Vaccine for Kids, Money for Everyone

As adults continue to debate President Biden’s mandate, the vaccine is now available to children. Yesterday, a key advisory committee of the FDA voted to recommend authorization of the Pfizer-BioNTech COVID vaccine for children between the ages of 5 and 11 years old. The vote was nearly unanimous, with 17 members backing it and one abstention. According to the details, nearly 28M kids within the 5-11 age group would be eligible for the shot, which would reportedly be distributed in smaller dosages and with smaller needles to make it easier to administer.

According to reports, advisors questioned whether authorization should be narrowed to kids that are deemed?"at risk"?or those that have pre-existing conditions. There was also discussion over the risks of myocarditis, a rare heart-related side effect that can cause inflammation; a side effect that has predominately been seen among young men after a second dose of an mRNA vaccine.

Of course, the bigger question remains whether children should be taking a vaccine at all. According to the FDA, children ages 5 to 11 account for about 9% of all reported COVID cases in the U.S. However, only a very minute proportion of young children with COVID?are likely to get severely ill or die. In other words, while case numbers have reportedly ticked up, studies show in the overwhelmingly majority of instances children do not experience symptoms from the disease, let alone suffer serious illness. As such, some parent and advocacy groups have already voiced opposition to a vaccine for children, suggesting it is?“unnecessary.”

Nevertheless, a formal authorization from the FDA is expected later this week, and the CDC vaccine advisory group is expected to make its own recommendation early next month. If all parties sign off, shots for young kids could begin immediately. Of course, the next question many families are asking is whether child vaccinations will be the parent’s choice or mandated by government officials?

Already the vaccine mandate for adults is heating up with President Biden’s edict set to go into effect sometime soon which could serve to intensify labor limitations. The order, which would require businesses with 100 or more employees to ensure they are vaccinated against COVID-19 or get tested weekly for the virus, is estimated to cover two-thirds of the private sector. However, according to vaccine data analysis firm KFF, 30% of unvaccinated workers said they would leave their jobs rather than comply with a jab or testing mandate, a sizable loss of workers which would compound the supply chain disruptions already plaguing the U.S. recovery.

The American Trucking Association (ATA), for example, has warned that many drivers will likely quit rather than get vaccinated, further disrupting the transportation component of the supply chain at a time when the industry is already short 80K drivers. Specifically, the association estimates that 37% of drivers could be lost through retirements, resignations and workers switching to smaller companies not covered by the requirements. Similarly, the Retail Industry Leaders Association has warned that the President’s mandate would likely trigger staffing problems ahead of the holiday season, while the National Retail Federation and U.S. Chamber of Commerce have asked to delay its implementation until January, at the earliest.

According to reports, over the past few weeks, the Office of Management and Budget has held dozens of meetings with labor unions, industry lobbyists and private individuals as the Biden administration conducts its final review. Yesterday’s meeting at the White House included dentists, staffing companies and realtors, among others.

At this point, labor demand is far outpacing labor supply with 10M job vacancies reported as of August. While some argue theoretically the President’s vaccine mandate could actually?boost?employment by reducing COVID-19 transmission and mitigating health risks, this positive outcome will only occur if workers themselves agree/comply with the leadership’s directives. Ahead of the key holiday shopping season many businesses are concerned a further limitation on parts, materials and labor will greatly exacerbate output limitations, creating unsustainable business conditions, undermining growth and further inciting inflation.

The market, meanwhile appears to be above the vaccine debate, focusing instead on solid earnings, including a stellar performance of some large technology companies which shattered expectations on Tuesday. Alphabet, for example, the parent company of Google, reported its third-quarter results showing the biggest quarterly revenue gain in 14 years.

This morning, however, equities are trading mixed with the Dow down 0.04% at 35,743.68, while the S&P 500 is up 0.15% at 4,581.84, and the Nasdaq is up 0.56% at 15,321.76 as of 9:50 a.m. ET.

The 10-year UST yield, however, is down 5bps, trading at 1.56% as of 9:51 a.m. ET.

