Friday, October 30, 2020

Q3 Real GDP Jumps +33.1 Percent

 Popular Economics Weekly

Calculated Risk

We are not really out of the COVID recession, per Calculated Risk graph, even though the US Bureau of Economic Analysis (BEA) “advance” estimate of third quarter GDP growth increased +33.1 percent from Q2. But it’s still 3.5 percent below last year’s fourth quarter growth rate.

The blue bars portray past recessions, so the graph also tells us how severely this pandemic has affected economic growth. Real GDP had declined -31.4 percent in Q2.

The main driver of the rebound was consumption spending, which rose at a 40.7 percent growth rate.  Consumers bought new cars and trucks in September, purchased new clothes for the start of the school year and cooler fall weather, and spent more on recreation such as gym memberships and park fees. They also visited their doctors and dentists more often.

The biggest surprises were weakness in government spending and a very large rebound in inventories, as businesses stocked up for the holidays. 

“We had thought federal spending would grow enough to keep overall public spending positive,” says Reuters, “but reported spending was down at both the federal and state levels, subtracting 0.7 percentage points from growth.” 

This is precisely why congress’s inaction on passing another pandemic relief package is so maddening. It’s now declining state and local spending that is suppressing growth and additional job creation.

Positive economic growth for the rest of this year is also in doubt, as initial unemployment claims haven’t fallen fast enough to stay ahead of COVID-19, since more consumers are staying home because COVID-19 infection rates are already rising with the fall season and we haven’t even reached the holidays, when families and friends tend to gather.

Altogether, the number of people receiving benefits from eight separate state and federal programs fell by 415,727 to an unadjusted 22.7 million as of Oct. 10, the latest data available, which means 22 million of the formerly employed haven’t yet found another job.

Economists are concerned that rising coronavirus cases will lead people to stay home and cause service industries to begin another round of layoffs. Adding to the sense of unease, Congress went home for the presidential election without passing addition coronavirus financial relief.

COVID Tracking Project

There are now more than 70,000 positive tests per day, surpassing the former 68,000 peak in August, not a good sign. Infection rates have risen above 7 percent (red line in graph), also a sign of faster community spreading of the virus in the long expected third surge in virus infections.

So consumers that drive 70 percent of economic activity are in a quandary. Will the pandemic surge continue and so require consumers to stay at home, as in already happening in France and Germany with their new lockdowns from rising infection rates?

The Conference Board’s latest consumer confidence report was a mixed bag.

“Consumer confidence declined slightly in October, following a sharp improvement in September,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved while expectations declined, driven primarily by a softening in the short-term outlook for jobs. There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high.”

Senior Director Franco sums up consumers’ current forebodings; what might happen for the rest of this year, and maybe into much of next year, until consumers have some confidence in an effective COVID-19 vaccine.

Harlan Green © 2020

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Wednesday, October 28, 2020

End of the Age of Narcissism--Part II?

 Answering the Kennedys’ Call


South Dakota’s Sturgis Motorcycle Rally this August was notable for the estimated 450,000 attending during the COVID-19 pandemic. It happened in spite of the almost unanimous warnings given by public health officials that it could be the mother-of-all super-spreader events.

Is this the last cry from a culture of narcissism that has prevailed in America since at least the 1970s, a culture of ‘me first’ with the credo of personal freedom unhindered by a regard for the welfare of others?

“Within weeks of the gathering,” reported WashPost, “the Dakotas, along with Wyoming, Minnesota and Montana, were leading the nation in new coronavirus infections per capita. The surge was especially pronounced in North and South Dakota, where cases and hospitalization rates continued their juggernaut rise into October.”

There were no state and local health officials to identify and monitor attendees returning home, or to trace chains of transmission after people got sick. “Some, however, believe the nearly 500,000-person gathering played a role in the outbreak now consuming the Upper Midwest,” according to WashPost.

And a USA TODAY analysis showed COVID-19 cases grew at a faster rate than before after at least five of President Trump’s most recent political rallies in the following counties: Blue Earth, Minnesota; Lackawanna, Pennsylvania; Marathon, Wisconsin; Dauphin, Pennsylvania; and Beltrami, Minnesota.

