Month-In-Review: October 2020

Despite a continued winding down of federal assistance and stalled fifth-round aid talks, the U.S. economy continued to exhibit resilience heading into the fourth quarter after reporting a record 33.1% rise in Q3. The labor market continued to improve (re)adding nearly half the jobs lost since the onset of the pandemic with an ongoing expansion in manufacturing, and stronger-than-expected gains in housing and consumer spending. Investors, however, were less than impressed by the recent bounce off second-quarter lows, raising concerns about the sustainability of the economy's current upward trajectory without a viable vaccine and bracing for increased uncertainty ahead of the November election.

Market Activity and Commodities

·      Equities – Equities ended lower in October for the second consecutive month, marking the worst month since March. Beginning at 3,363.00, the S&P 500 declined 2.8% in October, closing at 3,269.96. The Dow, meanwhile, fell 4.6% at the start of Q4 from 27,781.70 to 26,501.60. For the year, the S&P 500 is up 1.2%, while the Dow is down 7.1%.

·      Treasuries – Treasury yields ended the month of October higher after ending mostly unchanged in the month of September. The 10-yr Treasury yield rose 19bps from 0.69% to 0.88% at the start of Q4. The 2-yr Treasury yield, meanwhile, ended October up 3bps at 0.16%. Since the start of 2020, the 2-yr dropped 141bps and the 10-year declined 104bps.

·      Oil     

o  (Oct 9) – According to OPEC’s forecast, global oil demand will keep rising until roughly 2040, when it will plateau at about 109.3M bbl/day, or about 10% above the level of production in 2019. In contrast, according to oil giant British Petroleum (BP), oil consumption may never return to pre-pandemic levels. In its latest energy outlook, BP suggested even the most optimistic scenario would result in “broadly flat” demand for the next two decades as the world moves away from fossil fuels. As a result of its forecast, BP indicated plans to shrink oil and gas output by as much as 40% over the next decade and spend as much as $5B annually in renewable-power. Oil traded down 0.3% at $41.05 a barrel following the reports.

National Growth and Outlook

·      NFIB Small Business Optimism (Oct 13) – The NFIB Small Business Optimism Index rose from 100.2 to 104.0 in September, more than the expected rise to 100.9, according to Bloomberg, and a seven-month high.

·      Leading Index (Oct 22) – The Leading Index rose 0.7% in September, a tenth of a percentage point more than expected, according to Bloomberg, and following an upwardly revised 1.4% gain the month prior.

·      Chicago Fed National Activity Index (Oct 26) – The Chicago Fed National Activity Index declined from 1.11, revised up from 0.79, to 0.27 in September, a five-month low. According to Bloomberg, the index was expected to decline to 0.73. The Chicago Fed National Index draws on 85 economic indicators; a reading below zero indicates below-trend growth in the national economy and a sign of easing pressures on future inflation. In September, 50 of the 85 monthly individual indicators made positive contributions, while 35 made negative contributions.

·      GDP (Oct 29) – Third quarter GDP rose a record 33.1%, more than the 32% rise expected, according to Bloomberg, and following a historic 31.4% drop in the second quarter. In the details, personal consumption rose a record 40.7% following a 33.2% drop in the second quarter, the largest quarterly decline on record. Goods consumption rose 45.4% following a 10.8% decline in Q2, thanks to an 82.2% pop in durable goods and a 28.8% increase in nondurable goods orders. Services consumption gained 38.4% following two consecutive quarters of decline. Gross private investment rebounded 83.0% following three consecutive quarters of decline, and fixed investment rose 28.5% in Q3. Nonresidential investment, including office buildings and factories, rose 20.3%, thanks to a 70.1% gain in equipment investment. Structures investment, on the other hand, declined 14.6% and intellectual property investment fell 1.0% following an 11.4% decline the quarter prior. Additionally, residential investment gained 59.3% following a 35.6% decline the quarter prior. On the trade side, exports rose 59.7%, while imports gained 91.1%, following three consecutive quarters of decline. Finally, government consumption declined 4.5% in the third quarter, the largest quarterly decline since Q3 2011. Federal spending declined 6.2%, due to an 18.1% fall in nondefense spending. National defense spending, however, rose 3.0% following a 3.8% gain the quarter prior. State and local spending, meanwhile, declined 3.3%, the second consecutive quarter of decline.

