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Per jobs report 4.2M jobs were "added" in June. Bringing unemployment down to 11.1%. There are claims of "resurgence" which are far from the ground reality. The economic fundamentals aren't good at all.
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Per jobs report 4.2M jobs were "added" in June. Bringing unemployment down to 11.1%. There are claims of "resurgence" which are far from the ground reality. The economic fundamentals aren't good at all.
And no, the numbers are not fudged. There are misclassification errors & incomplete data but thats expected due to lockdown & skeleton crew operating to collect these stats.
Lets get to basics. To predict state of economy there are two main macroeconomic indicators:
1) Leading indicator - where its heading.
2) Lagging indicator - historical performance.
1) Leading indicator - where its heading.
2) Lagging indicator - historical performance.
1) Leading indicator - Things like stock market (share prices), yield curve (bond yield), house prices, production stats, retail sales, interest rates.
2) Lagging indicator - Things like GDP, CPI, inflation, currency strength, unemployment, commodity prices.
2) Lagging indicator - Things like GDP, CPI, inflation, currency strength, unemployment, commodity prices.
Stock market
Its up compared to Feb crash but its being propped up by Fed with stimulus, bailouts, PPP, EIDL, quantitative easing & various strategies to prevent a meltdown & prevent panic. Creating a massive bubble which is about to pop. 'Smart money' is out.
Its up compared to Feb crash but its being propped up by Fed with stimulus, bailouts, PPP, EIDL, quantitative easing & various strategies to prevent a meltdown & prevent panic. Creating a massive bubble which is about to pop. 'Smart money' is out.
Yield curve
ST yields have dropped significantly while LT haven't dropped to that extent. The curve has become steeper signaling a possible sharp severe recession with a quick recovery. Fed is even talking about controlling yield curve to bring stability.
ST yields have dropped significantly while LT haven't dropped to that extent. The curve has become steeper signaling a possible sharp severe recession with a quick recovery. Fed is even talking about controlling yield curve to bring stability.
But yield curves are not the holy grail of leading indicators & are often misinterpreted.
House prices
Prices have generally been stable, although some sectors have seen a significant drop. Fed policies & low interest rates are keeping things steady. However, this segment lags so we may say it getting hit later in 2020 or early 2021 if things do not improve.
Prices have generally been stable, although some sectors have seen a significant drop. Fed policies & low interest rates are keeping things steady. However, this segment lags so we may say it getting hit later in 2020 or early 2021 if things do not improve.
Existing home sales were significantly down. New homes sales were up. Mortgage applications were up to utilize the low interest rates. Shortage of affordable housing is also whats keeping prices steady. If employment numbers dont improve things will get ugly.
With remote work becoming the norm, many will leave expensive metropolitan cities to cheaper places radically altering demand & supply. Cities will likely see price drops & suburbs may see price increases.
Production stats
Total manufacturing (value) is down ~16% for May compared to Jan. The stats are a lot worse for exports & services sector as domestic/international trade has come to a halt.
Total manufacturing (value) is down ~16% for May compared to Jan. The stats are a lot worse for exports & services sector as domestic/international trade has come to a halt.
Retail sales
Retail trade & services is down ~8% for May compared to Jan. Historic data suggests it should have been up ~2%. For April it was down ~22%.
Across the sub-segments the drops were ~40%. Grocery stores & liquor stores were way up as ppl hoarded supplies.
Retail trade & services is down ~8% for May compared to Jan. Historic data suggests it should have been up ~2%. For April it was down ~22%.
Across the sub-segments the drops were ~40%. Grocery stores & liquor stores were way up as ppl hoarded supplies.
GDP
For the 1st Qtr GDP contracted by 5%. It is expected that by end of 2020 there will be an economic contraction under the best of scenarios. Massive reduction in exports & trade in general is likely to make things worse.
For the 1st Qtr GDP contracted by 5%. It is expected that by end of 2020 there will be an economic contraction under the best of scenarios. Massive reduction in exports & trade in general is likely to make things worse.
CPI
consumer price index has held steady. Food portion has risen but it has been offset by sharp declines in energy, goods, supplies & apparels. Within food segment, beef, dairy, poultry saw ~15% increases.
consumer price index has held steady. Food portion has risen but it has been offset by sharp declines in energy, goods, supplies & apparels. Within food segment, beef, dairy, poultry saw ~15% increases.
Inflation
In general inflation has held steady although food items have had ~10% inflation in past few months. This is largely due to hoarding of supplies by ppl at grocery stores, but also as farms & factories shutdown & are unable to send their goods through trucks.
In general inflation has held steady although food items have had ~10% inflation in past few months. This is largely due to hoarding of supplies by ppl at grocery stores, but also as farms & factories shutdown & are unable to send their goods through trucks.
Currency strength
USD has declined relative to other currencies but has seen some recovery in recent weeks. This has more to do with other currencies declining even more relative to USD. A stronger USD will make exports expensive resulting in a slow recovery.
USD has declined relative to other currencies but has seen some recovery in recent weeks. This has more to do with other currencies declining even more relative to USD. A stronger USD will make exports expensive resulting in a slow recovery.
Commodity prices
Except gold every commodity price has dropped ~30%. While there has been some recovery recently, with the resurgence of COVID there will be another drop soon.
Except gold every commodity price has dropped ~30%. While there has been some recovery recently, with the resurgence of COVID there will be another drop soon.
Unemployment
June was at 11.1% which is a surprising decline. The majority of hires were in restaurant & hospitality sector which had laid off their staff to comply with lockdowns. The hires were due to states lifting lockdown.
On the flip side wages were down.
June was at 11.1% which is a surprising decline. The majority of hires were in restaurant & hospitality sector which had laid off their staff to comply with lockdowns. The hires were due to states lifting lockdown.
On the flip side wages were down.
but with record COVID cases making their way, states are already initiating another lockdown. Many of these businesses had already laid off employees & rehires around the end of June. Stats which aren't reflected in jobs report.
Many of these businesses were already under duress & may not survive another lockdown especially with a dwindling PPP EIDL & stimulus package. I'm coming across quite a few businesses which are planning for liquidation or bankruptcy.
Break down of these employment numbers shows that black & hispanic communities had the least recovery.
