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.

Bracing for a Halt: March 16 – 20

This past week’s jobless claims data is only a taste of what is about to come. Here are the five things we learned from U.S. economic data released during the week ending March 20.

#1Jobless surged in mid-March, and that was only the tip of the iceberg. The Department of Labor reported that there were a seasonally adjusted 281,000 first-time claims made for unemployment insurance benefits during the week ending March 14. The surge of 70,000 applications from the prior week was the fourth largest jump in the 53-year history of the data series. The four-week moving average of first-time claims jumped by 16,500 to 232,250. Next week’s claims data will be historic as the full force of COVID-19 business shutdowns shows up, with some forecasters anticipating next week’s estimate showing two or three million claims. The DOL press release noted that many states reported pandemic-related layoffs with the impact centered on “service related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry.”

#2The Fed cut its short-term interest target to near zero percent and took other actions to support the credit markets. The Federal Open Market Committee (FOMC) canceled its two-day meeting scheduled for last week but voted to cut its fed funds target rate by a full percentage point to a range between 0.00 and 0.25 percent. This followed a half-percentage point cut earlier in the month. The statement noted that “the coronavirus outbreak has harmed communities and disrupted economic activity.” The FOMC expects to maintain this target rate until “it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” Other steps taken by the Fed include an asset purchasing program for Treasury and mortgage-backed securities, the creation of a facility to inject liquidity into the money market fund market (including those linked to short-term state and municipal securities), and an expansion of its overnight and term repurchase agreement operations.

#3Leading indicators edged up in February for a final hurrah. The Conference Board’s Leading Economic Indicators added 1/10th of a point during the month to a reading of 112.1 (2016=100), following an 8/10ths of a point advance in January. Only four of the LEI’s ten components made positive contributions. The coincident index advanced by 3/10ths of a point to 107.6 while the lagging index rose by 4/10ths of a point to 109.1. The subhead of the press release said it all: “Improvement in [the] Index Will Not Continue into March.” Noting the sharp declines in the stock prices, consumer sentiment, and hours worked, the press release concluded that “the economy may already be entering into a period of contraction.” 

#4Retail sales fell in February. The Census Bureau indicates that U.S. retail and food services sales dropped 0.5 percent during the month to a seasonally adjusted $528.1 billion. Some of the softness came from weakness at auto dealers/parts stores (-0.9 percent) and gas stations (with lower prices pulling down sales 2.8 percent). But even core retail sales were off 0.2 percent from January. There was weakness across most retail sectors; including, electronics/appliance stores (-1.4 percent), building materials retailers (-1.3 percent), apparel stores (-1.2 percent), restaurants/bars (-0.5 percent), furniture retailers (-0.4 percent), and department stores (-0.2 percent). Retail sales were up 4.3 percent from a year earlier, with core sales having a 12-month comparable of +4.4 percent.

#5Manufacturing output continued struggling in February. Even though the Federal Reserve finds manufacturing production grew a seasonally adjusted 0.1 percent during the month, with output 0.4 percent below that of a year earlier. Durable goods production gained 0.3 percent, boosted by motor vehicle production, while nondurables output declined 0.1 percent, pulled down by textiles, petroleum/coal products, and chemicals. Overall industrial production rose 0.6 percent in February, matching its year-ago level. Mining output slumped 1.5 percent while utility output surged 7.1 percent (with both electric and gas utilities reporting large increases).

Other U.S. economic data released over the past week:
Existing Home Sales (February 2020, Sales of Previously Owned Homes, seasonally adjusted annualized rate): 5.77 million units (+6.5% vs. January 2020, +7.2% vs. February 2019).
Job Openings and Labor Turnover (January 2020, Nonfarm Job Openings, seasonally adjusted): 6.963 million (+411,000 vs. December 2019, -557,000 vs. January 2019).
Business Inventories (January 2020, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.035 trillion (-0.1% vs. December 2019, +1.1% vs. January 2019).
Housing Market Index (March 2020, Index (>50=More Homebuilders Viewing Housing Market as “Good” vs. Being “Poor,” seasonally adjusted): 72 (vs. February 2020: 74, vs. March 2019: 62).
Treasury International Capital Flows (January 2020, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$28.0 billion (vs. December 2019: +$65.7 billion, vs. January 2019: -$24.8 billion).

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

Increased Economic Activity, Decreased Durable Goods Orders: December 23 – 27

The U.S. economy expanded more quickly in November, but durable goods orders faltered. Here are the five things we learned from U.S. economic data released during the week ending December 27.

#1Economic activity accelerated in November. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators, soared by 132-basis points during the month to its best reading since February 2018: +0.56. Fifty of the 85 indicators made positive contributions to the CFNAI, with 64 measures improving from their October marks. All four major categories of indicators grew in November. Still, the most significant gains came from indicators tied to production (making a +0.49 contribution to the CFNAI) and employment (making a +0.12 contribution). The three-month moving average of the CFNAI improved by ten basis points to a reading of -0.25. (A moving average ranging between 0.00 and -0.70 is indicative of below-average economic growth.)

#2Durable goods orders fell hard in November. The Census Bureau reports that new orders for manufactured goods slumped 2.0 percent during the month to a seasonally adjusted $242.6 billion, its second decline in three months. A primary culprit was the sharp 72.7 percent drop in orders for defense aircraft. Net of defense goods, durable goods orders rose 0.8 percent. Among major industries segments, orders increased for electrical equipment/appliances (+2.0 percent), motor vehicles (+1.9 percent), fabricated metal products (+0.4 percent), computers/electronics (+0.2 percent). Orders declined for civilian aircraft (-1.8 percent), machinery (-1.6 percent), and primary metals (-0.3 percent). 

#3New home sales gained in November. The Census Bureau finds new single-family home sales grew 1.3 percent during the month to a seasonally adjusted annualized rate (SAAR) of 719,000 units. New home sales have risen 16.9 percent over the past year. Sales grew in the Northeast (+52.4 percent), and West (+7.5 percent), held steady in the Midwest, slowed 4.1 percent in the South. Three of four Census regions enjoyed positive 12-month comparables, with only the Midwest experiencing a year-to-year sales decline. There were 323,000 new homes for sale at the end of November (a 5.4 month supply), matching the October count but 3.3 percent below November 2018 levels. The median sales price of $330,800 was up 7.2 percent from a year earlier (it is worth noting that price comparisons are difficult because the mix of homes sold likely differ month-to-month).

#4Jobless claims remained well in check during the final days of 2019. The Department of Labor estimates there were a seasonally adjusted 222,000 first-time claims made for unemployment insurance benefits during the week ending December 21. This was down 13,000 from the prior week and 30,000 from two weeks ago (when the late Thanksgiving holiday had messed with seasonal adjustments), but essentially matched the year-ago count of 223,000 first-time claims. The four-week moving average of first-time claims edged up by 2,250 to 228,000. This represented a 3.1 percent increase from a year earlier.

#5Agricultural prices rose in November. The U.S. Department of Agriculture’s index of the prices received by farmers increased by 4.6 percent to a reading of 88.6 (2011=100). This left the measure 0.2 percent ahead of its year-ago mark. Prices rose for eggs (+176.9 percent from the prior month), lettuce (+66.6 percent), cattle (+5.6 percent), and milk (+4.8 percent) but fell for corn, broilers, apples, and hogs. Meanwhile, cost pressures were held in relative check as the prices paid by farmers index inched up 0.3 percent to 110.4 (November 2018: 109.8). 

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