Employment

·      Jobless Claims

o  (Oct 1) – Initial jobless claims fell by 36k to 837k in the week ending September 26, more than the expected decline to 850k, according to Bloomberg, and the fifth consecutive week under 1M. A total of 62.8M applications for unemployment insurance had been filed over the past twenty-eight weeks. Continuing claims, meanwhile, declined from 12.7M to 11.8M.

o  (Oct 8) – Initial jobless claims fell by 9k from 849k, revised up from 837k, to 840k in the week ending October 3. According to Bloomberg, jobless claims were expected to fall to 820k. The decline, however, marked the sixth consecutive week under 1M, albeit in a tight range of 840k to 893k. While the labor market continued to improve, the rate of improvement continued to wane. A total of 63.6M applications for unemployment insurance had been filed over the past twenty-nine weeks. Continuing claims, meanwhile, declined from 11.98M to 10.98M.

o  (Oct 15) – Initial jobless claims unexpectedly rose by 53k from 845k, revised up from 840k, to 898k in the week ending October 10, the highest level since the end of August. According to Bloomberg, jobless claims were expected to decline to 825k. The rise, however, marked the eighth consecutive week under 1M, albeit in a tight range of 845k to 898k. A total of 64.5M applications for unemployment insurance had been filed over the past thirty weeks. Continuing claims, meanwhile, declined from 11.18M to 10.02M.

o  (Oct 22) – Initial jobless claims fell by 55k from 842k, revised down from 898k, to 787k in the week ending October 17, the lowest level since the March. According to Bloomberg, jobless claims were expected to decline to 870k. A total of 65.2M applications for unemployment insurance had been filed over the past thirty-one weeks. Continuing claims, meanwhile, or the total number of Americans claiming ongoing unemployment benefits, declined from 9.397M to 8.373M.

o  (Oct 29) – Initial jobless claims fell by 40k from 791k, revised up from 787k, to 751k in the week ending October 24, the lowest level since the March. According to Bloomberg, jobless claims were expected to decline to 770k. A total of 65.9M applications for unemployment insurance had been filed over the past eight months. Continuing claims, meanwhile, or the total number of Americans claiming ongoing unemployment benefits, declined from 8.465M to 7.756M.

·      Nonfarm Payrolls (Oct 2) – Nonfarm payrolls rose 661k in September, falling short of the 859k gain expected, according to Bloomberg. August payrolls, however, were revised up from a 1.371M rise to a 1.489M increase, and July payrolls were revised higher from a 1.734M rise to a 1.761M gain. Thus, the overall change in nonfarm payrolls (September data + net revisions) was 806k. Employers added 11.4M jobs since May. However, the 11.4M gain only accounted for slightly more than half of the 22.2M jobs lost in March and April. In the details, private payrolls rose by 877k in September, following a 1.0M gain in August. Goods-producing payrolls rose 93k due to a 26k gain in construction payrolls. Manufacturing payrolls, meanwhile, rose 66k in September, following a 36k rise in August. Service producing payrolls gained by 784k in September, following a 977k rise the month prior. Government payrolls fell 216k at the end of Q3 with federal employment declining 34k.

·      Participation Rate (Oct 2) – The civilian labor force declined by 695k, following a 968k rise in August. As a result, the participation rate fell from 61.7% to 61.4% in September, a two-month low.

·      Unemployment Rate (Oct 2) – Household employment rose by 275k in September, following a 3.8M rise the month prior. With a 695k decline in the labor force, the unemployment rate dropped more than expected from 8.4% to 7.9% in September.

·      Average Hourly Earnings (Oct 2) – Average hourly increased 0.1% in September, less than the 0.2% gain expected, according to Bloomberg, and a two-month low. Year-over-year, wages rose 4.7% in September, a three-month high.

·      Average Weekly Hours (Oct 2) – The average workweek rose from 34.6 to 34.7 hours in September, a four-month high.

·      JOLTS (Oct 6) – According to JOLTS – the Job Openings and Labor Turnover Survey – the number of job openings declined from 6,697k to 6,493k in August, more than the expected decline to 6,500k, according to Bloomberg, and a two-month low.

Consumer Activity and Confidence

·      Vehicle Sales (Oct 1) – Total vehicle sales rose from 15.18m to a 16.34m unit pace in September, more than the rise to 15.70m expected, according to Bloomberg, and a seven-month high. Year-over-year, however, vehicle sales dropped 4.3% following an 11.0% decline in August, and marking the seventh consecutive month of decline.

·      Consumer Credit (Oct 8) – Consumer credit unexpectedly declined $7.220b in August, a three-month low. According to Bloomberg, consumer credit was expected to increase by $14.000b.

·      University of Michigan Consumer Sentiment

o  (Oct 16) – The University of Michigan Consumer Sentiment Index rose from 80.4 to a reading of 81.2 in October, more than the expected rise to 80.5, according to Bloomberg, and a seven-month high. In the details, consumer expectations rose from 75.6 to a reading of 78.8, while consumers’ assessment of current conditions declined from 87.8 to 84.9, a two-month low.

