by Calculated Risk on 6/25/2020 08:56:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays, May 2020. The consensus is for a 6.0% decrease in personal income, and for a 9.0% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for June). The consensus is for a reading of 78.9.

by Calculated Risk on 6/25/2020 05:46:00 PM

The US is now conducting over 500,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly.

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

There were 640,465 test results reported over the last 24 hours. This is the most daily results reported (may be a data dump).

There were 41,939 positive tests.  This is the most positive tests ever.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 6.5% (red line).

For the status of contact tracing by state, check out testandtrace.com.

by Calculated Risk on 6/25/2020 02:15:00 PM

On March 31st, I wrote:

This is a healthcare crisis, and the economic outlook is based on presumptions about the course of the pandemic.

I've been updating my outlook monthly, and turning more and more pessimistic due to the poor US government response to the pandemic.

The Federal government's response has not been helpful, and in many ways, it has been counterproductive. The Vice President of the US, Mike Pence, wrote just last week in the WSJ: There Isn’t a Coronavirus ‘Second Wave’. The data has already proven Pence wrong.

Fortunately, some state and local governments have stepped up to fill the void, but in other localities, the response has been terrible.  And it is possible the pandemic will get worse in the Fall.

Some countries have been able to open their economies without an increase in infections. For example, in Japan, the economy is mostly open, however 1) everyone wears a mask, 2) there is robust contact tracing, and 3) everyone is urged to follow the 3 C's (avoid Closed spaces, Crowded places, and Close-Contact settings).   However, in the US, contact tracing is still ramping up, many people aren't wearing a mask or face covering, and many people are not following the 3Cs.

However, there is no leadership in the US to significantly change people's behavior.

It doesn't take an official lockdown to push local economies back into recession - many people will pull back as the number of cases and hospitalizations rise.  Based on recent hospitalization data, I expect further layoffs in some states like Arizona, Texas, and Florida.

I do expect another round of disaster relief in July - extending the extra unemployment benefits (perhaps at a lower level), extending the PPP, and providing relief to the States.   Without this disaster relief, the entire US economy might slide back into recession in August.

But even with another round of disaster relief, it seems likely the recovery will stall unless progress is made in slowing the spread of the virus.  The longer the widespread pandemic continues, the more structural damage to the economy.   And the more severe the economic damage, the longer it will take to recover from the pandemic.

Everyone is hoping for a vaccine in late 2020 or early 2021, but even if there is a vaccine, the damage to the economy will be extensive if we don't lower the infection rate significantly in the near term.

Perhaps there will be a sudden change in behavior while we wait for a vaccine - or some other breakthrough that will slow the spread of the virus - but I'm not sanguine.

After a decade of making fun of bearish analysts and writing "the future is bright", it pains me to be pessimistic.   I hope I'm wrong on the virus, but if I'm correct, then I expect every major economic forecast will be revised down for the 2nd half of 2020 and for early 2021.

by Calculated Risk on 6/25/2020 11:09:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Grew Slightly

The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity grew slightly after sharply decreasing for three straight months. Activity still remained well below year-ago levels, while expectations for future activity rebounded moderately.

“Regional factory activity expanded just slightly in June compared with a month ago, but was still well below year-ago levels,” said Wilkerson. “Of those surveyed, 76% of firms have taken advantage of emergency lending options, and expectations for future activity and employment levels have improved somewhat.”
…
The month-over-month composite index was 1 in June, up considerably from -19 in May and a record low of 30 in April. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The improvement in activity was driven by nondurable goods plants, while durable goods factories, especially nonmetallic mineral products, primary metals, fabricated metals, and computer and electronics plants continued to decline. Month-over-month indexes were mixed. Production, shipments, new orders, and supplier delivery time indexes recovered to positive levels, while indexes for order backlog, employment, new orders for exports, and inventories remained negative. Year over-year factory indexes mostly remained highly negative in June, but the composite index moved up slightly from -35 to -29. The future composite index rose considerably in June, rebounding from -2 to 9.
…
76% of factory contacts had applied for the Small Business Administration (SBA) Paycheck Protection Program since March 13, 2020 (up from 67% reported in April)
emphasis added

This suggests activity has bottomed, but this is just a slight increase off the bottom.   Three-fourth of the companies surveyed are using the PPP - and that suggests further layoffs coming if activity doesn't rebound.

by Calculated Risk on 6/25/2020 10:15:00 AM

From HotelNewsNow.com: STR: US hotel results for week ending 20 June

U.S. hotel performance data for the week ending 20 June showed another small rise from previous weeks and less severe year-over-year declines, according to STR.

