CNBC
"Jobless claims rise more than expected after break from holiday"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Thu, Dec 10 2020
Key Points
* Weekly jobless claims increased by 853,000 last week versus the Dow Jones estimate of 730,000.
* The total represented a sharp rise from the 716,000 a week ago.
* This was the highest number since Sept. 19 and reflects ongoing issues in the jobs market.
The pace of weekly jobless claims jumped last week after filings caught up with a decline due in part to the Thanksgiving holiday.
First-time claims for unemployment insurance totaled 853,000, an increase from the upwardly revised 716,000 total a week before, the Labor Department reported Thursday.
Economists surveyed by Dow Jones had been expecting 730,000.
This was the highest weekly total since Sept. 19 and reflects the job market’s struggles lately as coronavirus cases have spiked and local and state governments have imposed restrictions on some activities.
Continuing claims increased by 230,000 to 5.76 million, the first time that number has gone up since late August.
Markets reacted little to the news, with Wall Street indicating a slightly lower open for stocks.
The rise in virus cases has put substantial pressure on the labor market, with nonfarm payrolls increasing just 245,000 in November after rising 610,000 in October.
Those difficulties were reflected further in unadjusted jobless claims, which totaled 947,504, a 31.9% increase from the previous week.
Seasonal factors were pointing to a 12.9% increase, the Labor Department said.
“This recent surge suggests that claims are not just stagnating, they’re actively worsening,” said Daniel Zhao, senior economist at job placement site Glassdoor.
“The surge in initial claims is especially concerning when claims are still above levels near the peak of the Great Recession.”
Claims filed under pandemic-related unemployment assistance programs declined sharply as the program comes to an end absent any action from Congress before the end of the year.
Claims under the pandemic program for those who normally wouldn’t be covered under the government insurance program declined by 313,739 to 8.6 million, for the week ended Nov. 21.
Emergency claims for those whose benefits ran out fell by 36,140 to 614,517.
The total of those collecting under all programs declined by 1.12 million to just over 19 million.
A separate economic report Thursday indicated that inflation pressures remain tame.
The consumer price index increased 0.2% in November after being unchanged in October.
Wall Street had been expecting a monthly rise of 0.1%.
For the 12-month period, CPI was up 1.2%, compared with the 1.1% estimate.
Data also provided by Reuters
https://www.cnbc.com/2020/12/10/weekly- ... laims.html
THE ECONOMY
Re: THE ECONOMY
CNBC
"Powell says stock prices are not necessarily high considering the low level of interest rates"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Wed, Dec 16 2020
Key Points
* Federal Reserve Chairman Jerome Powell called financial stability a “mixed bag” as stock prices soar to new records.
* Low interest rates are keeping borrowing costs contained, making it easier for the economy to sustain a heavy debt load, he added.
Stocks at record highs and bond yields not far from their historic lows are telling two different stories, but Federal Reserve Chairman Jerome Powell said he isn’t worried about the disparity.
In fact, the central bank chief said during a news conference Wednesday, the low rates are helping justify an equity surge that has gone on largely unabated since the March pandemic crisis lows.
“The broad financial stability picture is kind of mixed I would say,” Powell said in response to a CNBC question at the post-meeting media Q&A.
“Asset prices are a little high in that metric in my view, but overall you have a mixed picture."
"You don’t have a lot of red flags on that.”
The S&P 500 has exploded 65% higher from its March 23 low amid trillions of stimulus from Congress and the Fed, which also has chipped in with near zero interest rates and about $3 trillion worth of bond purchases in that time.
The index is trading around 22 times forward earnings, well above its 10-year average of 15.6.
At the same time, the 10-year Treasury note, considered a benchmark for consumer borrowing rates as well as the anticipated growth level of the economy, remains mired with a 0.92% yield.
While that’s well above its March low, it’s also considerably below anything the market had seen prior to the pandemic.
Such a dichotomy might suggest elevated asset prices, but Powell said there’s more to the picture.
“Admittedly (price-to-earnings multiples) are high,” he said.
“But that’s maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it’s been historically from a term perspective.”
Low rates have helped keep borrowing costs cheap for businesses, which might have run into trouble otherwise as economic activity has slowed so much due to the coronavirus spread.
Powell noted that corporate leverage is high but “your interest payments are low."
"Defaults and downgrades have declined since earlier in the year.”
He said that the Fed is continually monitoring the level of asset prices but does not see any danger yet.
“We’ll be held accountable for what we saw and what we missed."
"So we work very hard at it,” he said.
The Fed kept its benchmark borrowing rate near zero following the meeting.
In addition, it pledged to keep buying at least $120 billion a month in bonds until its dual goals of full employment and sustained 2% inflation are met.
Data also provided by Reuters
https://www.cnbc.com/2020/12/16/powell- ... rates.html
"Powell says stock prices are not necessarily high considering the low level of interest rates"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Wed, Dec 16 2020
Key Points
* Federal Reserve Chairman Jerome Powell called financial stability a “mixed bag” as stock prices soar to new records.
* Low interest rates are keeping borrowing costs contained, making it easier for the economy to sustain a heavy debt load, he added.
Stocks at record highs and bond yields not far from their historic lows are telling two different stories, but Federal Reserve Chairman Jerome Powell said he isn’t worried about the disparity.
In fact, the central bank chief said during a news conference Wednesday, the low rates are helping justify an equity surge that has gone on largely unabated since the March pandemic crisis lows.
“The broad financial stability picture is kind of mixed I would say,” Powell said in response to a CNBC question at the post-meeting media Q&A.
“Asset prices are a little high in that metric in my view, but overall you have a mixed picture."
"You don’t have a lot of red flags on that.”
