by Calculated Risk on 5/20/2020 05:03:00 PM

In addition to having enough tests for test-and-trace, we also need people to conduct the tests.

There is a great new website that tracks the progress of each towards test-and-trace. The website also has resources on how to implement test-and-trace. This includes software, training resources, a calculator for how many people to hire and more. Every state should review this site!

Click on graph for larger image.

This graph is from the test-and-trace website. The graph is interactive, and shows the percent positive tests by state, and the number of contract traces hired and more.

Check it out.

In late April, Dr. Fauci said the US might be able to test 400,000 to 600,000 people per day sometime in May, and  testing is now close to that range. This might be enough to allow test-and-trace in some areas.  However, the US might need more than 900,000 tests per day according to Dr. Jha of Harvard's Global Health Institute.

There were 413,804 test results reported over the last 24 hours.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.2% (red line). The US probably needs enough tests to keep  the percentage positive well below 5%. (probably much lower based on testing in New Zealand).

NOTE: A few states are apparently including antibody tests with virus tests. The COVID tracking project is working to straighten that out.

by Calculated Risk on 5/20/2020 02:08:00 PM

From the Fed: Minutes of the Federal Open Market Committee, April 28–29, 2020. A few excerpts:

Participants noted that the coronavirus outbreak was causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health were inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices were holding down consumer price inflation. The disruptions to economic activity here and abroad had significantly affected financial conditions and had impaired the flow of credit to U.S. households and businesses.

Participants judged that the effects of the coronavirus outbreak and the ongoing public health crisis would continue to weigh heavily on economic activity, employment, and inflation in the near term and would pose considerable risks to the economic outlook over the medium term. Participants assessed that the second quarter would likely see overall economic activity decline at an unprecedented rate. Participants relayed information from their Districts that the burdens of the present crisis would fall disproportionately on the most vulnerable and financially constrained households in the economy.
...
Participants noted that recently enacted fiscal programs were crucial for limiting the severity of the economic downturn. In particular, the Cares Act and other legislation, which represented more than $2 trillion in federal spending in total, had provided direct help to households, businesses, and communities. For example, the PPP was providing a financial lifeline to small businesses, the expansion of unemployment benefits was helping restore lost income for laid-off workers, and the Treasury had provided a necessary financial backstop to many Federal Reserve lending facilities. Participants acknowledged that even greater fiscal support may be necessary if the economic downturn persists.
…
A number of participants commented on potential risks to financial stability. Participants were concerned that banks could come under greater stress, particularly if adverse scenarios for the spread of the pandemic and economic activity were realized, and so this sector should be monitored carefully. Participants saw risks to banks and some other financial institutions as exacerbated by high levels of indebtedness among nonfinancial corporations that prevailed before the pandemic; this indebtedness increased these firms' risk of insolvency. The upcoming financial stress tests for banks were seen as important for measuring the ability of large banks to withstand future downside scenarios. A number of participants emphasized that regulators should encourage banks to prepare for possible downside scenarios by further limiting payouts to shareholders, thereby preserving loss-absorbing capital. Indeed, historical loss models might understate losses in this context. A few participants stressed that the activities of some nonbank financial institutions presented vulnerabilities to the financial system that could worsen in the event of a protracted economic downturn and that these institutions and activities should be monitored closely.
…
Members further concurred that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term, and posed considerable downside risks to the economic outlook over the medium term. In light of these developments, members decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. Members noted that they expected to maintain this target range until they were confident that the economy had weathered recent events and was on track to achieve the Committee's maximum employment and price stability goals.
emphasis added

by Calculated Risk on 5/20/2020 11:46:00 AM

From the Census Bureau: Measuring Household Experiences during the Coronavirus (COVID-19) Pandemic

The U.S. Census Bureau, in collaboration with five federal agencies, is in a unique position to produce data on the social and economic effects of COVID-19 on American households. The Household Pulse Survey is designed to deploy quickly and efficiently, collecting data to measure household experiences during the Coronavirus (COVID-19) pandemic. Data will be disseminated in near real-time to inform federal and state response and recovery planning.
…
Data collection for the Household Pulse Survey began on April 23, 2020. The Census Bureau will collect data for 90 days, and release data on a weekly basis. (For the first release, the Census Bureau anticipates it will take two weeks after the first week of data collection to prepare and weight the data; subsequent releases will then be made on a weekly basis.)