·      Retail Sales (Oct 16) – Retail sales rose 1.9% in September, more than the double the 0.8% increase expected according to Bloomberg, and a three-month high. Year-over-year, retail sales rose 5.4% in September, a nine-month high, and following a 2.8% gain in August. Car sales rose 3.6% in September following a 0.7% gain the month prior, and gasoline stations sales rose 1.5%, following a 0.9% increase the month prior. Excluding autos, retail sales rose 1.5% in September, and gained 4.0% over the past 12 months. Excluding autos and gasoline, retail sales increased 1.5% and rose 5.9% year-over-year. In the details, health and personal care sales rose 1.7%, eating and drinking sales improved 2.1%, furniture sales gained 0.5%, and clothing sales rose 11.0%, a three-month high. Also, building materials sales increased 0.6%, non-store retailer sales rose 0.5%, miscellaneous sales gained 1.1%, and sporting goods sales rose 5.7%, following two consecutive months of decline. Additionally, general merchandise sales increased 1.8%, thanks to a 9.7% gain in department store sales, a three-month high. On the weaker side, food and beverage sales were flat, and electronics sales declined 1.6% at the end of Q3, a five-month low.

·      Consumer Confidence (Oct 27) – The Conference Board’s Consumer Confidence Index unexpectedly declined from 101.8 to 100.9 in October, a two-month low. According to Bloomberg, the index was expected to rise to 102.0 at the start of Q3. In the details, present situation improved from 98.9 to 104.6, while consumer expectations declined from 102.9 to 98.4, a two-month low.

Inflation

·      CPI (Oct 13) – The CPI rose 0.2% in September, as expected, according to Bloomberg, and following a 0.4% gain in August. Year-over-year, consumer prices rose 1.4% at the end of Q3, up from 1.3% in August, and a six-month high. Food prices were unchanged, following a 0.1% gain the month prior, while energy prices increased 0.8% in September, following a 0.9% gain in August. Excluding food and energy costs, the core CPI rose 0.2% and increased 1.7% over the past 12 months for the second consecutive month. In the details, transportation prices gained 1.0%, commodities prices rose 0.4%, and recreation prices increased 0.2% in September, following a 0.7% increase in August. Additionally, housing prices rose 0.2%, thanks to a 0.1% gain in the OER. On the weaker side, medical care prices were flat, following a 0.1% gain the month prior, and apparel prices fell 0.5% in September, a four-month low. Also, education and communication costs declined 0.2%, thanks to a 4.1% drop in personal computer prices.

·      PPI (Oct 14) – The PPI rose 0.4% in September, double the rise expected, according to Bloomberg, and a two-month high. Year-over-year, producer prices increased 0.4% in September following five consecutive months of decline. Food prices rose 1.2% following a 0.4% drop in August, while energy prices fell 0.3% at the end of Q3, the second consecutive month of decline. Excluding food and energy costs, the core PPI rose 0.4%, and increased 1.2% over the past 12 months, a seven-month high. Additionally, services costs rose 0.4%, due to a 0.2% gain in trade costs, a 0.4% rise in transportation and warehousing costs, and a 0.5% increase in other costs.

·     PCE (Oct 30) – The PCE rose 0.2% in September, as expected, according to Bloomberg, and following a 0.3% gain in August. Year-over-year, headline inflation increased 1.5%, a six-month high. Excluding food and energy, the core PCE rose 0.2% at the end of Q3, also as expected. Year-over-year, core inflation increased 1.5%, also a six-month high.

Manufacturing and Production Activity

·      ISM Manufacturing (Oct 1) – The ISM Manufacturing Index unexpectedly fell from 56.0 to a reading of 55.4 in September, a two-month low. According to Bloomberg, the index was expected to rise to 56.5 at the end of Q3. In the details, backlog of orders rose from 54.6 to 55.2, employment increased from 46.4 to 49.6, and prices paid rose from 59.5 to 62.8. Additionally, exports gained one point to 54.3, and supplier deliveries rose from 58.2 to 59.0, a four-month high. On the weaker side, new orders fell from 67.6 to 60.2, production decreased from 63.3 to 61.0, and imports declined from 55.6 to 54.0, a two-month low.

·      ISM Services (Oct 5) – The ISM Services Index unexpectedly rose from 56.9 to 57.8 in September, a two-month high. According to Bloomberg, the index was expected to decline to a reading of 56.2 at the end of Q3. In the details, new orders gained from 56.8 to 61.5 and employment increased from 47.9 to 51.8, a seven-month high. On the weaker side, backlog of orders declined from 56.6 to 50.1, prices paid fell from 64.2 to 59.0, and supplier deliveries decreased from 60.5 to 54.9 in September, a seven-month low. Also, imports fell from 50.8 to 46.6, and exports declined from 55.8 to 52.6 in September, a two-month low.

·      Empire Manufacturing (Oct 15) – The Empire Manufacturing Index fell from 17.0 to a reading of 10.5 in October, more than the expected decline to 14.0, according to Bloomberg, and a two-month low. In the details, prices paid rose from 25.2 to 27.8, and employment improved from 2.6 to 7.2 in October, a nine-month high. Also, shipments rose from 14.1 to 17.8, new orders increased from 7.1 to 12.3, and the average workweek improved from 6.7 to a reading of 16.1, the highest since May 2011.