14-20 June 2020 (percentage change from comparable week in 2019):

• Occupancy: 43.9% (-41.8%)
• Average daily rate (ADR): US$92.20 (-31.7%)
• Revenue per available room (RevPAR): US$40.48 (-60.3%)

“Occupancy was up another couple percentage points from last week, marking the 10th consecutive week of such an increase,” said Jan Freitag, STR’s senior VP of lodging insights. “Demand continues to be pushed upward by drive-to spots and the destinations with outdoor offerings such as beaches. For the week, 10 submarkets showed occupancy above 70%, led by Panama City (88.7%), where occupancy was just 0.7% lower than the comparable week in 2019.”
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

Usually hotel occupancy starts to pick up seasonally in early June. So even though the occupancy rate was up slightly compared to last week, the year-over-year decline only slightly improved this week compared to the previous three weeks  (41.8% decline vs 43.4% last week, 45.3% two weeks ago, and 43.2% decline three weeks ago).

The improvement appears related mostly to leisure travel as opposed to business travel.

Note: Y-axis doesn't start at zero to better show the seasonal change.

by Calculated Risk on 6/25/2020 08:37:00 AM

The DOL reported:

In the week ending June 20, the advance figure for seasonally adjusted initial claims was 1,480,000, a decrease of 60,000 from the previous week's revised level. The previous week's level was revised up by 32,000 from 1,508,000 to 1,540,000. The 4-week moving average was 1,620,750, a decrease of 160,750 from the previous week's revised average. The previous week's average was revised up by 8,000 from 1,773,500 to 1,781,500.
emphasis added

The previous week was revised up.

This does not include the 728,120 initial claims for Pandemic Unemployment Assistance (PUA).

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 1,620,750.

This was higher than the consensus forecast of 1.3 million initial claims and the previous week was revised up.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims decreased to 19,522,000 (SA) from 20,289,000 (SA) last week and will likely stay at a high level until the crisis abates.

Note: There are an additional 11,046,401 receiving Pandemic Unemployment Assistance (PUA). This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.

by Calculated Risk on 6/24/2020 08:42:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for a 1.300 million initial claims, down from 1.508 million the previous week.

• Also at 8:30 AM, Durable Goods Orders for May from the Census Bureau. The consensus is for a 10.6% increase in durable goods orders.

• Also at 8:30 AM, Gross Domestic Product, 1st quarter 2020 (Third estimate). The consensus is that real GDP decreased 5.0% annualized in Q1, unchanged from the second estimate of a 5.0% decrease.

• At 11:00 AM, the Kansas City Fed manufacturing survey for June. This is the last of regional manufacturing surveys for June.<

by Calculated Risk on 6/24/2020 05:59:00 PM

The US is now conducting over 500,000 tests per day, and that might be enough to allow test-and-trace in some areas. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly.

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

There were 502,290 test results reported over the last 24 hours.

There were 38,672 positive tests.  This is the most positive tests ever.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 7.7% (red line).  This is the highest percent positive since early May.

For the status of contact tracing by state, check out testandtrace.com.

by Calculated Risk on 6/24/2020 12:56:00 PM

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by -39.8% (-112.0 billion vehicle miles) for April 2020 as compared with April 2019. Travel for the month is estimated to be 169.6 billion vehicle miles.

The seasonally adjusted vehicle miles traveled for April 2020 is 160.9 billion miles, a -41.2% (-112.9 billion vehicle miles) decline from April 2019. It also represents -27.2% decline (-60 billion vehicle miles) compared with March 2020.

Cumulative Travel for 2020 changed by -14.8% (-152.3 billion vehicle miles). The cumulative estimate for the year is 875.9 billion vehicle miles of travel.

Click on graph for larger image.

This graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors.

Miles driven declined during the great recession, and the rolling 12 months stayed below the previous peak for a record 85 months.

Miles driven declined sharply in March, and really collapsed in April. This will be an interesting measure to watch when the economy eventually starts to recover.

This graph shows the YoY change in vehicle miles driven.

Miles driven were down 39.8% year-over-year in April.

by Calculated Risk on 6/24/2020 11:11:00 AM

Note: The question on lost income is always since March 13, 2020 - so this percentage will not decline.

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.

This will be updated weekly, and the Census Bureau released the recent 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.

The data was collected between June 11 and June 16, 2020.

Definitions:

Loss in employment income: "Percentage of adults in households where someone had a loss in employment income since March 13, 2020."

This number is since March 13, and hasn't changed significantly.

Expected Loss in Employment Income: "Percentage of adults who expect someone in their household to have a loss in employment income in the next 4 weeks."

31% of households expect a loss in income over the next 4 weeks.   This is down from 38.8% in late April.

Food Scarcity: Percentage of adults in households where there was either sometimes or often not enough to eat in the last 7 days.

About 10% of households report food scarcity.

Delayed Medical Care: "Percentage of adults who delayed getting medical care because of the COVID-19 pandemic in the last 4 weeks."

41% of households report they delayed medical care over the last 4 weeks. This has not declined.

Housing Insecurity: "Percentage of adults who missed last month’s rent or mortgage payment, or who have slight or no confidence that their household can pay next month’s rent or mortgage on time."

23.2% of households reported they missed last month's rent or mortgage payment.

K-12 Educational Changes: "Percentage of adults in households with children in public or private school, where classes were taught in a distance learning format, or changed in some other way."

Essentially all households with children are reporting were not being taught in a normal format.