The S&P 500 has exploded 65% higher from its March 23 low amid trillions of stimulus from Congress and the Fed, which also has chipped in with near zero interest rates and about $3 trillion worth of bond purchases in that time.
The index is trading around 22 times forward earnings, well above its 10-year average of 15.6.
At the same time, the 10-year Treasury note, considered a benchmark for consumer borrowing rates as well as the anticipated growth level of the economy, remains mired with a 0.92% yield.
While that’s well above its March low, it’s also considerably below anything the market had seen prior to the pandemic.
Such a dichotomy might suggest elevated asset prices, but Powell said there’s more to the picture.
“Admittedly (price-to-earnings multiples) are high,” he said.
“But that’s maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it’s been historically from a term perspective.”
Low rates have helped keep borrowing costs cheap for businesses, which might have run into trouble otherwise as economic activity has slowed so much due to the coronavirus spread.
Powell noted that corporate leverage is high but “your interest payments are low."
"Defaults and downgrades have declined since earlier in the year.”
He said that the Fed is continually monitoring the level of asset prices but does not see any danger yet.
“We’ll be held accountable for what we saw and what we missed."
"So we work very hard at it,” he said.
The Fed kept its benchmark borrowing rate near zero following the meeting.
In addition, it pledged to keep buying at least $120 billion a month in bonds until its dual goals of full employment and sustained 2% inflation are met.
Data also provided by Reuters
https://www.cnbc.com/2020/12/16/powell- ... rates.html
Re: THE ECONOMY
CNBC
"Weekly jobless claims unexpectedly rise, hit highest level since early September"
Fred Imbert @foimbert
Published Thu, Dec 17 2020
Key Points
The number of first-time unemployment-benefits filers totaled 885,000 in the week ending Dec. 12, the most since the week of Sept. 5.
* Economists polled by Dow Jones expected initial claims to fall to 808,000.
* These numbers “really highlight the fragility of the labor market,” said Stifel’s Lindsey Piegza.
Jobless claims unexpectedly rose last week as states reimposed coronavirus restrictions as lawmakers struggle to push through new government aid, according to a Labor Department report Thursday.
The number of first-time unemployment-benefits filers totaled 885,000 in the week ending Dec. 12, the most since the week of Sept. 5.
Economists polled by Dow Jones expected initial claims to fall to 808,000.
Initial claims for the previous week were revised higher by 9,000 to 862,000.
In all, 20.6 million Americans were receiving some kind of unemployment benefits through Nov. 28, the report said.
These numbers “really highlight the fragility of the labor market, particularly now as the second resurgence of the coronavirus [is] leading to further business closures and additional job losses, ” Lindsey Piegza, chief economist at Stifel, told CNBC’s “Squawk Box.”
The recent uptick in weekly jobless claims comes as coronavirus cases surge across the country.
More than 247,000 new infections were confirmed in the U.S. along with more than 3,600 Covid-related deaths, according to data from Johns Hopkins University.
Data from The Atlantic’s COVID Tracking Project showed a record 113,000 people were hospitalized with the virus.
Congress, meanwhile, is scrambling to push through new legislation to aid individuals and businesses before year-end.
Congressional leaders on Wednesday closed in on a $900 billion package that would include direct payments to individuals.
However, measure would exclude liability protections for businesses as well as aid to state and local governments.
Data also provided by Reuters
https://www.cnbc.com/2020/12/17/weekly- ... laims.html
"Weekly jobless claims unexpectedly rise, hit highest level since early September"
Fred Imbert @foimbert
Published Thu, Dec 17 2020
Key Points
The number of first-time unemployment-benefits filers totaled 885,000 in the week ending Dec. 12, the most since the week of Sept. 5.
* Economists polled by Dow Jones expected initial claims to fall to 808,000.
* These numbers “really highlight the fragility of the labor market,” said Stifel’s Lindsey Piegza.
Jobless claims unexpectedly rose last week as states reimposed coronavirus restrictions as lawmakers struggle to push through new government aid, according to a Labor Department report Thursday.
The number of first-time unemployment-benefits filers totaled 885,000 in the week ending Dec. 12, the most since the week of Sept. 5.
Economists polled by Dow Jones expected initial claims to fall to 808,000.
Initial claims for the previous week were revised higher by 9,000 to 862,000.
In all, 20.6 million Americans were receiving some kind of unemployment benefits through Nov. 28, the report said.
These numbers “really highlight the fragility of the labor market, particularly now as the second resurgence of the coronavirus [is] leading to further business closures and additional job losses, ” Lindsey Piegza, chief economist at Stifel, told CNBC’s “Squawk Box.”
The recent uptick in weekly jobless claims comes as coronavirus cases surge across the country.
More than 247,000 new infections were confirmed in the U.S. along with more than 3,600 Covid-related deaths, according to data from Johns Hopkins University.
Data from The Atlantic’s COVID Tracking Project showed a record 113,000 people were hospitalized with the virus.
Congress, meanwhile, is scrambling to push through new legislation to aid individuals and businesses before year-end.
Congressional leaders on Wednesday closed in on a $900 billion package that would include direct payments to individuals.
However, measure would exclude liability protections for businesses as well as aid to state and local governments.
Data also provided by Reuters
https://www.cnbc.com/2020/12/17/weekly- ... laims.html
Re: THE ECONOMY
Associated Press
"Congress seals agreement on COVID relief, government funding"
ANDREW TAYLOR
Sun, December 20, 2020, 12:28 AM EST
WASHINGTON (AP) — Top Capitol Hill negotiators sealed a deal Sunday on an almost $1 trillion COVID-19 economic relief package, finally delivering long-overdue help to businesses and individuals and providing money to deliver vaccines to a nation eager for them.
