Layoffs Skyrocketed in Mid-March: March 23 – 27

The first set of data reflecting the impact of the COVID-19 pandemic—jobless data—came out last week. Here are the five things we learned from U.S. economic data released during the week ending March 27.

#1COVID-19 layoffs led to a record number of jobless claims. The Department of Labor reports there were a seasonally adjusted 3.283 million first-time claims made for unemployment insurance benefits during the week ending March 21. The number of initial claims was up by more than 3 million filings from the prior week, 1,164 percent from the same week a year ago, and shatters the previous record of 695,000 claims back in October 1982. The press release noted that job cuts came from many industries, including the service sector (“particularly accommodation and food service”), health care/social assistance, arts/entertainment/recreation, transportation/warehousing, and manufacturing industries. As large as the number was, the data likely are underestimating actual layoff activity (due to capacity issues on claim filing websites and not all laid-off workers being aware of their eligibility for benefits).

#2Growth in personal income held steady in February but sputtered for personal spending. The Bureau of Economic Analysis reports that personal income rose at a seasonally adjusted 0.6 percent in February, matching the previous month’s growth rate. Disposable personal income—which nets out personal taxes—jumped 0.5 percent during the month with the “real” measure—which adjusted for inflation—increased 0.4 percent. Personal consumption expenditures (PCE) grew by a more modest 0.2 percent (matching January’s increase) while real PCE inched up 0.1 percent. Real spending on goods fell by 0.2 percent, including durable goods expenditures slumping 0.7 percent. Edging up was real spending on nondurable goods (+0.1 percent) and services (+0.2 percent). The savings rate bloomed by 3/10ths of a percentage point to +8.2 percent (its highest reading since last March). Over the past year, real disposable income has risen 2.2 percent, while the 12-month comparable for real spending was +3.0 percent.

#3Meanwhile, economic activity picked up in February. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic indicators, added 49-basis points during the month to a reading of +0.16 (its best mark since last November and indicative of economic growth higher than the historical average). Forty-four of the 85 indicators made positive contributions to the CFNAI, with the other 41 measures having negative impacts on the headline index. Also, all of the advance came from production-related indicators, with much smaller positive contributions coming from indicators tied to employment and personal consumption/housing. Measures linked to sales/orders/inventories made a small negative contribution. The CFNAI’s three-month moving average deteriorated by ten-basis points to -0.21. The Federal Reserve Bank of Chicago’s website included this statement: “The data through February were unlikely to have been affected much by the COVID-19 outbreak.” This will not be true for March’s report. 

#4Q4 2019 was likely the final quarter of economic growth for a while. The Bureau of Economic Analysis’ final estimate of Gross Domestic Product (GDP) for the last three months of 2019 finds the U.S. economy expanded 2.1 percent on a seasonally adjusted annualized basis. This matched the two previous estimates of Q4 GDP growth and followed growth rates of +2.1 percent and +2.0 percent during the two prior quarters. GDP increased 2.3 percent for all of 2019, down from gains of 2.9 percent in 2018 and 2.4 percent in 2017. The same report shows corporate profits grew an annualized 2.6 percent in Q4 after contracting 0.2 percent during the prior quarter. For all of 2019, corporate profits were flat when compared to 2018. We will see the first estimate of Q1 data—the first GDP report reflecting coronavirus impacts—on April 29.

#5New home sales slowed in February. The Census Bureau estimates new home sales declined 4.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 765,000 units. Despite the decline, sales were 14.3 percent above year-ago levels. February sales slumped in the West (-17.2 percent) and Midwest (-7.3 percent) but advanced in the Northeast (+38.9 percent) and South (+1.0 percent). All four Census regions enjoyed year-to-year sales increases. There were 319,000 homes available for sale at the end of the month, off 0.9 percent for the month and 6.7 percent from a year earlier. This was the equivalent to a 5.0 month supply of homes. 

Other U.S. economic data released over the past week:
FHFA House Price Index (January 2020, Purchase-Only Index, seasonally adjusted): +0.3% vs. December 2019, +5.2% vs. January 2019.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Personal Incomes Flourished in January: February 24 – 28

The U.S. economy started 2020 with some positive numbers, but questions emerge about the potential impact coming from COVID-19. Here are the five things we learned from U.S. economic data released during the week ending February 28.

#1Personal income rose in January. The Bureau of Economic Analysis reports that nominal (not inflation-adjusted) personal income rose 0.6 percent during the month, its biggest jump in 11 months. Nominal disposable income also advanced 0.6 percent while inflation-adjusted “real” disposable income swelled 0.5 percent. The extra money in the wallet did not, however, translate to significantly increased spending—real personal consumption expenditures (PCE) grew 0.1 percent during the month (the nominal measure advanced 0.2 percent). While durable goods spending surged 0.6 percent and that on services moved forward 0.3 percent, expenditures on nondurables slowed 0.2 percent. The savings rate widened by 4/10ths of a percentage point to +7.9 percent.