“Together, those counties saw 1,500 more new cases in the two weeks following Trump’s rallies than the two weeks before – 9,647 cases, up from 8,069.”

Why the almost suicidal determination of those bikers, and Trump die-hard supporters, to behave with such a blatant disregard for their own health, or that of others?

Were they making a desperate last stand against a pandemic that outnumbered them? Many of the attendees maintained it was an infringement of their personal freedom to not be able to participate in such public gatherings that obviously meant so much to them.

“I don’t think there was nothing that was going to stop me,” said one middle-aged biker who was infected with COVID-19 at the Sturgis rally, according to the WashPost.

In every other western country going through the same struggle to control the new coronavirus, super-spreader events wouldn’t be allowed or even considered in this day and age. Yet no authorities, or our Commander-in-Chief, mandated the banning of super-spreader events as a public health danger that could ultimately infect tens of thousands of Americans.

What will it take to end to such destructive behavior, based on a credo of personal freedom that has also fragmented our country into red and blue states? Are we seeing an end in President Donald Trump’s failing faux populism which has always been for the benefit of the financial elites, rather than discontented proletariat, and who has been diagnosed by multiple mental health professionals with a Narcissistic Personality Disorder?

This behavior is another description of a sociopathy —to use a clinical term—that has infected one political party, a party that is in effect destroying itself. The natural world has signaled that this behavior without a regard for the welfare of others, can no longer be tolerated. Mother Nature in the form of this COVID-19 pandemic is calling for an end to this culture of narcissism during the worst disease pandemic in 100 years.

Harvard political scientist Robert Putnam with co-author Shaylyn Romney Garrett, in his latest best-seller, The Upswing, How America Came Together a Century Ago and How We can Do It Again, believes we are seeing the dawn of a new era with the youth of America, one that eclipses the culture of narcissism and advances Teddy Roosevelt’s progressive policies of more than a century ago that broke up big business monopolies and instituted more egalitarian public policies, ultimately leading to FDR’s New Deal.

“America’s challenges will be equally difficult to solve—and will therefore require just as much youthful courage, vigor, and imagination to overcome. And so, to a large extent, America’s fate lies in the hands of the post-Boomer generations. Today’s young people did not cause today’s problems. But like their predecessors 125 years ago, they must forgo the cynicism of drift and embrace the hope of mastery.”

Will it signal the dawning of a new, more forward looking era, a new, new deal? Let us hope so, beginning with the results of this presidential election.

Harlan Green © 2020

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Friday, October 23, 2020

The Housing Boom Continues

 The Mortgage Corner

Calculated Risk

Total existing-home sales,, including single-family homes, townhomes, condominiums and co-ops, rose 9.4 percent from August to a seasonally-adjusted annual rate of 6.54 million in September.

The housing boom continues in the middle of the coronavirus pandemic. Overall home sales are up 20.9 percent from a year ago (5.41 million in September 2019).

"Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season," said Lawrence Yun, NAR's chief economist. "I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home."

That is one of the reasons for the surge—more well-healed, white collar buyers are working from home as the pandemic has accelerated the digital revolution, and a central work location is no longer needed.

Couple this with the upcoming 5G networks that will power more of everything—manufacturing, services, and online education, for starters. The World Economic Forum described what is possible with the wider band widths and faster speeds that 5G will bring to economic growth.

“Think about a world in which not just people but all things are connected: cars to the roads they are on; doctors to the personal medical devices of their patients; augmented reality available to help people shop and learn and explore wherever they are. This requires a massive increase in the level of connectivity.”

And it is exacerbating the existing housing shortage. Builders are playing catch up to this speeding up of the surge in demand.

Total housing inventory at the end of September totaled just 1.47 million units, down 1.3 percent from August and down 19.2 percent from one year ago (1.82 million). Unsold inventory sits at a 2.7-month supply at the current sales pace, down from 3.0 months in August and down from the more normal 4.0-month figure recorded in September 2019.