The agreement, announced by Senate leaders, would establish a temporary $300 per week supplemental jobless benefits and $600 direct stimulus payments to most Americans, along with a new round of subsidies for hard-hit businesses and money for schools, health care providers and renters facing eviction.
The House was expected to vote on the legislation very late Sunday or Monday and Senate action would follow.
Lawmakers are eager to leave Washington and close out a tumultuous year.
A breakthrough came late Saturday in a fight over Federal Reserve emergency powers that was resolved by the Senate's top Democrat, Chuck Schumer of New York, and conservative Republican Pat Toomey of Pennsylvania.
That led to a final round of negotiations.
The final agreement is the largest spending measure yet. It combines COVID-19 relief with a $1.4 trillion government-wide funding plan and lots of other unrelated measures on taxes, health, infrastructure and education.
Passage is nearing as coronavirus cases and deaths spike and evidence piles up that the economy is struggling.
Late-breaking decisions would limit the $300 per week bonus jobless benefits — one half the supplemental federal unemployment benefit provided under the CARES Act in March — to 10 weeks instead of 16 weeks as before.
The direct $600 stimulus payment to most people is also half the March payment, subject to the same income limits in which an individual’s payment begins to phase out after $75,000.
President Donald Trump is supportive, particularly of the push for providing more direct payments.
“GET IT DONE,” he said in a tweet late Saturday.
It would be the first significant legislative response to the pandemic since the $1.8 trillion CARES Act passed virtually unanimously in March.
https://news.yahoo.com/deal-fed-removes ... _test=2_15
"Congress seals agreement on COVID relief, government funding"
ANDREW TAYLOR
Sun, December 20, 2020, 12:28 AM EST
WASHINGTON (AP) — Top Capitol Hill negotiators sealed a deal Sunday on an almost $1 trillion COVID-19 economic relief package, finally delivering long-overdue help to businesses and individuals and providing money to deliver vaccines to a nation eager for them.
The agreement, announced by Senate leaders, would establish a temporary $300 per week supplemental jobless benefits and $600 direct stimulus payments to most Americans, along with a new round of subsidies for hard-hit businesses and money for schools, health care providers and renters facing eviction.
The House was expected to vote on the legislation very late Sunday or Monday and Senate action would follow.
Lawmakers are eager to leave Washington and close out a tumultuous year.
A breakthrough came late Saturday in a fight over Federal Reserve emergency powers that was resolved by the Senate's top Democrat, Chuck Schumer of New York, and conservative Republican Pat Toomey of Pennsylvania.
That led to a final round of negotiations.
The final agreement is the largest spending measure yet. It combines COVID-19 relief with a $1.4 trillion government-wide funding plan and lots of other unrelated measures on taxes, health, infrastructure and education.
Passage is nearing as coronavirus cases and deaths spike and evidence piles up that the economy is struggling.
Late-breaking decisions would limit the $300 per week bonus jobless benefits — one half the supplemental federal unemployment benefit provided under the CARES Act in March — to 10 weeks instead of 16 weeks as before.
The direct $600 stimulus payment to most people is also half the March payment, subject to the same income limits in which an individual’s payment begins to phase out after $75,000.
President Donald Trump is supportive, particularly of the push for providing more direct payments.
“GET IT DONE,” he said in a tweet late Saturday.
It would be the first significant legislative response to the pandemic since the $1.8 trillion CARES Act passed virtually unanimously in March.
https://news.yahoo.com/deal-fed-removes ... _test=2_15
Re: THE ECONOMY
THE HILL
"Toomey praises end of Federal Reserve lending programs, will support relief deal"
By Alexander Bolton
12/20/20 12:50 PM EST
Sen. Pat Toomey (R-Pa.), who will be the next chairman of the Senate Banking Committee if Republicans keep their majority in 2021, on Sunday praised the outcome of negotiations with Democrats to wind down the Federal Reserve’s expanded lending powers.
Toomey, who negotiated the deal late Saturday night with Senate Minority Leader Charles Schumer (D-N.Y.), said the agreement will close four Fed credit lending facilities funded by the CARES Act: the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Main Street Lending Program and the Municipal Credit Facility.
Toomey said the deal achieved his four goals: to sweep out $429 billion in unused CARES Act funds allocated for Fed lending and repurpose the money, to shut down the four lending facilities, to forbid the reopening of those facilities, and to ban future clones of the program.
“I’m very, very pleased with that,” he told reporters on a conference call Sunday.
“Those were the four goals."
"Those were the only goals, and we achieved every one of those goals.”
He also dismissed Democratic accusations that he was trying to hamstring the Federal Reserve’s capabilities in general or tie the hands of President-elect Joe Biden administration as “wild mischaracterizations of the Republican position.”
He said he was motivated to act by what he called “the very aggressive effort” by some Democrats to “make the case that these programs don’t end on Dec. 31,” the end date that Republican negotiators thought they had established in the CARES Act, the $2.2 trillion coronavirus relief package passed by Congress in March.
Toomey said one of the concessions he made was to narrow the language on prohibiting clone programs.
“We did narrow it relative to the language of ‘similar to’ because Democrats made a fair point."
"That was too broad, and that might have captured facilities that we didn’t intend to capture."
"Yes, it was narrowed,” he said.
Schumer on Sunday touted the narrowing of language on so-called copycat facilities as a big victory for Democrats.
“He dropped his dangerous language tying the Fed’s hands to respond to crises."
"Resolving this issue successfully now allows us to move into passing aid for Americans, extend unemployment insurance, deliver survival checks and more,” he tweeted.