#22019 ended with a moderately expanding economy. The Bureau of Economic Analysis’ second estimate of Q4 2019 Gross Domestic Product (GDP) growth matched that of its first estimate with a seasonally adjusted annualized rate (SAAR) of +2.1 percent. This followed a matching +2.1 percent gain during Q3 and a 2.0 percent advance in Q2. The revision reflected a higher than previously believed level of private inventory investment counterbalanced by a smaller estimate of nonresidential fixed investment. Making positive contributions to Q4 growth were (in descending order) imports, personal consumption, government expenditures, and exports. Dragging down economic activity were private inventory investment and nonresidential fixed investment. The BEA will once again update its Q4 GDP estimate on March 26.

#3Signs suggest economic conditions solidified in January. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators, improved by 26-basis points to -0.25. The three-month moving average gained by 14-basis points to a reading of -0.09, its best mark since last August. (A CFNAI reading of 0.00 is indicative of the U.S. economy growing at its historical average. A reading of -0.70 suggests an economic contraction.) Thirty-six of the 85 indicators made a positive contribution to the CFNAI, while the other 49 had a negative impact. All four major categories of indicators showed improved from their December readings, although three of them had overall a negative effect on the headline index: production (-0.23), employment (-0.03) sales/orders/inventories (-0.02), and personal consumption/housing (+0.03). 

#4Consumer Sentiment held firm for now. The Conference Board’s Consumer Confidence Index inched up by 3/10ths of a point in February to a seasonally adjusted 130.7 (1985=100). The present conditions index shed 8.8 points to a reading of 165.1 while the expectations index added 6.4 points to 107.8. 38.6 percent of survey respondents viewed current economic conditions as “good” (versus 40.0 percent in the January survey), while 44.6 percent described jobs as being “plentiful” (versus 47.2 percent in the January survey). In noting the consumers view current economic conditions “quite favorably,” the press release said the results “support spending and economic growth in the near term.”

The University of Michigan’s Index of Consumer Sentiment added 1.2 points in February to a seasonally adjusted 101.0 (1966Q1=100), leaving the measure up 7.2 points from a year earlier. The current conditions index edged up by 4/10ths of a point to 114.8 (February 2019: 108.5) while the expected conditions index added 1.6 points to 92.1 (February 2019). Most notable in the press release was the observation about the impact on sentiment from the news surrounding the coronavirus—while only eight percent of survey respondents noted that COVID-19 was affecting their economic expectations, 20 percent of those who completed the survey early last week (after the release of the CDC warnings and freefall in the stock market) said the news was affecting their outlook. (The press release noted that this difference was not statistically significant.)

#5New home sales surged in January. The Census Bureau reports that new home sales rose 7.9 percent to a seasonally adjusted annualized rate of 764,000 units. This was the highest level of new home sales since June 2007 and represented an 18.6 percent gain from a year earlier. Sales grew during the month in three of four Census regions: Midwest (+30.3 percent), West (+23.5 percent), and Northeast (+4.8 percent). The Midwest suffered a 4.4 percent drop in new home sales. There were 324,000 unsold new homes on the market at the end of January (+0.3 percent versus December 2019 and -4.6 percent versus January 2019), the equivalent to a 5.1 month supply. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 22, 2020, First-Time Claims, seasonally adjusted): 219,000 (+8,000 vs. previous week; -5,000 vs. the same week a year earlier). 4-week moving average: 209,750, -6.6% vs. the same week a year earlier).
Pending Home Sales (January 2020, Index (2001=100), seasonally adjusted): 108.8 (vs. December 2019: 103.4; January 2019: 102.9).
FHFA House Price Index (December 2019, Purchase-Only Index, seasonally adjusted): +0.6% vs. November 2019, +5.2% vs. December 2018.
Agricultural Prices (January 2020, Prices Received by Farmers): -2.2% vs. December 2019, +2.5% vs. January 2019.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Modest GDP and Consumer Spending Growth: January 27 – 31

2019 GDP growth was its most sluggish since 2016. Here are the five things we learned from U.S. economic data released during the week ending January 31.