·      Philly Fed Business Outlook Survey (Oct 15) – The Philly Fed Index unexpectedly jumped from 15.0 to 32.3 in October. According to Bloomberg, the index was expected to decline to 14.8 at the start of Q4. In the details, delivery time gained from 12.2 to 20.5, prices paid rose from 25.1 to 28.5, and inventories increased from -10.8 to -2.5 at the start of Q4, a two-month high. Also, shipments rose from 36.6 to 46.5 in October, and new orders popped from 25.5 to 42.6, an all-time high. On the weaker side, employment declined three points to a reading of 12.7 in October, a two-month low.

·      Industrial Production (Oct 16) – Industrial production industrial production unexpectedly declined 0.6% in September, a five-month low. According to Bloomberg, production was expected to rise 0.6% at the end of Q3.

·      Capacity Utilization (Oct 16) – Capacity utilization declined from 72.0%, revised up from 71.4%, to 71.5% at the end of the third quarter, more than the expected decline to 71.8%, according to Bloomberg, and a three-month low.

·      Kansas City Fed Manufacturing (Oct 22) – The Kansas City Fed Index unexpectedly rose from 11 to a reading of 13 in October, a two-month high. According to Bloomberg, the index was expected to remain at a reading of 11 for the second consecutive month.

·      Dallas Fed Manufacturing (Oct 26) – The Dallas Fed Manufacturing Outlook Index unexpectedly rose from 13.6 to a reading of 19.8 in October, a two-year high. According to Bloomberg, the index was expected to decline to 13.5 at the start of Q4.

·      Richmond Fed Manufacturing (Oct 27) – The Richmond Fed Index unexpectedly rose from 21 to an all-time high of 29 in October. According to Bloomberg, the index was expected to decline to a reading of 18 at the start of Q3.

·      Durable Goods (Oct 27) – Durable goods orders rose 1.9% in September, surpassing the 0.4% gain expected, according to Bloomberg, and marking the fifth consecutive month of a positive reading. August orders, however, were revised down a tenth of a percentage point to a 0.4% increase. Year-over-year, however, headline orders fell 0.4% at the end of Q3, the seventh consecutive month of decline. Transportation orders gained 4.1%, following a 0.9% decline the month prior, thanks to a 1.5% gain in vehicles and parts orders. Excluding transportation, durable goods orders rose 0.8% in September and rose 3.6% over the past 12 months. In other details, computers and electronics orders rose 0.6%, primary metals orders gained 4.0%, and fabricated metals orders increased 1.2%, a two-month high. On the weaker side, electrical equipment orders fell 2.0%, a five-month low, and machinery orders declined 0.3% in September, following a 1.9% gain in August

·      Capital Goods (Oct 27) – Capital goods orders rose 4.7% in September. Nondefense capital goods orders, meanwhile, increased 10.4% at the end of Q3, following an 8.0% gain in August. Capital goods orders excluding aircraft and defense – a proxy for business investment – rose 1.0% in September, down from the 2.1% gain the month prior. Year-over-year, however, business investment increased 5.9% in September.

·      Chicago PMI (Oct 30) – The Chicago PMI fell from 62.4 to a reading of 61.1 in October, less than the expected loss to 58.0, according to Bloomberg, albeit a two-month low. In the details, only production increased, while new orders, supplier deliveries, prices paid, and order backlogs saw declines.

Housing Market Activity

·      Construction Spending (Oct 1) – Construction spending rose 1.4% in August, double the rise expected, according to Bloomberg, and following an upwardly revised 0.7% gain in July. Construction spending has averaged a 0.3% decline over the last six months, but rose 2.5% year-over-year, a five-month high.

·      NAHB Housing Market Index (Oct 19) – The NAHB Housing Market Index unexpectedly rose from 83 to an all-time high of 85 in October. Any reading above 50 is considered positive sentiment. According to Bloomberg, the index was expected to remain at a reading of 83 for the second consecutive month.

·      Building Permits (Oct 20) – Building permits increased 5.2% in September from 1,476k, revised up from 1,470k, to a 1,553k unit pace, the highest since March 2007. According to Bloomberg, building permits were expected to rise 3.0% at the end of Q3. Year-over-year, building permits rose 8.1%, following a 0.3% increase in August. Single family permits rose 7.8% in September and increased 24.3% year-over-year, while multi-family permits fell 0.9% following a 13.4% decline in August, and dropped 19.2% over the past 12 months.

·      Housing Starts (Oct 20) – Housing starts rose 1.9% in September, pulling the annual pace up from 1,388k, revised down from 1,416k, to 1,415, a two-month high. According to Bloomberg, starts were expected to increase 3.5% at the end of Q3. Single family starts rose 8.5%, while multi-family starts declined 16.3% in September, the second consecutive month of decline. Year-over-year, housing starts gained 11.1% in September, a two-month high. On a regional basis, starts rose in three of the four regions of the country at the end of Q3: starts gained 66.7% in the Northeast, 6.2% in the South, and 1.4% in the West. Starts fell, however, 32.7% in the Midwest.

