Three Week Unemployment Claims Total Reaches 16.8 Million
Economic Report Monitor #12
The third week of jobless claims since the beginning of the COVID-19 lockdown began brought another fresh round of jobless claims. Just below the revised level of 6.87 million from the week before, this week 6.61 million individuals filed for unemployment benefits. The three week total now becomes 16.8 million or about 11% of the workforce after the three largest unemployment benefit claims in the history of the indicator. Bank of America sees the job cutting continuing as total job cuts could reach as much as 20 million with a peak unemployment rate of 15.6%. These numbers came at the same time as the Fed introducing new funding for small and mid-sized businesses totaling $2.3 trillion in an attempt to bridge the gap in funding during the lockdown. Markets continue to take the unemployment numbers in stride as equities rise, suggesting these massive unemployment claims numbers are priced in. Only time will tell if expectations are met.
The March Producer Price Index Survey was released today but does not provide much of a view on the inflationary effects of COVID-19 since data came in on March 10th. Regardless, there are visible impacts from trade and energy which were the biggest movers. Total final demand PPI only fell -0.2%. Goods fell -1.0%, dragged down by slumping oil prices with energy goods down -6.7%. Food was flat. Services was up slightly to 0.2% as trade grew 1.4%. One thing to note is deflationary forces have already start to emerge with annualized final demand PPI up just 0.7% and ex-food, energy, and trade PPI up 1.0%. Both figures are well below the 2.0% inflation target the Fed usually abides by. The extensive liquidity programs might be enough to supplement demand, but the global nature of the outbreak may inhibit supply chains too much to repair PPI demand.
Early reports of consumer sentiment came in from the University of Michigan for April, and the numbers were just as bad as one might expect. Current Economic Conditions careened downward to 72.4 almost -30 points lower than the 103.7 in March. Consumer Expectations fell a bit slower, down -9.7 points to 70. The resulting composite index was down -18.1 points to 71 completing the largest two-month drop of- 30.0 points, twice the last two-month record of -16.6 points. The data was bad enough for UMich Chief Economist Richard Curtin to suggest "consumers need to be prepared for a longer and deeper recession rather than the now discredited message that pent-up demand will spark a quick, robust, and sustained economic recovery." This goes against the initial thoughts of Fed members who surmised in the most recent Fed minutes that a quick and robust recovery would end the COVID-19 economic recession.
Two more indicators came in quietly behind COVID-19 affected data. Wholesale inventories were relatively unchanged as sales fell -0.8% in February with inventories falling -0.7% in the same month. Inventory-to-sales ratios remained relatively the same but a bit lower than a year ago. Nondurable inventories might be a bit squeezed in March as supply chains are hindered by the pandemic. Durable inventories should see less pressure as those sales are likely to stall with people feeling less wealthy. Finally, natural gas stockpiles from the previous week came out following seasonality trends. Nothing out of the ordinary to be reported though as storage levels remain around the same relative to last year and the 5-year average.
April 9th, 2020
The third week of jobless claims since the beginning of the COVID-19 lockdown began brought another fresh round of jobless claims. Just below the revised level of 6.87 million from the week before, this week 6.61 million individuals filed for unemployment benefits. The three week total now becomes 16.8 million or about 11% of the workforce after the three largest unemployment benefit claims in the history of the indicator. Bank of America sees the job cutting continuing as total job cuts could reach as much as 20 million with a peak unemployment rate of 15.6%. These numbers came at the same time as the Fed introducing new funding for small and mid-sized businesses totaling $2.3 trillion in an attempt to bridge the gap in funding during the lockdown. Markets continue to take the unemployment numbers in stride as equities rise, suggesting these massive unemployment claims numbers are priced in. Only time will tell if expectations are met.
The March Producer Price Index Survey was released today but does not provide much of a view on the inflationary effects of COVID-19 since data came in on March 10th. Regardless, there are visible impacts from trade and energy which were the biggest movers. Total final demand PPI only fell -0.2%. Goods fell -1.0%, dragged down by slumping oil prices with energy goods down -6.7%. Food was flat. Services was up slightly to 0.2% as trade grew 1.4%. One thing to note is deflationary forces have already start to emerge with annualized final demand PPI up just 0.7% and ex-food, energy, and trade PPI up 1.0%. Both figures are well below the 2.0% inflation target the Fed usually abides by. The extensive liquidity programs might be enough to supplement demand, but the global nature of the outbreak may inhibit supply chains too much to repair PPI demand.
Early reports of consumer sentiment came in from the University of Michigan for April, and the numbers were just as bad as one might expect. Current Economic Conditions careened downward to 72.4 almost -30 points lower than the 103.7 in March. Consumer Expectations fell a bit slower, down -9.7 points to 70. The resulting composite index was down -18.1 points to 71 completing the largest two-month drop of- 30.0 points, twice the last two-month record of -16.6 points. The data was bad enough for UMich Chief Economist Richard Curtin to suggest "consumers need to be prepared for a longer and deeper recession rather than the now discredited message that pent-up demand will spark a quick, robust, and sustained economic recovery." This goes against the initial thoughts of Fed members who surmised in the most recent Fed minutes that a quick and robust recovery would end the COVID-19 economic recession.
Two more indicators came in quietly behind COVID-19 affected data. Wholesale inventories were relatively unchanged as sales fell -0.8% in February with inventories falling -0.7% in the same month. Inventory-to-sales ratios remained relatively the same but a bit lower than a year ago. Nondurable inventories might be a bit squeezed in March as supply chains are hindered by the pandemic. Durable inventories should see less pressure as those sales are likely to stall with people feeling less wealthy. Finally, natural gas stockpiles from the previous week came out following seasonality trends. Nothing out of the ordinary to be reported though as storage levels remain around the same relative to last year and the 5-year average.
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