Is April 30th a Realistic Target?
Now that all but the most recalcitrant states have opted for some form of stay-at-home order the U.S.’s number of reported COVID-19 cases should start to level off, but the trajectory this week and next will most likely still be upwards. The latest lockdown actions will exacerbate the economic hit that was already showing itself in the March Jobs Report from last Friday. With April 30 now targeted for some limited reopening of the economy we’ll have to see a definitive plateauing in case counts between now and then. The late move by several states to implement stay-at-home orders, however, makes that outcome in doubt which could force extending extreme distancing measures into May. The weekly jobless claims numbers will provide the best real-time determination of the depth of the employment downturn. When those weekly claims numbers start to recede and return to “normal” levels that may provide the clearest signal that a bottom has been reached. Until then we can all do our part and try to stem the increase in new cases.
|Treasury Curve||Today||Week Change|
|3 Mo LIBOR||1.39%|
|6 Mo LIBOR||1.21%|
|12 Mo LIBOR||1.05%|
|Date||Statistic||For||Briefing Forecast||Market Expects||Prior|
|Apr 7||JOLTS Job Openings||Feb||6.500m||6.500m||6.963m|
|Apr 8||FOMC Meeting Minutes||Mar 18||NA||NA||NA|
|Apr 9||PPI MoM||Mar||-0.3%||-0.4%||-0.6%|
|Apr 9||PPI Ex-Food & Energy MoM||Mar||0.0%||0.0%||-0.3%|
|Apr 9||Initial Jobless Claims||Apr 4||5.00m||5.00m||6.648m|
|Apr 9||U. of Mich. Sentiment||Apr P||77.5||74.7||89.1|
|Apr 9||U. of Mich. Expectations||Apr P||NA||NA||79.7|
|Apr 10||CPI MoM||Mar||-0.3%||-0.3%||0.1%|
|Apr 10||CPI Ex-Food & Energy MoM||Mar||0.1%||0.1%||0.2%|
Top 5 Events for the Week
April 6 - 10, 2020
1. Coronavirus Developments – All Week
2. Congressional/Fed Actions – All Week
3. April U. of Mich. Sentiment – Thursday
4. Initial Jobless Claims – Thursday
5. March Inflation Readings – Thursday/Friday
1. COVID-19 Developments – All Week
Now that all but the most recalcitrant states have opted for some form of stay-at-home order, the U.S.’s number of reported COVID-19 cases should soon start to level off, but the trajectory this week and next should still be upwards. The lockdown actions will exacerbate the economic hit that was already showing itself in the March Jobs Report from last Friday. With April 30 now targeted for some limited reopening of the economy we’ll have to see some significant plateauing in case counts. The late move by several states to implement stay-at-home orders, however, makes that outcome in doubt which could extend extreme distancing measures into May.
2. Fed and Congressional Actions – All Week
With the rollout last Friday of the $350 billion SBA Paycheck Protection Program, bankers far and wide are no doubt inundated with loan requests. The lack of clear guidelines from the Treasury, however, promises a rocky start to the program. The other news that some of the direct payments to individuals could take over five months also casts some clouds over the ability of the government to put money in the hands of consumers when they need it. While most taxpayers have utilized direct deposit for tax refunds, those that have not supplied the IRS with that information could be in for a lengthy wait for a physical check. Meanwhile, as the depths of the economic crisis start to crystalize, a fourth stimulus plan could start to take shape this week as well. Be on the lookout for competing proposals from the administration and from Speaker Pelosi.
3. April University of Michigan Sentiment – Thursday
The April University of Michigan Consumer Sentiment will no doubt show the early scars of the broad-based shuttering of the U.S. economy. While the March report noted some faltering it was perhaps too early to expect an extreme shift in sentiment. That won’t be the case for this report. The April read is expected to print 74.7 versus 89.1 in March. 74.7 would be the lowest read since December 2011. The report also provides an outlook on expectations and that should decline to a six-year low. Thus, the extreme hit to confidence and expectations that we all expect looks like it will come to fruition in this report.
4. Weekly Jobless Claims – Thursday
Weekly jobless claims have quickly become the most immediate read on the impact of the economic shutdown. Two weeks ago claims spiked to 3.3 million after years being under 300 thousand and most recently in the low 200 thousand range. The 3.3 million bounce for the week ending March 20 was followed by a 6.6 million spike on March 27. That was the largest ever recorded for this series dating back to its mid-60’s beginnings. The expectation this week is for claims to set a new record with 10 million new filings. That would put claims over 20 million for the last three weeks, truly remarkable. With 150 million people in the labor force, the exploding claims numbers buttress forecasts of unemployment reaching 15%, or higher.
5. March Inflation Readings – Thursday/Friday
With policy rates at or near zero and $2 trillion in fiscal stimulus heading to the economy, one could be concerned about incipient inflation but that’s not today’s story, nor concern. Given the global collapse in demand, the more immediate concern is with deflation. March CPI is expected to be down –0.3% versus up 0.1% in February as extreme drops in energy prices flow through the series. The core rate (ex-food and energy) is expected to increase 0.1% versus 0.2% the prior month. On a year-over-year basis, CPI is expected to decrease from 2.3% to 1.6% while core CPI YoY is expected to dip to 2.3% from 2.4% the prior month. As mentioned, the more immediate concern is that the drop in commodity prices and other goods and services doesn’t spiral into a deflationary impulse. Later, zero policy rates and fiscal stimulus should start to stabilize and lift prices. That’s the hope anyway.
Thomas R. Fitzgerald
Director, Strategy & Research