·      Existing Home Sales (Oct 22) – Existing home sales rose 9.4% in September from 5.98m to a 6.54m unit pace, the highest since May 2006. According to Bloomberg, home sales were expected to rise 5.0% at the end of Q3. Single family sales rose 9.7%, and multi-family sales gained 6.3%. Year-over-year, existing home sales rose 20.9% in September, following a 10.1% increase in August. From a price standpoint, the median cost of a previously owned home rose 14.8% in September from a year earlier to a record $311.8k.

·      New Home Sales (Oct 26) – New home sales unexpectedly dropped 3.5% from 994k, revised down from 1,011k, to a 959k unit pace in September, a three-month low. According to Bloomberg, home sales were expected to rise 1.4% at the end of Q3. Year-over-year, however, sales jumped 32% following a 41% increase in August. The months’ supply of new homes rose from 3.4 to 3.6 months, a two-month high. And, from a price standpoint, the median cost of a newly constructed home rose 1.4% in September from the month prior to $327k. Year-over-year, new home prices increased 3.5% following a 1.4% decline the month prior.

·      S&P/CS 20 City Index (Oct 27) – The S&P Case-Shiller 20 City Home Price Index increased 0.47% in August, slightly less than 0.50% rise expected, according to Bloomberg, and following an upwardly revised 0.75% gain in July. Year-over-year, home prices rose 5.18%, the most since August 2018.

·      Pending Home Sales (Oct 29) – Pending home sales unexpectedly declined 2.2% in September, a five-month low. According to Bloomberg, home sales were expected to rise 2.7% at the end of Q3. Year-over-year, however, pending home sales increased 21.9%, the most since October 2009.

Trade and Currency

·      U.S. Dollar

o  (Oct 30) – The dollar rose as COVID-19 cases across Europe and in the United States increased and as new restrictions to stem the spread of the virus were imposed. The dollar traded up 0.1% at $94.04.

·      Trade (Oct 6) – The trade balance widened from -$63.4b to -$67.1b in August, the largest since August 2006. According to Bloomberg, the balance was expected to widen to -$66.2b. Total imports rose 3.2% to $239b, while exports increased 2.2% to $171.9b. The deficit with China specifically narrowed from $28.3 billion to $26.4 billion in August, bringing the total deficit to $197.025 billion year-to-date.

·      Import Prices (Oct 15) – Import prices increased 0.3% in September, as expected, according to Bloomberg, and following a 1.0% gain in August. Year-over-year, import prices declined 1.1%, the eighth consecutive month of decline, albeit up from the 6.9% drop in April.

Monetary Policy, Reports, and Commentary

·      Atlanta Fed GDPNow Forecast

o  (Oct 30) – Following a record 33.1% rise in the third quarter, the Atlanta Fed GDPNow’s initial forecast for the fourth quarter is 2.2%. However, according to the Atlanta Fed, it is important to note: “GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model.”

·      Fed Speak

o  (Oct 1) – According to Dallas Fed President Robert Kaplan, the Fed is unlikely to raise rates before 2023. Speaking to CNBC, Kaplan said he expects the fed funds rate will remain at zero for another 2.5-3 years. Kaplan’s outlook was in line with the latest Summary of Economic Projections; the latest September dot plot showed 13 of 17 Committee members saw no increase in rates until at least 2023. Still, his comments were noteworthy, however, given he dissented at the latest FOMC meeting, preferring additional flexibility to hike rates, if necessary, even while remaining accommodative.

o  (Oct 9) – Speaking on stimulus, Dallas Fed President Robert Kaplan indicated that he favored additional support for the economy, at least in the near term. Attending a virtual conference hosted by the San Antonio Chamber of Commerce, Kaplan, the last standing hawk, as Bloomberg News described him, voiced concerns that additional monetary support, specifically quantitative easing, at this point would “lack punch.” Thus, from here, a more meaningful impact would stem from fiscal policy action.

o   (Oct 9 ) – Boston Fed President Eric Rosengren also championed the need for additional government stimulus. Speaking at a virtual lecture event hosted online by the Marquette University Economics Department, Rosengren suggested failing to pass additional relief legislation could be extremely detrimental to the recovery. Rosengren went on to say the impact of further Fed support is likely to be less impactful, which is why Fed officials are pushing for further fiscal policy support: “There’s a limit to how far we can push the 10-year Treasury rate or the mortgage-backed rate down. That’s not to say we shouldn’t do it. It just says the magnitude of the impact, when rates are already so low, is probably much less than what we want, which is why I think you’re hearing Federal Reserve speakers call out for more fiscal policy.”

o  (Oct 14) – San Francisco Fed President Mary Daly said monetary policy should remain accommodative even if it boosts asset prices. Speaking at a virtual event hosted by the University of California, she said she is unwilling "to trade millions of jobs for people who need a ladder rung up in order to keep the stock market from going up."