Toomey, however, said Sunday that the changes he agreed to only clarified that the Fed’s lending powers would be restored to what they were before the CARES Act passed.
He asserted it was never his intention to roll back Fed authority any further.
“These programs were never intended to hang around indefinitely,” he said of the lending facilities allowed by the CARES Act, adding that he wanted to make clear that the Fed’s new programs were always supposed to end this year.
“This was never intended to constrain the Fed’s 13(3) lending programs as a general matter,” he said of the language he insisted on last week, referring to a section of the Federal Reserve Act.
“These facilities were put in place for a specific purpose."
"The purpose was to restore the normal functioning of the private lending and capital markets, not as a general all-purpose salve, fix-all for the economy,” he said.
Toomey on Sunday acknowledged that “it’s hard to like this process” of Congress racing to wrap up work on a coronavirus relief bill and omnibus spending package over the weekend when many rank-and-file lawmakers don’t yet know what exactly is in the massive legislation.
But Toomey said he would support it after scoring a victory on the Fed’s lending powers, which he said was his top priority last Thursday.
The entire coronavirus relief bill is expected to cost nearly $1 trillion.
Asked if he would vote for it, Toomey, a fiscal conservative, said, “That’s a fair question, given my history.:
"The answer is yes.”
“Despite the significant reservations I have about some particular features, I think the good outweighs the bad, and it is my intention at this point to vote for it,” he said.
https://thehill.com/homenews/senate/531 ... ort-relief
"Toomey praises end of Federal Reserve lending programs, will support relief deal"
By Alexander Bolton
12/20/20 12:50 PM EST
Sen. Pat Toomey (R-Pa.), who will be the next chairman of the Senate Banking Committee if Republicans keep their majority in 2021, on Sunday praised the outcome of negotiations with Democrats to wind down the Federal Reserve’s expanded lending powers.
Toomey, who negotiated the deal late Saturday night with Senate Minority Leader Charles Schumer (D-N.Y.), said the agreement will close four Fed credit lending facilities funded by the CARES Act: the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Main Street Lending Program and the Municipal Credit Facility.
Toomey said the deal achieved his four goals: to sweep out $429 billion in unused CARES Act funds allocated for Fed lending and repurpose the money, to shut down the four lending facilities, to forbid the reopening of those facilities, and to ban future clones of the program.
“I’m very, very pleased with that,” he told reporters on a conference call Sunday.
“Those were the four goals."
"Those were the only goals, and we achieved every one of those goals.”
He also dismissed Democratic accusations that he was trying to hamstring the Federal Reserve’s capabilities in general or tie the hands of President-elect Joe Biden administration as “wild mischaracterizations of the Republican position.”
He said he was motivated to act by what he called “the very aggressive effort” by some Democrats to “make the case that these programs don’t end on Dec. 31,” the end date that Republican negotiators thought they had established in the CARES Act, the $2.2 trillion coronavirus relief package passed by Congress in March.
Toomey said one of the concessions he made was to narrow the language on prohibiting clone programs.
“We did narrow it relative to the language of ‘similar to’ because Democrats made a fair point."
"That was too broad, and that might have captured facilities that we didn’t intend to capture."
"Yes, it was narrowed,” he said.
Schumer on Sunday touted the narrowing of language on so-called copycat facilities as a big victory for Democrats.
“He dropped his dangerous language tying the Fed’s hands to respond to crises."
"Resolving this issue successfully now allows us to move into passing aid for Americans, extend unemployment insurance, deliver survival checks and more,” he tweeted.
Toomey, however, said Sunday that the changes he agreed to only clarified that the Fed’s lending powers would be restored to what they were before the CARES Act passed.
He asserted it was never his intention to roll back Fed authority any further.
“These programs were never intended to hang around indefinitely,” he said of the lending facilities allowed by the CARES Act, adding that he wanted to make clear that the Fed’s new programs were always supposed to end this year.
“This was never intended to constrain the Fed’s 13(3) lending programs as a general matter,” he said of the language he insisted on last week, referring to a section of the Federal Reserve Act.
“These facilities were put in place for a specific purpose."
"The purpose was to restore the normal functioning of the private lending and capital markets, not as a general all-purpose salve, fix-all for the economy,” he said.
Toomey on Sunday acknowledged that “it’s hard to like this process” of Congress racing to wrap up work on a coronavirus relief bill and omnibus spending package over the weekend when many rank-and-file lawmakers don’t yet know what exactly is in the massive legislation.
But Toomey said he would support it after scoring a victory on the Fed’s lending powers, which he said was his top priority last Thursday.
The entire coronavirus relief bill is expected to cost nearly $1 trillion.
Asked if he would vote for it, Toomey, a fiscal conservative, said, “That’s a fair question, given my history.:
"The answer is yes.”
“Despite the significant reservations I have about some particular features, I think the good outweighs the bad, and it is my intention at this point to vote for it,” he said.
https://thehill.com/homenews/senate/531 ... ort-relief
Re: THE ECONOMY
CNBC
"Weekly jobless claims rise less than expected, but hold above 800,000"
Thomas Franck @tomwfranck
Published Wed, Dec 23 2020
Key Points
* The number of first-time unemployment-benefits filers decelerated to 803,000 in the week ending Dec. 19.
* Economists polled by Dow Jones expected initial claims to rise to 888,000.
* Last week, employers weighed a wintertime spike in Covid-19 cases against expected relief from a pending $900 billion stimulus package.
Jobless claims rose less than expected last week as employers weighed a wintertime spike in Covid-19 cases against expected relief from a pending $900 billion stimulus package, the Labor Department reported Wednesday.
The number of first-time unemployment-benefits filers decelerated to 803,000 in the week ended Dec. 19.