Builders are responding. U.S. single-family homebuilding raced to a more than 13-year high in September. The report from the Commerce Department showed single-family homebuilding jumped 8.5 percent to a seasonally adjusted annual rate of 1.108 million units last month. That offset a 16.3 percent decline in starts for the volatile multi-family segment to a pace of 307,000 units, said the National Association of Homebuilders (NAHB). Overall, housing starts increased 1.9 percent to a rate of 1.415 million units last month.

Homebuilding has advanced 11.1 percent year-on-year, with single-family starts surging 22.3 percent. Further gains in single-family home construction are likely, said Reuters, with building permits shooting up 7.8 percent to a rate of 1.119 million units last month, the highest level since March 2007

"Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market," said Lawrence Yun, NAR’s chief economist. "Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery."



Scarce inventory has been problematic for the past few years, according to Yun, an issue he says has worsened in the past month due to the dramatic surge in lumber prices and the dearth of lumber resulting from California wildfires.

Mortgage rates are helping to offset some of those high home prices, however. A 30-year conforming fixed-rate mortgage dropped to 3 percent in August and has averaged below 3 percent in the past few weeks, the lowest on record.

I said last week that the NAR also reports pending home sales for contracts closing in approximately two months are also surging, which will boost sales through the end of the year. Pending home sales in August continued to move upward, marking four uninterrupted months of positive contract activity. Each of the four major regions have experienced growth in month-over-month and year-over-year pending home sales transactions.

Harlan Green © 2020

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Tuesday, October 20, 2020

The Winter Pandemic is Coming

 Financial FAQs


There is little doubt that this fall and winter will show a surge in pandemic illnesses and deaths. States in the Midwest and South will hurt the most, but also some northern states like Montana, North and South Dakota that don’t have statewide mask-wearing requirements.

At least 793 new coronavirus deaths and 65,327 new cases were reported in the United States on Oct. 15. Over the past week, there has been an average of 54,399 cases per day, an increase of 25 percent from the average two weeks earlier.

And this is just at the start of the flu season. As of Friday afternoon, more than 8,036,100 people in the United States had been infected with the coronavirus and at least 217,800 have died, according to a New York Times database.

Who is listening as the holidays approach? Dr. Fauci has warned that “This is an outbreak of historic proportions, the likes of which we have not seen in 102 years,” he said, referencing the 1918 flu. Death rates are actually increasing in 23 of those states at this writing.

Just look at the numbers. There are now 40 states with increasing infection rates, and 22 states with increasing death rates. North and South Dakota, Kansas, Montana and Alabama are the deadliest states, according to John Hopkins. 


There were 913,976 test administered this Friday, and a positivity rate rising above 5 percent again; anything above that infection rate is not considered controllable by epidemiologists. So what does this pandemic surge mean for economic growth?

We will be looking in the rear-view mirror with the upcoming Q3 GDP forecasts that predict on average a 35 percent GDP growth that could fool US into thinking the pandemic-induced recession has ended. A 35 percent annualized increase in Q3 GDP is about 7.8 percent QoQ, and would still leave real GDP down about 3.3 percent from last year’s Q4.

The Q3 growth surge is partly due to a huge and probably temporary jump in retail sales, up 1.9 percent from August to September (seasonally adjusted), and were up 5.4 percent from September 2019.

So what should be done? Harvard Professors Larry Summers and David Cutler predict a much worst outcome if more pandemic relief isn’t passed this year.

They have just published a study in The Journal of the American Medical Association that says the total cost of the pandemic is estimated at more than $16 trillion, or approximately 90 percent of the annual gross domestic product of the US by the fall of 2021 when the pandemic is predicted to have subsided. Approximately half of this amount is the lost income from the COVID-19–induced recession; the remainder is the economic effects of shorter and less healthy life.

“However, increased investment in testing and contact tracing (approx. $100m) could have economic benefits that are at least 30 times greater than the estimated costs of the investment in these approaches,” they said.

Professor Summers said in a recent Sunday Fareed Zakaria CNN interview that the total cost of the pandemic — including more than 10 weeks of near total lockdown across most of the country, which caused the GDP in second quarter to drop by more than a third — will eclipse the money the U.S. has spent on every war since September 11, 2001, including those in Afghanistan, Iraq and Syria.

