments. (…)
CONSUMER WATCH
Survey: 53% of Americans say $600 coronavirus stimulus checks won’t last them a full month
(…) That total includes 18 percent who do not think the money is enough to make any impact on their finances.
Meanwhile, 71 percent of those receiving stimulus payments say the money will be very important or somewhat important to their near-term financial situation. (…)
Of the Americans who are planning to spend their stimulus checks, most (42 percent) say they’re going to put it toward monthly bills, such as their rent, mortgage or utilities. More than a quarter of respondents (25 percent) want to use the funds to pay down debt, and nearly a third (32 percent) are going to allot it toward their day-to-day essentials. Few Americans (8 percent) say they’re going to use their stimulus check to cover discretionary purchases, from dining out and shopping to taking a vacation.
Other Americans (6 percent) say they are inclined to invest it, while 30 percent plan to park the cash in their savings. A marginal 5 percent don’t know what they’ll do with the money, while 8 percent selected “other.” (…)
Americans’ plans for their stimulus check depend on how much money they make. An overwhelming majority of those earning under $30,000 annually (49 percent) say they’re going to put the funds toward monthly bills, while Americans making $80,000 and over a year were most likely to say they’re going to put their check toward their savings (39 percent). Those higher-income earners were also more than two times as likely to put the funds toward discretionary spending than their lower-income counterparts (at 16 percent versus 6 percent, respectively). (…)
Americans Aren’t Draining Their Retirement Funds in the Pandemic Workers affected by the pandemic continued to withdraw money from their retirement accounts in the final months of 2020. But, as happened earlier in the year, the increase was modest.
(…) In 2020, Fidelity Investments, the nation’s largest 401(k) provider, said 1.6 million people, or 6.3% of eligible participants in plans it administers, took some money out.
Fidelity and many other 401(k) record-keepers reported that although the number of people taking Covid-19-related withdrawals continued to grow in the final three months of 2020, the rate of increase was modest and largely in line with what occurred in earlier months, even as the option to take a penalty-free withdrawal ended on Dec. 31.
An additional 1% of 401(k) participants at Fidelity took what is known as a hardship distribution in 2020. These allow withdrawals for reasons including buying a home, preventing foreclosure or paying medical bills. In a typical year, about 2% take a hardship distribution.
At rival Vanguard Group, 5.7% of eligible participants took penalty-free withdrawals because of the crisis and 1.7% did so on hardship grounds in 2020. T. Rowe Price Group Inc. TROW 1.32% says 8% of eligible people in plans it administers with assets over $25 million took at least one withdrawal because of the pandemic. About 6% of people with 401(k) accounts that Alight Solutions LLC administers tapped their savings. (…)
The main reason withdrawal rates are lower than expected is that the unemployment crisis has disproportionately fallen on lower-income workers, who “are least likely to have a 401(k) plan,” said Brigitte Madrian, an economist at Brigham Young University. (…)
But there is a LOT of cash somewhere!
Households cash, checking & savings deposits (% of GDP 1950-2020)
Source: Macrobond, ING
Source: Macrobond, INGChina’s Consumers Fall Behind Even as Its Economy Marches Forward One thing is missing from China’s otherwise remarkable economic recovery: a strong rebound in consumer spending.
(…) Domestic consumption has lagged, with retail sales shrinking 3.9% in 2020 from the previous year and demand for imported goods falling slightly.
There are many reasons for the weakness. While China’s unemployment rate never shot up as much as unemployment did in the U.S. and Europe, many employers cut salaries or hours, leaving consumers anxious. Many opted to save more—a common tendency in China, which has long had a high savings rate.
China’s government also didn’t hand out checks to consumers as the U.S. did, choosing instead to focus stimulus on helping factories and other businesses. (…)
“You have real restraints on where this recovery could go in China and how much its economy can speed up, if [the government] doesn’t do more on the consumption side,” said Leland Miller, chief executive officer of China Beige Book, a research firm that conducts private surveys on the Chinese economy. (…)
Yan Ling, a 25-year-old teacher living in the central city of Chongqing, said she plans to keep cutting back on what she calls unnecessary goods, such as snacks and clothes, in part because she worries that a possible resurgence of the pandemic could threaten her job stability. (…)
“The pandemic made me realize the importance of saving,” she said. (…)
Although China’s household savings rate edged down from a peak of 25% of gross domestic product in 2010 to 23% in 2018, it remains far above the global average, according to the International Monetary Fund. A survey by China’s central bank in the third quarter of 2020 found that 50% of households said they plan to save more, up from 45% a year earlier, while fewer said they intend to spend or invest more. (…)
While China’s urban employment rate recovered to pre-pandemic levels by September, estimated workloads were still down by more than 40% from normal, according to Gan Li, a professor of economics at Texas A&M University.
Average incomes among private-sector employees dropped 29% in September from a year earlier, his research showed.