·      September 16th FOMC Meeting Minutes (Oct 7)

o  The September 15-16 FOMC meeting minutes affirmed a number of officials’ concerns, as well as the Committee’s assessment of the current economy previously outlined in September’s policy materials and press conference. According to the minutes, the economy is recovering at a faster-than-expected pace, in part thanks to the swift policy reaction by the Fed; the virus, however, remains the number one risk. Inflation is also improving at a faster-than-expected rate, benefiting from an improved growth profile, but remains well below the Fed’s 2% target. There was also a difference of opinion among policy makers on the implementation of the new approach to inflation. The labor market has improved, however, gains vary greatly across demographic groups with Black and Hispanic unemployment rates still elevated relative to the average jobless rate. There is also growing concern that women will be disproportionately hindered in the labor market because of childcare and schooling needs. Household spending has improved from earlier lows prompted by solid income gains stemming from generous government transfer payments, however, further fiscal stimulus is needed to continue to support households and businesses.

·      Beige Book (Oct 21)

o  The Federal Reserve’s latest version of the Beige Book reported the economy grew in all districts since mid-September, but at a slower rate. In the details, growth was reported as steady in banking, manufacturing and residential construction, but commercial real estate and consumer spending are still weak, the central bank said. The report walked the fine line between acknowledging the recent improvements from the low lows of Q2, while also acknowledging the lingering weakness in the economy amid still ample uncertainty and risks with the virus far from contained.

Domestic News and Activity 

·      Politics and the Trump Administration

o  (Oct 1) – According to Moderna CEO Stéphane Bancel, while the company may be able to apply for emergency use authorization by late November, the company does not expect full approval to distribute the vaccine to all sections of the U.S. population until next spring. Speaking at a Financial Times conference, Bancel said this reflected the minimum amount of time needed to accumulate enough safety data. 

o  (Oct 1) – The CDC extended its ban on passenger cruising from U.S. ports through October 31, as expected. Even after action is allowed to resume, safety protocols are likely to remain in place, including mandatory masks in public spaces and COVID-19 tests for passengers before they board.

o  (Oct 1) – California Governor Gavin Newsom signed legislation that will require boards of publicly traded companies based in the state to have at least one “racially, ethnically or otherwise diverse director by 2021,” and more by the end of 2022. According to reports on the legislation, regardless of qualifications or other merit, individuals who identify as Black, African-American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who identify as gay, lesbian, bisexual or transgender would be considered eligible for meeting the requirement. According to independent research, as it stands today, more than 35% of California’s 513 public-company boards would fail to meet the new diversity requirement.

o  (Oct 2) – President Trump and First Lady Melania Trump tested positive for coronavirus, with speculation infection spread from White House Counselor to the President Hope Hicks, who also tested positive and who recently flew on Air Force One. Other top officials who tested positive included: President Trump's campaign manager Bill Stepien, former White House adviser Kellyanne Conway, Senators Thom Tillis of North Carolina and Mike Lee of Utah, and former Governor Chris Christie.

o  (Oct 2) – The House passed a $2.2T coronavirus stimulus plan, however, the proposal did little to move either side to a bipartisan compromise. According to reports, Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin had been in talks, however, a sizable gap remained on a range of issues, including the scope of aid provided to state and local governments, and whether or not to establish a liability shield for businesses and schools.

o  (Oct 5) – In order to stem a second wave of the virus, New York City once again closed down, or at least the neighborhoods that had a positivity rate of more than 3% for at least seven straight days. Within nine ZIP codes, schools and restaurants closed amid other restrictions which could reportedly last 2-4 weeks. “We can stop this from being a 'second wave' in New York City," Mayor De Blasio said at a press conference.

o  (Oct 6) – President Trump checked out of Walter Reed Medical Center after a three-night stay out of what the White House called “an abundance of caution.” The President said he was feeling good and was ready for the second of three debates that was scheduled on October 15th.

o  (Oct 7) – After weeks of unproductive negotiations, President Trump instructed White House officials to halt negotiations of pandemic aid until after the election. Following his initial comments, the President later tweeted support for a standalone bill for $1,200 stimulus checks, as well as $25B in relief for airlines and additional Paycheck Protection Program (PPP) funds.

o  (Oct 8) – Vice President Mike Pence and Democratic vice presidential hopeful Kamala Harris squared off in what was the only vice presidential debate. The victor of the debate depended on your preferred news outlet, however, with minimal bickering, badgering and insults, the real winner was the American people, having a somewhat coherent policy debate. Harris sought to make the election about President Trump’s handling – and implied failure – of the coronavirus, while Pence focused on the left-leaning tilt of the Democratic Party’s policies and the detrimental impact they will have on the economy.