Now is the time, they say, to borrow more when the cost of money is so cheap—at almost zero interest—to start the projects that will bring down the pandemic infection rates and bring back longer-term growth and prevent the enormous wastage in life and property that present inaction is costing Americans.

There is really no alternative, or we will end up approaching the horrific 1918 Spanish flu death count when we were much less prepared.

Harlan Green © 2020

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Saturday, October 17, 2020

Back to a 'V' Shaped Recovery?


Popular Economics Weekly


Richard Clarida, No.2 official at the Federal Reserve said on Wednesday that the U.S. recession begun in March with the coronavirus pandemic may already be over.

“This recession was by far the deepest one in postwar history but it also may go into the record books as the briefest recession in U.S. history,” Clarida said in prepared remarks to an Institute for International Finance conference. The flow of economic data since May has been “surprisingly strong,” he said.

Why? There is much pent up consumer demand with a record personal savings rate double (approximately 14 percent) what it was pre-pandemic because of the March to June business shutdown when they couldn’t spend on anything but essentials.

Meanwhile, initial jobless claims remained worryingly high in the week of October 10.  The seasonally adjusted level of state claims rebounded by 53K to 898K, which is the highest reading since the first half of August, said Reuters’ Wrightson/ICAP data service.  In not seasonally adjusted terms, claims were up 76K, with the increase spread across a range of states:  Indiana was up 19K, Illinois and Massachusetts were each up 10K, Georgia was up 8K, for instance. 

The pace of new layoffs continues to be a source of concern.  “We continue to think it is an open question whether there will be enough new hires and worker call-backs in October to offset the ongoing job losses,” said ICAP.  “The string of positive payroll gains could be interrupted this month.”


October’s unemployment report won’t be released until Friday after the November election. September’s unemployment rate fell to 7.9 percent from 8.4 percent in August.

In the continuing claims data, workers continued to fall off the state rolls in the week of October 3 as they exhausted their regular benefits.  The number of beneficiaries slid 1.2 million in seasonally adjusted terms to a level of 10.0 million still collecting some form of unemployment benefits. 

Economists’ consensus is that the economy should rebound at a 31.9 percent annualized rate in the July-September quarter. The economy sank at a record minus -31.4 percent rate in the second quarter.

The Fed vice chairman was not all upbeat though. He said the outlook for the economy was unusually uncertain and depends on the course of the virus. It will take time for the economy to recover all the lost ground in the recession and he said more help from Fed policy and Congressional spending “will be needed.”

I believe a full recovery in the consumer-dependent service sector probably won’t happen until next summer, at least, once a reliable vaccine is developed and widely distributed.

Harlan Green © 2020

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Wednesday, October 14, 2020

Booming Home Sales Create Housing Shortage

The Mortgage Corner

Booming Realtors’ existing-home sales are showing there is a very severe housing shortage with record sales and a record low housing inventory. Santa Barbara Realtor Jim Witmer said the demand for Santa Barbara homes is huge and inventory is being held back by seller’s concerns about the virus.  Buyers are making decisions based on spending more time at home, with work space and more amenities. 

“This trend continues as more people relocate to the safety and lifestyle offered by Santa Barbara.  This should continue to drive our values up.  The supply is limited and it is a good time to be a seller,” said Witmer.

Inventory levels are at record lows, with just 228 homes listed for sale in the MLS in September, down 22 percent from January.

The NAR reports that housing affordability declined in August compared to a year ago, despite median incomes rising. However, the jump in home prices—up 11.7 percent—was way above family income increases of 2.2 percent. August 2019).

"Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market," said Lawrence Yun, NAR’s chief economist. "Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery."


Total housing inventory at the end of August totaled 1.49 million units, down 0.7 percent from July and down 18.6 percent from one year ago (1.83 million). Unsold inventory sits at a 3.0-month supply at the current sales pace, down from 3.1 months in July and down from the 4.0-month figure recorded in August 2019.

Scarce inventory has been problematic for the past few years, according to Yun, an issue he says has worsened in the past month due to the dramatic surge in lumber prices and the dearth of lumber resulting from California wildfires.