#1Q4 GDP growth matched that of Q3. The Bureau of Economic Analysis’ first estimate of fourth-quarter 2019 Gross Domestic Product (GDP) finds the U.S. economy expanded at a seasonally adjusted annualized rate of 2.1 percent, matching Q3’s growth rate and just above Q2’s 2.0 percent advance. Positive contributors to Q4 GDP were, in descending order, net exports (adding 132-basis points to growth), consumption (+120-basis points), government expenditures (+47-basis points), and fixed residential investment (+21-basis points). Dragging down business activity, however, were the change in private inventories (costing 109-basis points) and fixed nonresidential investment (-1-basis point). The U.S. economy expanded 2.3 percent for all of 2019, down from 2018’s 2.9 percent advance. The 2019’s slower growth rate was the result of smaller gains in fixed nonresidential investment and consumption, along with declining exports. The BEA will revise its Q4 GDP estimate twice over the next two months.GDP Growth--2012 to 2019

#2Personal spending eased up in December. The Bureau of Economic Analysis reports that real personal consumption expenditures (PCE) inched up 0.1 percent on a seasonally adjusted basis during the month following a 0.3 percent bump in November. Spending on both goods and services grew 0.1 percent, with durable goods spending slowing 0.3 percent and nondurables expenditures increasing 0.2 percent. Nominal (not inflation-adjusted) PCE rose 0.3 percent during the month, funded by 0.2 percent gains in both nominal personal income and disposable income. Real disposable income dipped 0.1 percent. The savings rate shed 2/10ths of a percentage point to +7.6 percent. Over the past year, real PCE has risen 3.3 percent, funded by a 2.0 percent bounce in real disposable income.

#3The Fed maintained the status quo. The policy statement following this past week’s Federal Open Market Committee meeting nearly matched that of December. This includes assertions of a “strong” labor market and an economy “rising at a moderate rate.” The most recent statement shifts to the word “moderate” to describe household spending (it was previously “strong) and continued to describe both business investment and exports as “weak.” Nevertheless, the FOMC voted without dissent to keep the fed funds target rate at a range between 1.50 and 1.75 percent, as expected.

#4Consumers started 2020 in a better mood. The Conference Board’s Consumer Confidence Index added 3.4 points in January to a seasonally adjusted 131.6 (1985=100). The current conditions index rose by 4.8 points to 175.3 while the expectations measure added 2.5 points to 102.5. 40.8 percent of survey respondents saw current economic conditions as “good” versus a mere 10.4 percent viewing them as “bad.” Further, 49.0 percent of consumers reported that jobs were “plentiful,” well above the 11.6 percent who said jobs were “hard to get.” The press release linked the improved sentiment to “a more positive assessment of the current job market and increased optimism about future job prospects.”

The January reading from the University of Michigan’s Index of Consumer Sentiment of 99.8 was a half-point ahead of that from December and 8.6 points above the January 2019 mark. While the current conditions index shed 1.1 points to 114.4 (January 2019: 108.8), the expectations measure advanced 1.6 points to 90.5 (January 2019: 79.9). The press release termed the strength in sentiment as “surprising given the overall slow pace of economic growth, which was accompanied in January by renewed military engagements in the Mideast, an impeachment trial in the Senate, and a fast spreading coronavirus.”

#5A surge in defense aircraft orders masked a drop in durable goods orders. The Census Bureau reports that new orders for durable manufactured goods rose 2.4 percent in December to a seasonally adjusted $245.5 billion. Much of the increase came from a 168.3 percent surge in defense aircraft orders that had fueled a 7.6 percent jump in transportation goods orders. But net of transportation goods, orders slipped 0.1 percent. Orders climbed for computers/electronics (+0.8 percent) and fabricated metal products (+0.3 percent) but declined for machinery (-1.1 percent), electronic equipment/appliances (-0.6 percent), and primary metals (-0.6 percent). Also taking a step back was orders for nondefense, non-aircraft capital goods orders—a proxy for business investment—which slumped 0.9 percent. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 25, 2020, First-Time Claims, seasonally adjusted): 216,000 (-7,000 vs. previous week; -28,000 vs. the same week a year earlier). 4-week moving average: 214,500 -3.9% vs. the same week a year earlier).
New Home Sales (December 2019, New Home Sales, seasonally adjusted annualized rate): 694,000 (-0.4% vs. November 2019, +23.0% vs. December 2018).
Pending Home Sales (December 2019, Index (2001=100), seasonally adjusted): 103.2 (-4.9% vs. November 2019, +4.6% vs. December 2018).
Case-Shiller Home Price Index (November 2019, 20-City Index, seasonally adjusted): +0.5% vs. October 2019, +2.6% vs. November 2018.
Bankruptcy Filings (2019, Business and Non-Business Filings): 774,940 (+0.2% vs. 2018).
Agricultural Prices (December 2019, Prices Received by Farmer): +0.8% vs. November 2019, -0.8% vs. December 2018.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.