By now, it should be clear that COVID-19 is not going to go away anytime soon. Consumers and businesses are getting used to living and working under the pandemic and some changes, such as the tendency to work from home, will likely be long-lasting. The economy is always evolving. However, rapid changes can be destabilizing. There will be a number of challenges in the new year.
The initial efforts by policy makers positioned the economy for a robust rebound off the depressed levels, but there are still many moving pieces in order for the economy to return to pre-COVID levels.
Job losses in the early stages of the pandemic were more concentrated among low-wage workers. About half of those jobs have come back. For high-wage workers, who have been more able to work from home, job losses were less severe and have rebounded much better.
Key Takeaways
Nonfarm payrolls continued to recover in September, although the pace of improvement has slowed and we are unlikely to return to February levels until the pandemic is well behind us. The impact of COVID-19 has been uneven, with job losses remaining more severe in lower-paying service industries. Consumer spending has improved, though mixed across sectors. Further fiscal support will be critical for the unemployed.
Many factors feed into the relative strength or weakness of the U.S. economy, but the president traditionally receives the credit or blame. Fiscal policy – taxes and government spending – have an important role in economic activity, and confidence can drive consumer spending and business investment decisions.
The fastest, most economically destructive recession is now in investors’ rearview mirrors. CIO Larry Adam shares his perspective on the unfolding recovery.
Despite a September slump, the S&P 500 and NASDAQ wrapped up the third quarter with gains of 8.47% and 11%, respectively.
The first of three presidential debates is set for the evening of September 29. The topics, chosen by the Chris Wallace, the moderator, will be the Trump and Biden records, the Supreme Court, COVID-19, the economy, racial tensions, and election integrity.
Today is National Family Health and Fitness Day! The COVID-19 outbreak undoubtedly brought our health and the health of our loved ones to the forefront of our minds, and with many states closing fitness centers in the initial stages of the lockdowns, the virus certainly challenged our traditional methods for exercise too.
The death of Supreme Court Justice Ruth Bader Ginsburg ignited a fight over her replacement. The increased animosity in Washington lowered the odds that lawmakers will reach agreement on a further fiscal support package and dampened investor sentiment.
The Dow Jones Industrial dipped almost 3% on Monday, and the S&P 500 slid more than 2% from the previous week, off about 7% from its recent highs earlier this month.
There were no significant surprises following the September 15-16 Federal Open Market Committee meeting. As expected, short-term interest rates were left unchanged and the FOMC did not alter its asset purchase plans.
The start of this year was calm with the economic expansion reaching a record duration, unemployment at record lows, and earnings growth set to reach all-time highs. However, a ‘Black Swan’ event—COVID-19—erupted, driving market and economic volatility to unprecedented levels.
The major stock market indices were choppy on a day-to-day basis, as investors continued to reevaluate the rally off the lows. The economic data reports were inconsequential.
Review the latest Weekly Headings by CIO Larry Adam.
Chief Economist Scott Brown discusses current economic conditions.
Private–sector payrolls rose by 1.027 million in the initial estimate for August. Normally, such a gain would be considered outstanding. However, in this recovery, that comes as a disappointment.
Led by technology and large-cap companies, the S&P 500 is on pace to post its best summer performance in over 80 years.
The Fed updated its monetary policy framework, moving to a flexible average inflation target. That means that the central bank will target an average inflation rate of 2% (as measured by the PCE Price Index) over time.
While a panoramic view of broader economic and market developments will always be a crucial shot when constructing our outlook, sometimes it is important for us to bring certain sectors into focus.
In the minutes of the July 28-29 FOMC meeting, participants expected no change in policy rates anytime soon, but officials saw a need for more clarity regarding the likely path, such as adopting output-based forward guidance.
Initial claims for unemployment benefits fell below one million for the first time since mid-March (20 weeks). However, unadjusted claims had already dipped below that level a week earlier. Unadjusted claims totaled 831,000.
The overall economic outlook depends on the virus, efforts to contain it, and the degree of fiscal support. We’ve had a sharp- but-partial rebound in May and June, following a steep decline in March and April. The pace of improvement is expected to moderate. The impact of the pandemic has not been felt evenly.
This upcoming Wednesday is National Aviation Day, a holiday established by President Franklin Delano Roosevelt in order to honor the birthday of Orville Wright—inventor of the first airplane. While it’s hard to believe we’ve had the ability to fly for more than 115 years, it is even harder to comprehend the havoc that the COVID-19 pandemic has wreaked on the airline industry.