Mortgage rates are helping to offset some of those high home prices, however. A 30-year fixed-rate mortgage dropped to 3 percent in August and has averaged below 3% in the past few weeks, the lowest on record.

The NAR also reports pending home sales for contracts closing in two months are also surging, which will boost sales through the end of the year. Pending home sales in August continued to move upward, marking four uninterrupted months of positive contract activity. Each of the four major regions experienced growth in month-over-month and year-over-year pending home sales transactions.

The Pending Home Sales Index (PHSI),*, a forward-looking indicator of home sales based on contract signings, rose 8.8 percent to 132.8 – a record high – in August. Year-over-year, contract signings rose 24.2 percent.

The sale pendings reported by Santa Barbara MLS are again much higher than the previous year (50 percent), so we can expect October to also be a big month for sales, said Witmer.

Harlan Green © 2020

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Saturday, October 10, 2020

Is the Age of Narcissism About to End?

Answering the Kennedys’ Call

Are we nearing the end of what historians and psychologists have called the Age of Narcissism, an era that has spawned populist governments and closed borders, the breakup of traditional families and communities, and the election of Donald Trump?

The Greeks may once again be an example for western liberal democracy after a multi-year struggle to reject their own neo-fascist autocracy that attempted to capitalize on this modern age of discontent.

Foreign Policy Magazine reports that the leaders of Greece’s Golden Dawn political party were found guilty on Wednesday of a range of criminal activity, including using the party as cover to run a criminal organization.

“The ruling followed a trial that lasted five-and-a-half years. Several dozen party members and associates, including 18 former lawmakers and party leader Nikos Michaloliakos, were found guilty on a variety of charges, including murder, attempted murder, assault, and possession of weapons.”

Does this sound familiar? The FBI and Michigan’s State Police just arrested 13 members of two neo-fascist Michigan militia groups for plotting to kidnap Michigan’s Governor Gretchen Witmer and try her for treason, after their plan for an armed occupation of its state capital fell through.

This is while President Trump has refused to disavow white supremacist violence as well as autocratic foreign leaders for their abuse of human rights.

Trump is the man that has been diagnosed by multiple mental health professionals with a Narcissistic Personality Disorder (NPD), “using other people as instruments of gratification even while craving their love and approval,” in the words of social historian Christopher Lasch.

While suffering from COVID-19, Trump has held several coronavirus super-spreader campaign events that infected some 34 supporters, Senators, and White House staff with COVID-19 to date; showing no concern for their health and safety.

Christopher Lasch was perhaps the first to broach the subject in various critiques of modern American society. This included his 1979 best-seller, The Culture of Narcissism: American Life in an Age of Diminishing Expectations that took “what was still mainly a narrow clinical term and used it to diagnose a pathology that seemed to have spread to all corners of American life,” per a recent NY Times summary of his book.

Lasch saw this as a societal pathology that took individualism to its destructive extreme of ‘me first’ over concern for others that broke up communities in the headlong rush to a post-WWII, consumer-driven economy. The extended family was transformed into the nuclear family of a married couple with children; grandparents migrating to senior living centers; as the growing middle class moved to  suburbs and away from traditional family and community values.

“In Lasch’s definition (drawn from Freud), the narcissist, driven by repressed rage and self-hatred, escapes into a grandiose self-conception, using other people as instruments of gratification even while craving their love and approval,” said the review. “Lasch saw the echo of such qualities in “the fascination with fame and celebrity, the fear of competition, the inability to suspend disbelief, the shallowness and transitory quality of personal relations, the horror of death.”

I contend that Greece’s example may be the first sign of the demise of the culture of narcissism, and its white supremacist, neo-fascist roots that have spawned so-called populist governments in Hungary, UK’s Brexit movement, and Presidents for life in Turkey and Russian.

We are now seeing its demise in the return to traditional households within the American populace, where families are once again coming together. NY Times’ Timothy Egan wrote a wonderful Op-ed on his yearning for the extended family that he saw returning in the face of the coronavirus pandemic.