Economists polled by Dow Jones expected initial claims to rise to 888,000.
Initial claims for the previous week were revised higher by 7,000 to 892,000, the highest print since early September.
Continuing jobless claims, a proxy for the number of people receiving benefits via regular state programs, fell to a seasonally adjusted 5.3 million in the week ended Dec. 12 from 5.5 million a week earlier, according to the Labor Department.
In all, 20.4 million Americans were receiving some kind of unemployment benefits through Dec. 5, the report said.
“With a new bill likely to be signed with extra benefits and an extension of them in terms of time, we’ll see how people manage the job opportunities available relative to the size of these benefits,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“For those that can’t find work, the extra claims will obviously help them."
"Either way, come spring and summer we hope that we’ll see a sharp decline in all these numbers,” he added.
The newest jobless claims report came amid a dramatic showdown between President Donald Trump and U.S. lawmakers.
Earlier this week, Congress passed with veto-proof majorities a long-awaited, $900 billion relief package.
The bill includes $600 stimulus checks to most individuals and their dependents, $300-per-week federal unemployment benefits and about $320 billion in business relief.
Democrats say the package is a step in the right direction but that they will advocate for more aid after President-elect Joe Biden takes office on Jan. 20.
“While we’re already hearing naysayers criticize the construction and composition, the bottom line is they’re dropping $900 billion of spending into households over the next few months, and that will absolutely support the economy,” Nathan Sheets, chief economist at PGIM Fixed Income, said in a note Tuesday about the latest legislation.
But in a stunning tweet Tuesday evening, Trump cast doubt on whether he would sign the bill, the product of months of negotiations by his own Treasury secretary, Steven Mnuchin.
Trump called the Covid relief bill an unsuitable “disgrace” and urged congressional leaders to make significant edits to the measure, including bigger direct payments to individuals and families.
The U.S. is recording at least 215,400 new Covid-19 cases and at least 2,600 virus-related deaths each day, based on a seven-day average calculated by CNBC using Johns Hopkins University data.
Data from The Atlantic’s COVID Tracking Project showed a record 117,000 people hospitalized with the virus.
Data also provided by Reuters
https://www.cnbc.com/2020/12/22/weekly- ... laims.html
"Weekly jobless claims rise less than expected, but hold above 800,000"
Thomas Franck @tomwfranck
Published Wed, Dec 23 2020
Key Points
* The number of first-time unemployment-benefits filers decelerated to 803,000 in the week ending Dec. 19.
* Economists polled by Dow Jones expected initial claims to rise to 888,000.
* Last week, employers weighed a wintertime spike in Covid-19 cases against expected relief from a pending $900 billion stimulus package.
Jobless claims rose less than expected last week as employers weighed a wintertime spike in Covid-19 cases against expected relief from a pending $900 billion stimulus package, the Labor Department reported Wednesday.
The number of first-time unemployment-benefits filers decelerated to 803,000 in the week ended Dec. 19.
Economists polled by Dow Jones expected initial claims to rise to 888,000.
Initial claims for the previous week were revised higher by 7,000 to 892,000, the highest print since early September.
Continuing jobless claims, a proxy for the number of people receiving benefits via regular state programs, fell to a seasonally adjusted 5.3 million in the week ended Dec. 12 from 5.5 million a week earlier, according to the Labor Department.
In all, 20.4 million Americans were receiving some kind of unemployment benefits through Dec. 5, the report said.
“With a new bill likely to be signed with extra benefits and an extension of them in terms of time, we’ll see how people manage the job opportunities available relative to the size of these benefits,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“For those that can’t find work, the extra claims will obviously help them."
"Either way, come spring and summer we hope that we’ll see a sharp decline in all these numbers,” he added.
The newest jobless claims report came amid a dramatic showdown between President Donald Trump and U.S. lawmakers.
Earlier this week, Congress passed with veto-proof majorities a long-awaited, $900 billion relief package.
The bill includes $600 stimulus checks to most individuals and their dependents, $300-per-week federal unemployment benefits and about $320 billion in business relief.
Democrats say the package is a step in the right direction but that they will advocate for more aid after President-elect Joe Biden takes office on Jan. 20.
“While we’re already hearing naysayers criticize the construction and composition, the bottom line is they’re dropping $900 billion of spending into households over the next few months, and that will absolutely support the economy,” Nathan Sheets, chief economist at PGIM Fixed Income, said in a note Tuesday about the latest legislation.
But in a stunning tweet Tuesday evening, Trump cast doubt on whether he would sign the bill, the product of months of negotiations by his own Treasury secretary, Steven Mnuchin.
Trump called the Covid relief bill an unsuitable “disgrace” and urged congressional leaders to make significant edits to the measure, including bigger direct payments to individuals and families.
The U.S. is recording at least 215,400 new Covid-19 cases and at least 2,600 virus-related deaths each day, based on a seven-day average calculated by CNBC using Johns Hopkins University data.
Data from The Atlantic’s COVID Tracking Project showed a record 117,000 people hospitalized with the virus.
Data also provided by Reuters
https://www.cnbc.com/2020/12/22/weekly- ... laims.html
Re: THE ECONOMY
REUTERS
"Fed's Evans calls for possible revamp of U.S. financial regulation"
By Reuters Staff
January 5, 2021
(Reuters) - Chicago Federal Reserve President Charles Evans on Tuesday raised the possibility that U.S. financial regulation and supervision may be due for an overhaul, given the new reality that interest rates are likely to be low for a long time.
The Fed recently undertook just such a review of its monetary policy framework, culminating in the adoption last August of a new strategy that targets 2% inflation on average and seeks to rectify shortfalls, but not overshoots, on the Fed’s full employment goal.