Nonfarm payrolls rose about as expected in the initial estimate for July, even as economists’ forecasts were widespread and risks to their job outlooks were generally seen to the downside. The unemployment rate fell a bit more than anticipated, but labor force participation stalled.
The pandemic has undoubtedly brought about a number of challenges for investors, but constructing a well-founded economic outlook and identifying opportunities in the midst of this unprecedented time are “always on my mind.” Until we can announce that COVID-19 ‘has left the building,’ our team will strive to do exactly that.
The U.S. economy contracted 9.5% through the second quarter, the worst single-quarter decline in gross domestic product (GDP) since the Commerce Department started tracking it in 1947. It was expected the report would show a dip, but it’s important to recognize what that dip represents.
Real GDP was reported to have fallen at a 32.9% annual rate in 2Q20. Nobody should have been surprised by that. Component data had already indicated massive and broad-based weakness and most economists’ estimates fell in the -30% to -35% range. News reports had generally implied that the downturn was ongoing. That’s clearly not that case...
Between the biggest week of earnings, the Fed meeting, and key economic data, there were plenty of headlines ‘hot off the press’ for the financial markets to handle this week, and as we look ahead, some of these same developments, as well as a few others still have the potential to ‘turn up the heat’ on market volatility.
The Federal Open Market Committee (FOMC) is expected to leave monetary policy unchanged. Officials won’t release revised economic projections until the mid-September FOMC meeting, but Chair Powell will provide an assessment of current economic conditions in his post-meeting press conference.
We distance ourselves from the chaos and panic of the crowd during pullbacks and from the ‘amusement’ and euphoria of rebounds and instead focus on providing a steady, reliable outlook that remains focused on risks on the horizon.
The pandemic had a significant impact on household spending in March and April, with a sharp contraction in consumer services (basically anything where people come into close contact with each other). The relaxation of social distancing guidelines has contributed to a sharp-but-partial rebound in May and June.
The economic calendar was thin. Investors remained concerned about rising cases of COVID-19. A return to a full lockdown appears unlikely, but the pace of improvement in the economy is expected to slow.
The U.S. Treasury is expected to announce a June budget shortfall of about $863 billion, bringing the 12-month total to nearly $3 trillion (or about 14% of pre-pandemic GDP). The red ink will continue. Lawmakers are expected to approve another round of federal stimulus later this month. None of that is worth losing sleep over.
The June job market report and other indicators remained consistent with an unprecedented steep drop in economic activity in March and April, followed by a sharp-but-partial rebound in May and June. Many of these data were collected before the recent surge in COVID-19 cases.
It’s all about the pandemic. Rising cases in a number of states fueled fears of a second wave of infections and a more protracted economic recovery.
As states ease their COVID-19 lockdown measures, rising case numbers have put pressure on equity markets.
The initial economic rebound seen in recent weeks won’t bring us back to pre-pandemic levels, explains Chief Economist Scott Brown. “A full recovery will take time.”
Efforts to contain the coronavirus have had a major impact on the global economy. There is still a lot of uncertainty in the outlook, which has three elements. First, there was a sharp decline U.S. Gross Domestic Product in 2Q20. Second, there was a sharp-but-partial rebound off the lows in May. Third, improvement after the initial rebound will slow, barring a vaccine or effective treatment for COVID-19...
In her recent book, “The Deficit Myth,” Stephanie Kelton, a professor at Stony Brook University, writes about many of the common misperceptions surrounding government debt and deficits.
Tomorrow is the summer solstice, the longest day of the year and the official start to summer! For those who are still fortunate enough to travel with friends and family this year, the trip may look a little different than usual given ongoing restrictions and social distancing guidelines still in effect.
The National Bureau of Economic Research (NBER) has formally declared that a recession began in February. The expansion lasted 128 months, the longest on record (at least back to 1854). Economic data reports should suggest that the downturn may have ended in April. That doesn’t mean everything is okay.
Equities suffered a heavy single-day decline amid rising jobless claims and continued coronavirus concerns.
Stock market participants remained optimistic about the economy, further encouraged by a surprisingly strong employment report for May. Bond yields moved above their recent range.
This week marked the 50th trading day since its March 23 low, with the S&P 500 rallying ~40% —the best 50 day rally since 1932. While the index has recovered ~85% of its virus-induced losses, there is still a distance to go, and if you are like me, the further the race goes, the more challenging it gets and the slower I advance.
In contrast to expectations of further deterioration, the May Employment Report suggested significant improvement in labor market conditions. No doubt, the economy has turned the corner as states have re-opened.