“The PEW Research Center reported that 64 million Americans were living in multigenerational households—the highest number on record, and an increase of almost 70 percent from 1980. Last year, for the first time in 100 years, the average number of people in the American household started going up instead of down, to 2.63 people per unit,” he reported.

The Age of Narcissism was probably a historical anomaly anyway, said Egan, which probably began its demise before the pandemic, as millennials remained stuck in their parents’ home during the Great Recession because of the lack of jobs and failure of Wall Street. It’s really an indictment of what our narcissistic culture has spawned since the 1970s—a modern, self-interested capitalism that enshrined “greed is good” and maximization of profits as the sole responsibility of modern corporations.

Tens of thousands of people gathered outside the courthouse to await the verdict of Greece’s Golden Dawn trial, reported Foreign Policy. When the news came, the crowds erupted in applause and cheers. “The mood here today is resonant of the celebrations we saw with the liberation of Athens from the Nazis. It’s a great day,” said Petros Constantinou, a leading anti-racism activist.

Harlan Green © 2020

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Wednesday, October 7, 2020

Do We Want Another Great Recession?

Financial FAQs



Federal Reserve Chair Jerome Powell has warned of “tragic’ economic risks if another coronavirus aid package isn’t passed by congress. This is while President Trump has just said that talks over additional aid will be suspended until after the election in order that the Senate has the time left to take up Judge Amy Barrett’s Supreme Court nomination.

“Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth,” Powell said. “By contrast, the risks of overdoing it seem, for now, to be smaller.”

Employment of those in the bottom rung of the wage distribution scale remains 21 percent below its February level, while it was only 4 percent lower for workers who receive higher wages, the Fed chairman said.

It seems that Republicans have painted themselves into a corner if they expect to profit from an economy sure to get worse without another aid package before the election. Why are they writing off their chances on November 3rd with an economy sure to slow again? Your guess is as good as mine.

MarketWatch’s chart above highlights the problem. The top 10 percent of household income-earners now corral 51.9 percent of Americans’ aggregate income. That includes stocks as well as real estate and other investments by ‘rentiers’—those living off their assets, rather than the wages and salaries of most workers.

Out middle-income households now garner just 14.1 percent of household income, whereas it was closer to 20 percent in the 1960s and 1970s, before the cutting of taxes and deregulation of whole industries gave corporations the license to maximize their profits, rather than the welfare of their employees.

The predictions of future growth are dire without additional aid to households as well as certain industries his hardest by the pandemic shutdowns.

The NY Times Neil Irwin summarized best what is likely to happen without additional aid. “Business news headlines are reflecting a drumbeat of layoffs normally seen in recessions. In the last few weeks alone, oil giant Shell said it was cutting 9,000 positions, with Disney eliminating 28,000 and defense giant Raytheon 15,000.

“After shedding jobs in the spring, these sectors have brought workers back slowly, or not at all, through the summer. Some have continued cutting positions. Employment at corporate headquarters — “management of companies and enterprises,” in the official terminology — fell by 92,000 in March and April, with another 4,000 jobs lost since.”

He quotes Sophia Koropeckyj, an economist at Moody’s Analytics, who said we do expect there to be a new steady state, but not until 2023 or 2024,” In a new report, she estimates that 5 million people will find it difficult to get new work after the pandemic because their old jobs have disappeared or changed significantly. “I don’t think the severity of this downturn has been well understood yet given the bounce-back over the summer.”

Nobel-winning economist Paul Krugman has been saying what is obvious. Without additional government aid, we could sink into another Great Recession.

“The lesson I take is that our political dysfunction is even worse, our ability to rise to the occasion even lower, than I imagined. It’s hard to look at what’s happening now without feeling a sense of despair.”

Let us see what happens over the next few weeks. Few economists see good times ahead unless the 80 percent of households that earn wages and salaries; many are the essential workers that have a difficult time meeting even their living expenses; are given additional aid.

Harlan Green © 2020

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Monday, October 5, 2020

Unemployment Declines, Modest Hiring Enough to Boost Growth?