o  (Oct 9) – Speaker of the House Nancy Pelosi rejected the notion of stand-alone relief legislation, suggesting piecemealing together targeted funds would limit the ability to divert money everywhere it is deemed necessary. According to reports, the White House would support a larger bill, although broader support may prove difficult with many GOP senators voicing spending concerns.

o  (Oct 13) – U.S. Supreme Court nominee Judge Amy Coney Barrett faced questions on Capitol Hill in a very contentious confirmation hearing. Republicans sought to approve her nomination ahead of the presidential election. Although, Democrats feared her confirmation would give the nine-member Court a 6-3 conservative majority, altering the balance of the court for potentially decades to come.

o  (Oct 13) – The study of Johnson & Johnson's COVID-19 vaccine was temporarily paused due to an unexplained illness in a trial participant. 

o  (Oct 13) – A study in the Lancet Infectious Diseases journal showed the 25-year-old Nevada man who became seriously ill following a second coronavirus infection did in fact catch the coronavirus on two separate occasions. A comparison of genetic codes showed "significant differences" between each virus variant, raising further questions about coronavirus immunity. There had been reports of secondary coronavirus infections in Hong Kong, the Netherlands and Belgium, which were no more serious than the first. According to reports, however, there was one case in Ecuador which mirrored the U.S. case in being more severe.

o  (Oct 14) – Stimulus negotiations were again deadlocked. Democratic Speaker of the House Nancy Pelosi insisted that the White House revamp its $1.8T offer, while Republican Senate Majority Leader Mitch McConnell continued to push for a smaller-scale strategy. President Donald Trump, meanwhile, voiced confidence that Republicans would "go along with" a deal that the White House works out with Pelosi, despite initial dismissal. "Republicans should be strongly focused on completing a wonderful stimulus package for the American People!" Trump tweeted. On the other hand, Pelosi said, "Nobody is waiting till February. I want this very much now, because people need help now."

o  (Oct 14) – According to reports, Eli Lilly paused a government-sponsored trial of its antibody therapy due to safety concerns.

o  (Oct 14) – Calling the initiative "Virtual First," Dropbox will stop asking employees to come into its offices and instead make remote work the standard practice, even after the coronavirus pandemic ends. As the duration for the shutdown and lingering restrictions of interaction persists, more businesses are likely to follow suit.

o  (Oct 14) – According to the International Monetary Fund (IMF), government spending to fight the coronavirus and the economic downturn will propel public debt to near 100% of global GDP. In its latest semiannual Fiscal Monitor report, the IMF reported that governments have committed $11.7 trillion, or 12% of global output, as of September, which will expectedly drive up budget deficits by 9% of GDP on average this year.

o  (Oct 15) – According to the Centers for Disease Control and Prevention (CDC), COVID-19 vaccines may not be initially recommended for children when they become available. According to reports, thus far, early clinical trials have only included non-pregnant adults, although companies are seeking to expand participating groups. Confidence in a vaccine appeared to be somewhat fragile with 50% of the population indicating they would not be willing to be among the first to take the vaccine. Of course, to stem community spread, according to Food and Drug Administration (FDA) officials, 70% to 80% of the population would need to be vaccinated.

o  (Oct 16) – President Trump and former Vice President Joe Biden held dueling town halls. During the hour-long Q&A session, Trump talked up his response to the coronavirus and his record on the economy, pro-business policies and his deals on international trade and China. Biden gave equal focus to critiquing the President’s actions over the past four years, and in particular, his response to the pandemic.

o  (Oct 16) – The U.S. made an offer to the EU to remove a host of tariffs if Airbus repaid the billions it received in government aid. Retaliation, however, also remained a second option should the EU move forward with additional tariffs. “If they strike back, then we'll strike much harder," President Trump told reporters. "They don't want to do anything, I can tell you that."

o  (Oct 19) – Global coronavirus cases topped 40 million worldwide. In the U.S., daily cases had been averaging more than 50,000.

o  (Oct 20) – The U.S. could authorize emergency use of Moderna's experimental COVID-19 vaccine in December. Similarly, Pfizer said it expects to seek U.S. authorization of emergency use of its vaccine by late November.

o  (Oct 26) – The U.S. recorded record new coronavirus cases for a second day, adding more than 85k. As the cold weather of winter sets in, encouraging people to congregate inside, caseloads are expected to continue to increase, potentially leading to further restrictions, safety measures and in some case, lockdowns. In Chicago, for example, where cases spiked, Mayor Lori Lightfoot implemented a curfew between 10:00pm and 6:00am on nonessential businesses and placed a ban on taverns serving liquor indoors.