This will be updated weekly, and the Census Bureau released the first survey results today. This survey asks about Loss in Employment Income, Expected Loss in Employment Income, Food Scarcity, Delayed Medical Care, Housing Insecurity and K-12 Educational Changes.

Click on graph for larger image.

This survey will be useful in tracking the "opening" of the economy.

This is the first release. The data was collected between April 23 and May 12, 2020.

The data will be updated weekly for the next 90 days.

by Calculated Risk on 5/20/2020 10:38:00 AM

From the National Center for Health Statistics: Births: Provisional Data for 2019. The NCHS reports:

The provisional number of births for the United States in 2019 was 3,745,540, down 1% from the number in 2018 (3,791,712). This is the fifth year that the number of births has declined after the increase in 2014, down an average of 1% per year, and the lowest number of births since 1985.

The provisional general fertility rate (GFR) for the United States in 2019 was 58.2 births per 1,000 females aged 15–44, down 2% from the rate in 2018 (59.1), another record low for the nation. From 2014 to 2019, the GFR declined by an average of 2% per year.
…
The birth rate for teenagers in 2019 was 16.6 births per 1,000 females aged 15–19, down 5% from 2018 (17.4), reaching another record low for this age group. The rate has declined by 60% since 2007 (41.5), the most recent period of continued decline, and 73% since 1991, the most recent peak.

Here is a long term graph of annual U.S. births through 2018.

Click on graph for larger image.

Births have declined for five consecutive years following increases in 2013 and 2014.

Note the amazing decline in teenage births.

With fewer births, and less net migration, demographics will not be as favorable as I was expecting a few years ago.

There is much more in the report.

by Calculated Risk on 5/20/2020 08:32:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture billings continue historic contraction

Demand for design services in April saw its steepest decline on record, according to a new report today from The American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score of 29.5 for April reflects a decrease in design services provided by U.S. architecture firms (any number below 50 indicates a decrease in billings). During April, both the new project inquiries and design contracts scores also declined significantly, posting scores of 28.4 and 27.6 respectively.

“With the dramatic deceleration that we have seen in the economy since mid-March, it’s not surprising that businesses and households are waiting for signs of stability before proceeding with new facilities,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Once business activity resumes, demand for design services should pick up fairly quickly. Unfortunately, the precipitous drop in demand for design services will have lasting consequences for some firms.”
...
• Regional averages: West (38.1); Midwest (31.2); South (31.1); Northeast (23.0)

• Sector index breakdown: institutional (36.1); multi-family residential (30.3); mixed practice (29.0); commercial/industrial (27.8)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 29.5 in April, down from 33.3 in March. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

This is the lowest level for this index on record, even below the lowest level during the Great Recession.

by Calculated Risk on 5/20/2020 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 15, 2020.

... The Refinance Index decreased 6 percent from the previous week and was 160 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 1.5 percent lower than the same week one year ago.
...
“Applications for home purchases continue to recover from April’s sizeable drop and have now increased for five consecutive weeks. Purchase activity – which was 35 percent below year-ago levels six weeks ago – increased across all loan types and was only 1.5 percent lower than last year,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Government purchase applications, which include FHA, VA, and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months. As states gradually re-open and both home buyer and seller activity increases, we will be closely watching to see if these positive trends continue, or if they reflect shorter-term, pent-up demand.”

Added Kan, “Despite mortgage rates remaining close to record-lows, refinance activity slid to its lowest level in over a month. The average loan amount for refinances fell to its lowest level since January – potentially a sign that part of the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten. We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates. With many homeowners still facing economic and employment uncertainty, these refinance opportunities will allow them to save money on their monthly payments, which can then be used to help other areas of their budgets.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.41 percent from 3.43 percent, with points increasing to 0.33 from 0.29 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

The refinance index has been very volatile recently depending on rates and liquidity.