In other economic news, following in the footsteps of Los Angeles, the Chicago City Council is reportedly set to consider the?"largest basic income program in the history of the United States."?According to reports, the one-year pilot program will give 5,000 low-income households $500 per month at a total cost of $31.5M. The program would be funded through federal money Chicago received from the Biden administration's American Rescue Plan.

While the program is supposedly supported by most of the city's 50 aldermen, it has received pushback from the 20-member Black Caucus, which has urged Mayor Lori Lightfoot to redirect the cash to violence prevention programs.

To be fair, the proposed Chicago program actually differs from the generalized Universal Basic Income (UBI) programs. In this case, Chicago is proposing direct payments toward a defined group of people. UBI, on the other hand, essentially promises money to every recipient regardless of income or circumstance.

While promoted under the goal of closing the wealth gap, critics argue this is simply a form of redistribution and further worry that these programs – like the enhanced unemployment benefits program – will further discourage workers from finding and retaining employment. Furthermore, critics argue the best way to invest in communities is not increasing?“handouts,”?but creating a safe environment by investing in violence prevention programs, and mental health resources among other support avenues.

Yesterday, the FHFA House Price Index rose 1.0% in August, less than 1.5% gain expected and down from a 1.4% gain the month prior.

The S&P CaseShiller 20-City Home Price Index, meanwhile, increased 1.2% in August, less than the 1.5% rise expected according to?Bloomberg, and following a 1.5% gain the month prior. Year-over-year, the 20-city home price index rose 19.7% in August, down from the record 20.02% increase in July. Nationally, home prices rose 19.8% over the past 12 months, following a similar rise the month prior.

Also yesterday, new home sales jumped 14.0% in September from 702k to 800k, a six-month high. According to?Bloomberg, new home sales were expected to rise 2.2% at the end of Q3. Year-over-year, however, sales dropped 17.6%, the fourth consecutive month of an annual decline. Due to a rise in sales, the months’ supply of new homes dropped from 6.5 to 5.7 months, the lowest in four months. And, from a price standpoint, the median cost of a newly constructed home rose 1.8% from the month prior at $409k. Year-over-year, new home prices increased 18.7%, down, however, from the 23.3% gain reported the month prior.

Finally yesterday, consumer confidence, according to the Conference Board, unexpectedly rose four points to a reading of 113.8 in October, a two-month high. According to?Bloomberg, confidence was expected to decline to a reading of 108.0 at the start of Q4. In the details, consumers’ expectations rose from 86.7 to 91.3, and present situation increased from 144.3 to 147.4 in October, a two-month high.

This morning, durable goods orders fell 0.4% in September, less than the 1.1% decline expected, according to?Bloomberg, albeit the weakest pace in five months.

Year-over-year, headline orders rose 14.4% in September, down from the 20.7% increase the month prior and a seven-month low.

Transportation orders fell 2.3%, following a 3.8% increase the month prior, due to a 27.9% drop in in civilian aircraft orders and a 2.9% decline in vehicles and parts orders. Excluding transportation, durable goods orders rose 0.4% in September and increased 14.7% over the past 12 months.

Capital goods orders declined 0.4% in September. Nondefense capital goods orders, meanwhile, dropped 4.2%, following a 7.4% increase in August. Capital goods orders excluding aircraft?and?defense – a proxy for business investment – rose 0.8% September, the strongest pace since June. Year-over-year, business investment increased 12.8%.

In other details, primary metals orders rose 0.6%, fabricated metals orders increased 0.7%, and machinery orders gained 1.1%, a two-month high. On the weaker side, electrical equipment orders fell 0.5%, following a 1.6% gain the month prior, and computers and electronics orders declined 0.3% in September, a seven-month low.

Tomorrow, initial jobless claims are expected to decline slightly from 290k to 289k in the week ending October 23, and GDP is expected to rise 2.6% in the third quarter, down from the 6.7% pace reported in the second quarter.

Later this week, on Friday, the PCE is expected to rise 0.3% in September and 4.4% over the past 12 months, up from the 4.3% annual pace reported in August. Excluding food and energy costs, the core PCE is expected to increase 0.2% in September and 3.7% year-over-year, also up from the 3.6% annual pace reported in August.

-Lindsey Piegza, Ph.D., Chief Economist