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Bad news and good news on coronavirus; plus, implications for Election Day

Bad news and good news on coronavirus; plus, implications for Election Day

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 - by New Deal democrat

No economic news today as we head into the Memorial Day weekend, but there are a few coronavirus and economic/political developments of note.

First, the bad news: the declining trend in new diagnosed cases of coronavirus in the US has stopped in the past week. Instead new cases have leveled off. Here’s a graph from Conor Kelly’s excellent tableau coronavirus dashboard page:


Cases in the US outside of NY actually increased slightly (2%) in the past week.

Now, the good news: as also shown in the above dashboard, testing has continued to increase dramatically, up 18% again in the past week.

The jury is still out on whether the slight increase in new cases in the past 4 or 5 days is because some States recklessly “reopened” without justification, or whether it is just an artifact of increased testing. There was a similar small increase in new cases right after testing started to ramp up around April 20, but it lasted less than a week. It will take about another week to know which explanation for the end of the decline in new cases is the better one.

Even better good news about testing: the US is no longer lagging compared to other major developed countries. The below graph shows the 7 day average in US testing per capita compared with those countries in Western Europe that also had major outbreaks, plus South Korea:


As you can see, South Koreas started large-scale testing immediately and was rewarded with “crushing the curve,” allowing the country to go back to nearly normal activity. The US did awful even compared with Europe until about April 20, when testing in the US ramped up significantly. In the past week, testing in the US finally surpassed all of the major countries in Western Europe except for Belgium (the worst hit on a per capita basis).

Of note, at their worst on a per capita basis both Belgium and Spain had worse outbreaks  than the US does now:



This strongly suggests that, with proper staffing, much of the US could begin an aggressive tracing program to help tamp down new infections more.

In that regard, there is a new site called “Test and Trace” which is tracking exactly that. Here’s their map, as of May 20, of which US States are able to begin a successful test, trace, and isolate regimen:


My one criticism is that the site measured “planned hires” for tracers in each State, as opposed to *actual* hires.

I continue to think that it will be crucial for at least one medium sized or major State to “crush the curve” to show other States that the plan can be successful - particularly if new outbreaks begin in States that have recklessly relaxed restrictions.

Finally, on a related political/economic note, the April index of Leading Indicators was reported yesterday, and as expected it was another bad month, down -4.4%:


Since the LEI tells us where the economy is likely to be in the next 6 to 8 months, this tells us that conditions are still going to be poor on Election Day. And every econometric election model says that means the incumbent will be defeated.

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Government

Coronavirus dashboard for October 5: an autumn lull as COVID-19 evolves towards seasonal endemicity

  – by New Deal democratBack in August I highlighted some epidemiological work by Trevor Bedford about what endemic COVID is likely to look like, based…

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 - by New Deal democrat

Back in August I highlighted some epidemiological work by Trevor Bedford about what endemic COVID is likely to look like, based on the rate of mutations and the period of time that previous infection makes a recovered person resistant to re-infection. Here’s his graph:




He indicated that it “illustrate[s] a scenario where we end up in a regime of year-round variant-driven circulation with more circulation in the winter than summer, but not flu-like winter seasons and summer troughs.”

In other words, we could expect higher caseloads during regular seasonal waves, but unlike influenza, the virus would never entirely recede into the background during the “off” seasons.

That is what we are seeing so far this autumn.

Confirmed cases have continued to decline, presently just under 45,000/day, a little under 1/3rd of their recent summer peak in mid-June. Deaths have been hovering between 400 and 450/day, about in the middle of their 350-550 range since the beginning of this past spring:



The longer-term graph of each since the beginning of the pandemic shows that, at their present level cases are at their lowest point since summer 2020, with the exception of a brief period during September 2020, the May-July lull in 2021, and the springtime lull this year. Deaths since spring remain lower than at any point except the May-July lull of 2021:



Because so many cases are asymptomatic, or people confirm their cases via home testing but do not get confirmation by “official” tests, we know that the confirmed cases indicated above are lower than the “real” number. For that, here is the long-term look from Biobot, which measures COVID concentrations in wastewater:



The likelihood is that there are about 200,000 “actual” new cases each day at present. But even so, this level is below any time since Delta first hit in summer 2021, with the exception of last autumn and this spring’s lulls.