That new framework, designed to overcome the downward pull on inflation from persistently low interest rates globally, led the U.S. central bank to promise super-accommodative monetary policy for what could be years as it tries to push inflation upwards.
The expectation of an extended period of low rates raises concerns that investors take on excessive risks as they reach for yield, generating marketwide financial instability, Evans said in remarks prepared for delivery to a virtual meeting of the American Economic Association.
Responding to such concerns by raising rates or paring back the Fed’s asset purchases before the central bank’s economic goals are met would be a “lose-lose scenario (that) could not just threaten the achievement of our dual mandate objectives, but might not even improve financial stability either, given that financial stability is bolstered by a strong economy,” Evans said.
Instead of monetary policy, Evans said, the better tools to address financial stability concerns are regulation and supervision.
And though both have improved since their last overhaul in the aftermath of the 2007-2009 financial crisis, “more can and should be done,” Evans said.
“Perhaps it is time for financial institutions and their supervisors to do the same — that is, review their business models and make their supervisory and regulatory strategies as robust and resilient as possible — in this low nominal interest rate environment.”
The proposal, made at the end of remarks that were largely repetitive of comments he made Monday, represents a potentially important addition to an already large to-do list for president-elect Joe Biden when he takes office on Jan. 20.
Reporting by Ann Saphir; Editing by Chizu Nomiyama
https://www.reuters.com/article/usa-fed ... SL1N2JG1NZ
"Fed's Evans calls for possible revamp of U.S. financial regulation"
By Reuters Staff
January 5, 2021
(Reuters) - Chicago Federal Reserve President Charles Evans on Tuesday raised the possibility that U.S. financial regulation and supervision may be due for an overhaul, given the new reality that interest rates are likely to be low for a long time.
The Fed recently undertook just such a review of its monetary policy framework, culminating in the adoption last August of a new strategy that targets 2% inflation on average and seeks to rectify shortfalls, but not overshoots, on the Fed’s full employment goal.
That new framework, designed to overcome the downward pull on inflation from persistently low interest rates globally, led the U.S. central bank to promise super-accommodative monetary policy for what could be years as it tries to push inflation upwards.
The expectation of an extended period of low rates raises concerns that investors take on excessive risks as they reach for yield, generating marketwide financial instability, Evans said in remarks prepared for delivery to a virtual meeting of the American Economic Association.
Responding to such concerns by raising rates or paring back the Fed’s asset purchases before the central bank’s economic goals are met would be a “lose-lose scenario (that) could not just threaten the achievement of our dual mandate objectives, but might not even improve financial stability either, given that financial stability is bolstered by a strong economy,” Evans said.
Instead of monetary policy, Evans said, the better tools to address financial stability concerns are regulation and supervision.
And though both have improved since their last overhaul in the aftermath of the 2007-2009 financial crisis, “more can and should be done,” Evans said.
“Perhaps it is time for financial institutions and their supervisors to do the same — that is, review their business models and make their supervisory and regulatory strategies as robust and resilient as possible — in this low nominal interest rate environment.”
The proposal, made at the end of remarks that were largely repetitive of comments he made Monday, represents a potentially important addition to an already large to-do list for president-elect Joe Biden when he takes office on Jan. 20.
Reporting by Ann Saphir; Editing by Chizu Nomiyama
https://www.reuters.com/article/usa-fed ... SL1N2JG1NZ
Re: THE ECONOMY
Federal Reserve Bank of Cleveland
"Patience Will Be a Virtue in Fostering a Broad-Based Sustainable Recovery"
Loretta J. Mester
Maekyung - Korea-America Economic Association Forum - Allied Social Science Associations Annual Meeting (via videoconference)
01.04.21
I thank Professor Yoosoon Chang, president of the Korea-America Economic Association, for the opportunity to speak at this year’s annual forum.
Over the years, the forum has had a number of distinguished speakers and it is truly an honor to speak with you this evening about the outlook for the economy and monetary policy.
Of course, the views I’ll present are my own and not necessarily those of the Federal Reserve System or of my colleagues on the Federal Open Market Committee.
I would like to start with wishing everyone a happy and healthy new year.
Wishing someone good health at the start of a new year is a time-honored tradition.
But it has taken on a deeper meaning this year as we turn the page on 2020, a year in which the coronavirus pandemic inflicted pain and hardship on people all over the world.
The pandemic was an unprecedented shock to global health and to the economy – the largest shock in most of our lifetimes.
With the distribution of vaccines now underway and with further fiscal policy relief for households and businesses on the way, the prospects are good for a much more favorable 2021.
Nonetheless, the next few months will be challenging ones, as the country continues to struggle with increasing new cases of COVID-19, which are putting strains on our healthcare system and limiting economic activity.
I believe patience will prove to be a virtue as the year unfolds.
Until the vaccines have been widely distributed and many people have been vaccinated, we will all need to be patient and continue to follow public health experts’ advice to socially distance, wear a mask, and wash our hands to help control the virus’s spread.
In addition, monetary policy will also need to remain patiently accommodative to support a broad-based and sustainable recovery and achievement of our longer-run goals of maximum employment and price stability.
The Economy
In thinking about the impact of the pandemic on the economy, I find it helps to think in terms of phases.
The pre-pandemic phase at the start of last year found the economy on very solid footing.
It was the 11th year of the expansion, and from the perspective of our monetary policy goals, things looked quite good.
The unemployment rate was at historically low levels, employment growth was strong, and participation in the labor force was higher than what was expected given the aging of the population.
And after several years of running low, inflation was near our longer-run goal of 2 percent.
But the pandemic changed all of that.