But the index is way up from last year (over triple last year).

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 1.5% year-over-year.

Note: Red is a four-week average (blue is weekly).

by Calculated Risk on 5/19/2020 08:31:00 PM

Wednesday:
• At 7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• During the day, The AIA's Architecture Billings Index for April (a leading indicator for commercial real estate).

• At 2:00 PM, FOMC Minutes, Meeting of April 28-29, 2020

by Calculated Risk on 5/19/2020 06:07:00 PM

In late April, Dr. Fauci said the US might be able to test 400,000 to 600,000 people per day sometime in May, and  testing is now close to that range. This might be enough to allow test-and-trace in some areas.

However, the US might need more than 900,000 tests per day according to Dr. Jha of Harvard's Global Health Institute.

There were 399,479 test results reported over the last 24 hours.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.3% (red line). The US probably needs enough tests to keep  the percentage positive well below 5%. (probably much lower based on testing in New Zealand).

NOTE: A few states are apparently including antibody tests with virus tests. The Covid tracking project is working to straighten that out.

by Calculated Risk on 5/19/2020 02:39:00 PM

This is an important note and suggests the economy is dependent on the course of the pandemic.

Merrill Lynch economists put out a note this morning: Nordic Lessons. Here are a few brief excerpts:

One of our core views is that both voluntary and mandated social distancing have significant impacts on the economy. A new academic paper out of the University of Copenhagen and CEBI quantifies the effect of each kind of social distancing on consumer spending during the COVID-19 pandemic. ...

Let us start with the facts. The outbreak began at the end of February in Denmark and Sweden. … Since then the two countries have diverged significantly in terms of health care outcomes. As of May 18, Denmark had 95 deaths per million people, while Sweden (363 per million) has had among the highest COVID-19 mortality rates in the world.  This difference points to a large healthcare benefit from lockdown policies. What about the economic costs?

The paper finds that consumer spending dropped by 25% in Sweden and by 29% in Denmark. The 4pp difference between the two declines quantifies the cost of lockdown policies. While 4% of consumer spending is not trivial, it is a small share of the total decrease in consumer spending. Therefore the data indicate that most of the slowdown occurred due to voluntary social distancing rather than lockdown policies.
...
If the paper’s results are applicable to other countries, they have important implications for the economic outlook. … Even as restrictions are lifted, consumer spending will likely remain highly impaired, with services getting hit the hardest. Ending lockdowns might also limit the activity of more vulnerable people, further delaying the recovery.

In summary, the economic downturn has been primarily because of the virus, not the policy response.
emphasis added

by Calculated Risk on 5/19/2020 12:23:00 PM

As expected, the housing market slumped in April. There is some evidence of a pickup in activity recently, but any lasting resurgence will be dependent on the course of the pandemic. Note that April sales are for contracts typically signed in February and March.  So the report for May will probably be even worse (based on March and April contracts).

From SacRealtor.org: April 2020 Statistics – Sacramento Housing Market – Single Family Homes

April closed with 1,013 sales, down 13.4% from the 1,170 sales in March. Compared to one year ago (1,496), the current figure is a 32.3% drop.
...
The Active Listing Inventory increased 10% from March to April, from 1,658 units to 1,823 units. Compared with April 2019 (2,094), inventory is down 14.9%. The Months of Inventory increased from 1.4 to 1.8 Months. This figure represents the amount of time (in months) it would take for the current rate of sales to deplete the total active listing inventory.
...
The Median DOM (days on market) decreased from 8 to 7 and the Average DOM decreased from 26 to 16. “Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.”
emphasis added

1) Overall sales decreased to 1,013 in April, down 32.3% from 1,496 in April 2019. Sales were down 13.4% from March 2020 (previous month).

2) Active inventory was at 1,823, down from 2,094 in April 2019. That is down 14.9% year-over-year.  This is the twelfth consecutive month with a YoY decline in inventory.