Hospitalizations show a similar pattern. They are currently down 50% since their summer peak, at about 25,000/day:



This is also below any point in the pandemic except for briefly during September 2020, the May-July 2021 low, and this past spring’s lull.

The CDC’s most recent update of variants shows that BA.5 is still dominant, causing about 81% of cases, while more recent offshoots of BA.2, BA.4, and BA.5 are causing the rest. BA’s share is down from 89% in late August:



But this does not mean that the other variants are surging, because cases have declined from roughly 90,000 to 45,000 during that time. Here’s how the math works out:

89% of 90k=80k (remaining variants cause 10k cases)
81% of 45k=36k (remaining variants cause 9k cases)

The batch of new variants have been dubbed the “Pentagon” by epidmiologist JP Weiland, and have caused a sharp increase in cases in several countries in Europe and elsewhere. Here’s what she thinks that means for the US:


But even she is not sure that any wave generated by the new variants will exceed summer’s BA.5 peak, let alone approach last winter’s horrible wave:



In summary, we have having an autumn lull as predicted by the seasonal model. There will probably be a winter wave, but the size of that wave is completely unknown, primarily due to the fact that probably 90%+ of the population has been vaccinated and/or previously infected, giving rise to at least some level of resistance - a disease on its way to seasonal endemicity.

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JOLTs jolted: Did the Fed break the labour market?

In the Bureau of Labor Statistics (BLS) August release of the Job Openings and Labor Turnover Survey (JOLTS) report, the number of job openings, a measure…

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In the Bureau of Labor Statistics (BLS) August release of the Job Openings and Labor Turnover Survey (JOLTS) report, the number of job openings, a measure of demand for labour, fell to 10.1 million. This was short of market estimates of 11 million and lower than last month’s level of 11.2 million.

It also marked the fifth consecutive month of decreases in job openings this year, while the August unemployment rate had ticked higher to 3.7%, near a five-decade low.

In the latest numbers, the total job openings were the lowest reported since June 2021, while incredibly, the decline in vacancies of 1.1 million was the sharpest in two decades save for the extraordinary circumstances in April 2020. 

Healthcare services, other services and retail saw the deepest declines in job openings of 236,000, 183,000, and 143,000, respectively.

With total jobs in some of these sectors settling below pre-pandemic levels, the Fed’s push for higher borrowing costs may finally be restricting demand for workers in these areas.

The levels of hires, quits and layoffs (collectively known as separations) were little changed from July.

The quits rate (a percentage of total employment in the month), a proxy for confidence in the market was steady at 2.8%.

Source: US BLS

From a bird’s eye view, 1.7 openings were available for each unemployed person, cooling from 2.0 in the month prior but still above the historic average. 

The market still appears favourable for workers but seems to have begun showing signs of fatigue.

Ian Shepherdson, Economist at Pantheon Macroeconomics noted that it was too soon to suggest if a new trend had started to emerge, and said,

…this is the first official indicator to point unambiguously, if not necessarily reliably, to a clear slowing in labour demand.

Nick Bunker, Head of Economic Research at Indeed, also stated,

The heat of the labour market is slowly coming down to a slow boil as demand for hiring new workers fades.

Ironically, equities surged as investors pinned their hopes on weakness in headline jobs numbers being the sign of breakage the Fed needed to pull back on its tightening.

Kristen Bitterly, Citi Global Wealth’s head of North American investments added,

(In the past, in) 8 out of the 10 bear markets, we have seen bounces off the lows of 10%…and not just one but several, this is very common in this type of environment.