“Low workload reflects a depressed demand, which means that recovery in the job market is still quite fragile,” said Mr. Gan. (…)
Chinese authorities have suggested in recent months that they will take steps to increase consumption this year with what some officials have described as “demand-side reforms,” though little detail has been revealed. (…)
Similar to the USA: “China has a “two-speed recovery,” led in particular by sales of housing. Meanwhile, consumer services are lagging behind seriously” (Bloomberg’s John Authers)
When Investors Forget Fundamentals, the Market Is Broken Best explanation for how stocks have moved so far this year is the raw price of the stock, an almost meaningless number
(…) Forget a careful evaluation of future cash flow, valuation, brand power, management skill or even political sensitivity. I repeat: The best explanation for how stocks have moved so far this year is the price of the stock, an almost meaningless number.
Stocks priced below $1 have performed the best, followed by those between $1 and $2, and so on up almost perfectly. The worst performers have share prices above $100. It looks remarkably like investors are treating a low-price share as an indicator that the stock is a bargain, and a higher price as a sign that it is worse value for money. (…)
John Authers describes this new curve steepener!
[Here’s a] graph from SocGen’s chief quantitative strategist, Andrew Lapthorne. It ranks the small-cap stocks in the Russell 2000 by their share price — not their market cap, or their price-earnings ratio or anything like that, but just by the nominal price per share in dollars. The highest-priced stocks are on the left, while the cheapest are on the right. Black dots show how they have done since the vaccine trade got going in earnest at the beginning of November (on the right-hand scale), and the red dots show how well they’ve done so far this year (on the left-hand scale).
Covid-19
BioNTech/Pfizer vaccine found effective against Covid-19 variant Laboratory-based study shows mutations were neutralised by antibodies in blood of vaccinated patients
Israeli hospital: 98% of staff who got 2nd shot have high-level COVID antibodies
A new serological study conducted at Sheba Medical Center in Ramat Gan has shown 98% of hospital workers who received the second dose of the coronavirus vaccine have developed a high level of antibodies to fight off the virus.
The study of 102 samples, taken a week after Israel began administering the second dose — when the vaccine is expected to reach peak effectiveness — showed most vaccinees had higher antibody counts than among those who have recovered from COVID-19.
The hospital says that a week after receiving the final dose, antibodies jumped to a level between 6 and 20 times higher than that observed after the first shot. (…)
Europe, Struggling to Exit the Pandemic, Faces Bleak 2021 Covid-19 infections and deaths remain stubbornly high across much of Europe while vaccination efforts are moving so slowly that widespread immunity is unlikely in the region before the fall, raising the prospect of a bleak 2021.
(…) The EU, with a population of around 450 million, had by late December ordered 300 million doses of the vaccine developed by BioNTech SE and Pfizer Inc., the first to be authorized in Western countries. That amount, expected to be delivered sometime by the fall, is sufficient for 150 million people, since inoculation requires two doses.
The bloc is now negotiating the order of another 200 million doses, which would start to become available late this year. (…)
The vaccination effort would be bolstered by the possible authorization on Jan. 29 of a shot developed by AstraZeneca PLC and the University of Oxford, with the bloc having preordered 300 million doses of it. (…)
France, Once a Vaccine Pioneer, Is Top Skeptic in Covid-19 Pandemic
(…) France’s mass vaccination campaign is off to a glacial start, with only around 422,000 people receiving the vaccine in more than three weeks since European regulators authorized the drug, far behind most other developed nations. A big reason: French officials are running up against deeply ingrained opposition that has made France among the world’s top vaccine skeptics.
An Ipsos poll conducted in December found that France ranked at the bottom of 15 countries on willingness to take a Covid-19 vaccine, with only 40% of the public saying they wanted the shot. Polls show that more than three-quarters of nursing home workers—who are among the government’s first target groups for the vaccine—don’t want to take it. (…)
Some of the world’s first antivaccination groups arose in France toward the end of the 19th century as Louis Pasteur pioneered the technique of using attenuated viruses to stimulate immunity. The Universal League of Antivaccinators was founded in France in 1880 to oppose proposals to make the smallpox vaccine obligatory. The league wrote to the French government three years later to oppose a government pension for Mr. Pasteur, calling his discoveries “disappointments and disasters.” (…)
The National League for Liberty in Vaccination, a French nonprofit founded in 1953, is one of the oldest antivaccine groups. France has been slower to adopt vaccines against diseases such as measles and rubella than the U.S. and some other developed countries. (…)
China Barricades Part of Capital as Northern Outbreak Escalates
Daxing district in southern Beijing, where its new airport is located, has been sealed off from the rest of the country after six infections were found there. The total number of cases in Beijing stands at 15, while over a thousand infections have been found nationwide since early January, mostly in China’s vast rural northern provinces.
While the number of cases is small compared to outbreaks in western countries, the flareup — fueled by an unusually cold winter — is China’s biggest coronavirus challenge since the Wuhan crisis a year ago given its potential to spread to the capital of over 20 million people, China’s cultural and political center. (…)
Residents in five Daxing apartment complexes have been barred from leaving their homes from Wednesday, said the local government, while students across the district were told to stay home. A wide range of public venues, including office buildings, hotels, restaurants, factories and supermarkets have been closed while the Daxing population undergoes mass testing.
In addition, Beijing is now requiring anyone coming to the city from overseas to be quarantined in isolation for 21 days — first at a centralized facility for 14 days, and then at their residence for seven days. They can then move around the city but are banned from any public gatherings for a further seven days. (…)