o  (Oct 27) – Judge Amy Coney Barrett was confirmed to the Supreme Court along party lines. In a 52-48 Senate vote, every Republican, save Senator Susan Collins from Maine, voted in favor of the 48-year-old conservative mother of seven, exacerbating the political divide in Washington. Barrett took her oath at the White House and began working the following day after taking a second oath in a private ceremony. With Barrett’s confirmation, the bench now has a conservative lean of 6 to 3. Because of this “imbalance,” Democrats strongly opposed Barrett’s confirmation which could have policy implications for years to come. Following her confirmation, some Democratic representatives voiced support for “packing” the Court in the case of a Blue sweep come November, a fringe notion of increasing the number of justices from nine to 15 as a way of redirecting the swing of the Court to a left-wing agenda.

o  (Oct 28) – Coronavirus cases continued to rise in the U.S. as hospitalizations rose at least 10% in one week in 32 states and D.C

International News and Activity 

·      European Union

o  (Oct 1) – Calling it "the first step in an infringement procedure," the European Union launched legal proceedings against the United Kingdom for a breach of "good faith" clauses in the Brexit Withdrawal Agreement. Furthermore, should the U.K. refuse to drop its Internal Markets Bill, the EU threatened further legal action, health fines and/or trade sanctions.

o  (Oct 6) – European coronavirus cases continued to rise, threatening the recovery and further restrictions. According to European Central Bank President Christine Lagarde, the risks of a W-shaped recovery remain if additional lockdowns are required to stem the spread of the virus. Speaking at the CEO Council Summit, an online event hosted by the Wall Street Journal, Lagarde warned that measures to contain coronavirus threatened Europe's economic recovery and urged governments not to turn off the fiscal taps too soon. “While we have seen recovery in late spring, early summer, we now fear that the containment measures that have to be taken by the authorities will have an (negative) impact,” Lagarde said.

o  (Oct 9) – The number of COVID-19 reported cases surged overseas. According to Bloomberg News, German infections topped 4,000 and Russia reported record cases, despite its untested vaccine.

o  (Oct 14) – The World Trade Organization (WTO) awarded the EU the right to impose tariffs on roughly $4B of American goods in retaliation for subsidies granted to Boeing. The decision followed a similar WTO ruling from last year that allowed the U.S. to impose tariffs on $7.5B in EU goods over state support for Airbus.

o  (Oct 15) – A resurgence of cases in Europe lead to additional restrictions and lockdowns. Germany posted its highest ever increase in confirmed COVID-19 cases, and as a result, reimposed restrictions on businesses and gatherings in city hotspots, including Berlin. Meanwhile, in France, the government declared a public health state of emergency and announced a curfew for Paris and eight other big cities. Italy also surpassed its daily record for newly diagnosed coronavirus cases, and in the U.K., with cases rising, officials debated over whether a country-wide "circuit breaker" lockdown was needed.

o  (Oct 28) – Coronavirus continued to rise in Europe with countries preparing for tighter restrictions on businesses and public gatherings. German Chancellor Angela Merkel proposed closing bars and restaurants for a month to curb the spread of the virus, while French officials considered a one-month lockdown.

·      The U.K.

o  (Oct 15) – Despite outlining a self-imposed deadline of October 15th for reaching a trade agreement with the EU, Prime Minister Boris Johnson did not close the door to additional talks. According to reports, the “real” deadline had been pushed out to early November, closer to the end of the transition period set to expire December 31st. If a deal is not reached by year-end, however, the U.K. will leave the single market without a trade agreement with the EU.

o  (Oct 16) – U.K. Prime Minister Boris Johnson warned that the U.K. would be prepared to leave the EU single market and customs union without a trade deal. According to reports, the Prime Minster was willing to listen if the EU had a new offer, but "unless there's a fundamental change of approach, we should go for the Australia solution," which means no overarching trade agreement.

·      China

o  (Oct 9) – The Chinese Caixin Services PMI rose from 54.0 to 54.8 in September, surpassing expectations and marking the second consecutive month of increase and the fifth month of expansion (a reading above 50). In the details, growth was supported by a marketed rise in total new business, although new export work continued to decline.

o  (Oct 19) – Chinese GDP rose 4.9% in Q3 from a year prior, up from a 3.2% annual pace reported in Q2. While welcomed improvement, this was noticeably below the country’s 6.2% pre-virus trend pace and short of expectations for a 5.5% gain. Year-to-date, Chinese GDP rose 0.7%, suggesting the country has recouped the lost activity in the first half of the year. In the details, the country’s recovery centered on a solid gain in retail and industrial output.

·      Japan

o  (Oct 1) – The Tokyo Stock Exchange, the world's third largest exchange, suffered its worst power outage, taking trading offline for the day. According to reports, the outage was the result of a hardware breakdown which left the market unable to function. "We apologize to investors and market participants for causing disruption," Tokyo Stock Exchange officials said in a statement. Trading resumed as normal the following day.

-Lindsey Piegza, Ph.D., Chief Economist