The worst may be yet to come

As for the health of the economy, after much seesawing in its projections, which swung between 0.3% as recently as September 27 and as high as 2.7% just a couple of weeks earlier, the Atlanta Fed GDPNow estimate was finalized at a sharply rebounding 2.3% for Q3, earlier in the week.

Rod Von Lipsey, Managing Director, UBS Private Wealth Management was optimistic and stated,

…looking for a stronger fourth quarter, and traditionally, the fourth quarter is a good part of the year for stocks.

As I reported in a piece last week, a crucial consideration that has been brought up many a time is the unknown around policy lags.

Cathie Wood, Ark Invest CEO and CIO noted that the Fed has increased rates an incredible 13-fold in a span of just a few months, which is in stark contrast to the rate doubling engineered by Governor Volcker over the span of a decade.

Pedro da Costa, a veteran Fed reporter and previously a fellow at the Peterson Institute for International Economics, emphasized that once the Fed tightens policy, there is no way to know when this may be fully transmitted to the economy, which could lie anywhere between 6 to 18 months.

The JOLTs report reflects August data while the Fed has continued to tighten. This raises the probability that the Fed may have already done too much, and the environment may be primed to send the jobs market into a tailspin.

Several recent indicators suggest that the labour market is getting ready for a significant deceleration.

For instance, new orders contracted aggressively to 47.1. Although still expansionary, ISM manufacturing data fell sharply to 50.9 global, factory employment plummeted to 48.7, global PMI receded into contractionary territory at 49.8, its lowest level since June 2020 while durable goods declined 0.2%.

Moreover, transpacific shipping rates, a leading indicator absolutely crashed, falling 75% Y-o-Y on weaker demand and overbought inventories.

Steven van Metre, a certified financial planner and frequent collaborator at Eurodollar University, argued

“…the next thing to go is the job market.“

A recent study by KPMG which collated opinions of over 400 CEOs and business leaders at top US companies, found that a startling 91% of respondents expect a recession within the next 12 months. Only 34% of these think that it would be “mild and short.”

More than half of the CEOs interviewed are looking to slash jobs and cut headcount.

Similarly, a report by Marcum LLP in collaboration with Hofstra University found that 90% of surveyed CEOs were fearful of a recession in the near future.

It also found that over a quarter of company heads had already begun layoffs or planned to do so in the next twelve months.

Simply put, American enterprises are not buying the Fed’s soft-landing plans.

A slew of mass layoffs amid overwhelming inventories and a weak consumer impulse will result in a rapid decline in price pressures, exacerbating the threat of too much tightening.

Upcoming data

On Friday, the markets will be focused on the BLS’s non-farm payrolls data. Economists anticipate a comparatively small addition of jobs, likely to be near 250,000, which would mark the smallest monthly increase this year.

In a world where interest rates are still rising, demand is giving way, the prevailing sentiment is weak and companies are burdened by excessive inventories, can job cuts be far behind?

The post JOLTs jolted: Did the Fed break the labour market? appeared first on Invezz.

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International

Trade Deficit decreased to $67.4 Billion in August

From the Department of Commerce reported:The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $67.4 billion in August, down $3.1 billion from $70.5 billion in July, revised.August exp…

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From the Department of Commerce reported:
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $67.4 billion in August, down $3.1 billion from $70.5 billion in July, revised.

August exports were $258.9 billion, $0.7 billion less than July exports. August imports were $326.3 billion, $3.7 billion less than July imports.
emphasis added
Click on graph for larger image.

Exports increased and imports decreased in August.

Exports are up 20% year-over-year; imports are up 14% year-over-year.

Both imports and exports decreased sharply due to COVID-19 and have now bounced back.

The second graph shows the U.S. trade deficit, with and without petroleum.

U.S. Trade Deficit The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Note that net, imports and exports of petroleum products are close to zero.

The trade deficit with China increased to $37.4 billion in August, from $21.7 billion a year ago.

The trade deficit was slightly lower than the consensus forecast.

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