In March, the country took aggressive social-distancing measures to limit the spread of the virus and to buy some time for the healthcare system to increase its capacity to care for the sick, learn more about the virus itself, and develop testing and treatments.
In this shutdown phase, there were swift and severe effects across the economy as nonessential businesses stopped operating and many activities came to a halt.
But as public health statistics began to improve and many parts of the country began to relax some of their stay-at-home restrictions, a reopening phase began in May.
This reopening phase saw sharp rebounds in activity and hiring in those parts of the economy that did not involve close physical contact.
As the summer wore on, the economy entered its current phase – a pre-vaccination recovery phase.
The economy continued to recover but, as expected, at a slower pace than in the reopening phase.
More recently, the pace of activity has also been constrained by the current surge in new virus cases, which has resulted in mandatory and voluntary restrictions on some activities.
In this phase, the recovery has varied considerably across sectors.
Interest-rate-sensitive sectors, like housing and autos, have been particularly strong.
Sales of single-family homes, both new and existing, are now well above pre-pandemic levels, and so is spending on durable goods, including autos.
Spending on food in grocery stores surged in March and has remained elevated.
But spending in other sectors, including travel, leisure, and hospitality, which involve more person-to-person contact, is still very constrained compared to pre-pandemic levels.
Performing arts institutions continue to struggle and lost a substantial income source with the cancelation of holiday performances.
The commercial real estate sector is also feeling the strains as many businesses fight to stay afloat.
These phases of the economy – shutdown, reopening, pre-vaccination recovery – are clearly seen in the data.
So I would like to illustrate where things stand with a couple of slides before turning to the outlook.
Economists tend to look at growth rates when assessing the economy, but in this unprecedented situation, looking at the level of activity also provides an important perspective.
[FIGURE 1] The official GDP data clearly show the deep plunge in activity associated with the shutdown followed by a rebound as the economy reopened.
Economic activity peaked in February and the U.S. economy entered a recession.
Real GDP fell at a 5 percent annual pace in the first quarter and a record 31 percent annual pace in the second quarter.
The level of real GDP in the second quarter was back down to its level in early 2015 – a loss of over five years of output growth.
Growth rebounded in the third quarter as the economy reopened, with real GDP rising at a 33 percent annual pace; its level was back to where it was in early 2018.
The rebound in activity was stronger than many analysts were anticipating, a good reminder that we should never count out the resiliency of the U.S. economy or of the American people.
Growth continued in the fourth quarter, but at a slower pace, and I expect 2020 ended with real GDP still somewhat below where it was at the end of 2019.
[FIGURE 2] The economic phases are also clearly seen in the labor market data.
April saw an unprecedented rise in unemployment and loss of jobs, particularly in sectors where people could not work from home.
The unemployment rate hit 14.7 percent in April, up from 3.5 percent in February.
But as the economy reopened, there was a rapid decline in the unemployment rate as people on temporary furlough or layoff began to be rehired.
The improvement in the labor market was faster than anticipated, but the pace has slowed and the overall unemployment rate remains very elevated, at 6.7 percent in November.
[FIGURE 3] Moreover, some of the disparities in the recovery thus far can be seen in labor market outcomes for different racial/ethnic groups and different educational attainment groups.
All groups’ unemployment rates surged last spring and have fallen since then but, as of November, there has been less progress for nonwhites and for those without a college education.
Relative to their pre-pandemic levels, the unemployment rates of Blacks, Hispanics, and Asians remain higher than that of whites, and the unemployment rate of high school graduates without any college is higher than that of college graduates. 1
[FIGURE 4] These unemployment rates would be even higher if people had not left the labor force over the course of last year.
As of November, the labor force participation rate for those age 16 or older was almost 2 percentage points lower than it was in February.
Among workers in the prime working ages of 25 to 54, women’s participation is down 2-1/2 percentage points compared to about 2 percentage points for men.
In part, this reflects the types of jobs held by women and men, with a higher share of women working in industries hit the hardest by the pandemic.
Reports from regional contacts, as well as survey results from the Cleveland Fed’s national daily Consumers and COVID-19 Survey, indicate that the need to provide childcare for pre-school children or those being schooled remotely is disproportionately impacting the ability of women to remain in the workforce or work their usual number of hours.
Firms also tell us that maintaining productivity is now harder because of the variability they are experiencing in their workforce levels – on any given day there are some workers who unexpectedly have to stay home because a school is closed or because they have been exposed to the virus.
On a more positive note, our contacts from staffing companies report that while they have few people looking for job placements, they have seen a significant increase in people taking their online training courses.
This suggests that people are preparing themselves to re-enter the labor force when their circumstances allow them to do so.
[FIGURE 5] The payroll employment data also tell a similar story across the economic phases caused by the pandemic.
In just the two months of March and April, the economy lost 22 million jobs, the same number of jobs it had added over the entire previous expansion, which lasted over 10 years.
More than three-quarters of those losses were in the sectors paying below-average wages.
When the economy reopened in May, hiring picked up rapidly.
As expected, the pace has slowed since that rebound, and more recently, hiring has slowed even more given the re-imposition of some restrictions on activity due to the increase in new COVID cases.
As of November, employment remained more than 6 percent, or almost 10 million jobs, below its level in February, and a larger share of those currently unemployed are on permanent rather than temporary layoff compared to earlier in the year.
It will take some time for these workers to get re-employed as they may need to retrain for other occupations.
[FIGURE 6] Weakness in economic activity and the uncertain outlook throughout last year put downward pressure on inflation, even though supply disruptions caused the prices of certain goods and services to rise.
During the shutdown phase in the spring, total PCE inflation fell to 1/2 percent and core PCE inflation, which excludes food and energy prices, fell to under 1 percent.