 Popular Economics Weekly


The economy regained 661,000 jobs in September and the unemployment rate fell for the fifth month in a row to 7.9 percent, the government said Friday. It's the smallest advance since a recovery began in May, with August revised upward to 1.49 million new payroll jobs. Private-sector payrolls rose by a stronger 877,000. A-219,000 decline in government employment reduced the overall number, mainly in state and local education.

Bars and restaurants added the most jobs in September (200,000), followed by retail, health care and white-collar businesses. Workers also put in more hours on the job, another good sign for the labor market. So far the U.S. has recovered about 11.4 million jobs since a recovery got underway in May. The economy had shed about 23 million jobs at the height of the pandemic.

We have to worry about the upcoming fall and winter COVID seasons, however, to know if employment and economic growth will continue. Consumers are more optimistic about their future with the Conference Board’s consumer confidence survey also showing increased optimism.


“Consumer Confidence increased sharply in September, after back-to-back monthly declines, but remains below pre-pandemic levels,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “A more favorable view of current business and labor market conditions, coupled with renewed optimism about the short-term outlook, helped spur this month’s rebound in confidence. Consumers also expressed greater optimism about their short-term financial prospects, which may help keep spending from slowing further in the months ahead.”

Consumer spending also increased 1 percent, a good number, but before the latest announced layoffs by airlines and other large employers. This is happening in part because congress can’t agree on another relief package, though the Democrat-led House just passed a $2.2 trillion aid bill. No word yet on what the Republican-led Senate is doing, however.

The NY Times reports that Disney, Allstate Insurance and several airlines have announced some 60,000 job cuts or furloughs with more to follow if congress can’t get its act together on more aid.

The last estimate of Q2 GDP was barely changed, contracting at -31.4 percent vs. -31.7 percent in the second estimate, and it looks like the upcoming first estimate of third quarter GDP growth will be positive, maybe ending the pandemic-induced recession, as I said yesterday.

The employment numbers do not look to be trending in the right direction, especially with the -2.7 percent decline in personal income reported by the Commerce Department for August that is due to the ending of the $600 percent week unemployment stipend in July. 

Consumer spending is two-thirds of economic activity these days, so I see further headwinds ahead as we navigate the COVID-19 pandemic.

Harlan Green © 2020

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Thursday, October 1, 2020

No Surprises in Q2 GDP. ADP Employment

 Financial FAQs


The last estimate of Q2 GDP was barely changed, contracting at -31.4 percent vs. -31.7 percent in the second estimate, but that isn’t dampening the stock market, as it looks like the upcoming first estimate of third quarter GDP growth will be positive, maybe ending the pandemic-induced recession.

Tomorrow’s ‘official’ Labor Department unemployment report should tell us more about third quarter growth, with the first Q3 estimate coming out at the end of October..

Why the consumers’ optimism, just as Covid-19 infection rates are beginning to rise again? Americans’ spending rose 1 percent in August for the fourth month in a row, stemming largely from the massive infusion of federal aid for the unemployed, and the reopening of more businesses. But the increase was the smallest since the U.S. reopened and pointed to a slower economic recovery.

Incomes had declined by 2.7 percent because of the end of government aid in July, the biggest drop since early in the pandemic, but spending is still positive due to accumulated savings from the lockdowns. The personal savings of 14.1 percent is still almost twice as high as it was before the pandemic.


And ADP reported on Wednesday that 749,000 private nonfarm payroll jobs were created in September, with most of the jobs in midsize (259k) and large (297k) companies. It is probably a sign that Friday’s Labor Department unemployment report will show at least 1 million new private payroll jobs being created as well.

Another positive growth sign was that initial jobless claims filed through state programs dropped to 837,000 in the week ended Sept. 26 from a revised 873,000 in the prior week, the Labor Department said Thursday.

And an estimated 650,120 people also filed new claims under the Pandemic Unemployment Assistance Act, the federal law that temporarily made self-employed workers eligible for benefits for the first time ever. That put the number of actual or unadjusted new claims at 1.49 million.

So more workers are returning to their workplace, but the question will still be whether the continuing job creation trend remains positive, given that the fall and winter pandemic/flu season is just beginning.

Harlan Green © 2020

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