Open Sesame. No, Open Sloooowly
In the latest coronavirus update, President Trump said he disagreed with Georgia's decision to restart its economy. While the administration has supported the notion the U.S. economy needs to reopen as soon as it’s safe, the President told Governor Brian Kemp that it was potentially “too early†at this point to ease stay-at-home orders and let some businesses reopen. The state was the first in the country to significantly loosen restrictions, though there are still some limitations in place and some cities such as Atlanta remain on lockdown. According to Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, the state should move “more slowly†and furthermore, cautioned that leaving the virus to its own devices it would likely take off and add fatalities.
Of course, it remains a double-edged sword; as administrations around the country struggle to contain the coronavirus, the longer the economy is shut down, the more devastating the “cure†will become and the more difficult it will be to get the economy back on track once the pandemic is under control – if it is ever under control. As Fauci continues to reiterate, the virus may simply subside during the warmer spring only to reappear in the fall and winter months.
According to the WSJ, roughly a quarter of the 46K COVID-19 related deaths in the U.S. have been directly linked to nursing or long-term care facilities. According to the data, the virus has hit the most vulnerable elderly population in at least 4,800 facilities nationwide.
Another hard-hit venue in the U.S. has been food processing plants, affecting the country’s food supply chain. According to reports, while staff undergo testing, Tyson is closing a factory for one of its subsidiaries in Logansport, Indiana. The pork processing facility produces 3M pounds of pork daily and helps support more than 250 independent family farmers from across nine states. The decision follows last week’s closure of a Smithfield Foods pork processing plant which accounts for up to 5% of production after more than 500 of its workers were infected and one died from COVID-19.
As the spread of the virus continues, albeit at a reduced rate in many areas, Treasury Secretary Steven Mnuchin says the government must continue to spend to support efforts to end the pandemic. "We need to spend what it takes to win the war," Treasury Secretary Steven Mnuchin declared Wednesday morning on Fox Business. The response was supposedly a rebuke to Senate Majority Leader Mitch McConnell who feels the federal government should "push the pause button." While Mnuchin is reportedly “sensitive†to concerns about the rising federal debt, he said he believes low interest rates and the urgency of preventing as much long-term damage as possible cuts in the other direction.
As we have written extensively, the U.S. deficit was already was on track to reach $1.5T before accounting for any spending on combating the coronavirus. Now, adding in three layers of federal spending – an $8.3B spending bill passed in early March for health agencies and testing, and for small-business loan subsidies; a $100B bill passed in mid-March to extend unemployment benefits; and the latest $2T relief package – projections for the year’s government shortfall have more than doubled.
Yesterday, the FHFA House Price Index rose 0.7%, more than the 0.3% gain expected, according to Bloomberg, and a two-month high.
This morning, initial jobless claims rose 4.43M in the week ending April 18 following a rise of 5.25M the week prior. According to Bloomberg, claims were expected to rise by 4.50M.
The five-week sum of claims now totals 26.45M, exacerbating fears the government’s efforts to protect citizens from the health pandemic is leaving the labor market devastated.
Also this morning, new home sales fell 15.4% from 741k, revised down from 765k, to a 627k unit pace, the largest decline since March July 2013 and a ten-month low. According to Bloomberg, new home sales were expected to drop 16.3% at the end of the first quarter. Year-over-year, sales fell 9.5% following a 10.8% gain the month prior. The months’ supply of new homes rose from 5.2 to 6.4 months, a ten-month high. And, from a price standpoint, the median cost of a newly constructed home fell 2.6% in March from the month prior to $321k. Year-over-year, new home prices gained 3.5% following a 2.9% rise in February.
Later this morning, the Kansas City Fed Index is expected to fall 20 points from -17 to a reading of -37 in April.
Tomorrow, durable goods orders are expected to decline 12% in March.
-Lindsey Piegza, Ph.D., Chief Economist