As the economy reopened and started to recover, inflation firmed.
This is especially true for durable goods, where high demand has driven inflation for these goods to a 25-year high.
The inflation rates for services, which include sectors hardest hit by the pandemic, including travel and hospitality, have remained near the bottom of their ranges over the last decade.
Overall, inflation remains below the FOMC’s longer-run goal of 2 percent.
The Economic Outlook
That is a brief review of where the economy is, but I bet you are even more interested in where the economy is headed.
It continues to be the case that the path of the economy depends largely on the path of the virus, which is affected by our actions to control its spread, treat it, test for it, and vaccinate against it.
This means there is still a high degree of uncertainty around the outlook, although some of the worst-case scenarios and downside risks have lessened over time.
As shown in the December Summary of Economic Projections, fewer FOMC participants see the balance of risks as weighted to the downside than they did in September. 2
Three key factors are shaping my thinking about the economic outlook.
They suggest that the near-term outlook is likely to be weak, while the medium-run outlook is likely to show considerable improvement.
First, the U.S. and many other countries are experiencing a surge in new virus cases.
The latest data for the U.S. show some tempering over the past two weeks, but new case counts still well exceed those seen last spring and summer.
They are straining hospital capacity, necessitating more voluntary and mandated restrictions on activity and casting a shadow on the near-term economic outlook.
A second factor shaping my outlook is the positive developments on the vaccine front, which have made me more confident about the economy’s recovery over the medium run.
It will take several months for vaccines to be widely distributed and for a large segment of the population to be vaccinated.
But widespread vaccinations will create economic conditions that look very different from the current conditions in the midst of the rapid rise in virus cases, hospitalizations, and deaths.
The third factor shaping my outlook is the fact that while the pace of the recovery is slowing from the strong rebound seen in the third quarter of last year, so far the recovery has generally been stronger than anticipated.
This suggests that we may have been underestimating the economy’s resilience and underlying momentum, as well as the ability of households and businesses to adapt to this unprecedented environment.
Taking these factors into account, I expect the recovery to continue, but to be uneven over the year.
In the near term, the current surge in virus cases is likely to weigh on activity this winter as the surge is managed through social distancing and targeted shutdowns, albeit ones that are less severe than those last spring.
As the surge is brought under control and more people become vaccinated, I expect economic activity to pick up.
Assuming that most people are vaccinated by the third quarter of the year, I expect to see a strong pickup in economic activity in the second half of this year as people and businesses feel it is safe to re-engage in a broad range of activities.
I expect this post-vaccination phase of the recovery to continue over the next few years, with growth above trend, declines in the unemployment rate, and gradually rising inflation.
Given the severity of the pandemic shock, it will take time to move to a more broad-based sustainable recovery.
The recovery will likely remain uneven for some time, as some sectors will recover faster than others.
It will take time for some of the workers who have lost jobs to find new ones, either at another firm in their current industry or in a new industry after they retrain.
Changes in consumer preferences with respect to shopping, dining, and housing, firms’ demand for office space, and the re-establishment of more robust supply chains could all necessitate structural changes to the economy that will take time to unfold.
Policy
My modal outlook, which I just described, depends on appropriate policy.
In my view, both fiscal policy and monetary policy will continue to be needed to limit lasting damage to the economy from the pandemic and support the achievement of a broader, sustainable recovery.
Monetary and fiscal policy are not substitutes; they are complements and we saw them working together very effectively earlier last year when the pandemic hit.
Fiscal policy actions included grants to individuals, certain businesses hit hardest by the pandemic, and states and municipalities; expanded unemployment benefits; and loans to small businesses that became grants for firms maintaining their payrolls.
The recently passed $900 billion of additional fiscal relief will help support households and businesses hardest hit by the pandemic in the first half of 2021, helping to provide a bridge until the economy improves later in the year.
Further investment in vaccine deployment and aid to states responsible for distributing the vaccines would support a broader and faster recovery.
For its part, the Federal Reserve took actions to ensure that financial markets had enough liquidity to continue to function well, that credit could continue to flow to households and businesses, and that the stance of monetary policy was highly accommodative.
These actions have included buying Treasury and agency mortgage-backed securities (MBS), implementing emergency facilities to backstop the flow of credit throughout the economy, ensuring our central bank counterparties abroad have access to dollar funding, temporarily relaxing some of the regulatory requirements on banks so they have greater capacity to lend, and lowering the target range of our policy rate, the fed funds rate.
The FOMC has been maintaining the fed funds rate target range at 0 to 1/4 percent since March.
We expect it will be appropriate to maintain that range until labor market conditions have reached levels consistent with our assessments of maximum employment, and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.
The FOMC also continues to increase its holdings of Treasury securities by at least $80 billion per month and of agency MBS by at least $40 billion per month.
We expect to continue doing so until substantial further progress has been made toward our maximum employment and price stability goals.
The forward guidance on our policy rate and asset purchases is entirely consistent with our revised monetary policy strategy, which was summarized in a statement we released last August.3
The forward guidance ties the stance of monetary policy to progress on our mandated goals.
The guidance is also consistent with my view that policy patience will prove to be a virtue.
The current stance of policy is well calibrated to my outlook.
A slowdown in the economy in the first part of the year along the lines I am expecting would not require a change in monetary policy so long as the medium-run outlook remains intact.
Nor would the strengthening in growth I expect to see later this year necessitate a change in our policy stance because I expect that the economy will still be far from our employment and inflation goals.
Of course, if the economy evolves materially differently than expected or if risks, including those to financial stability, emerge that could impede attainment of our monetary policy goals, we would be prepared to respond appropriately.
But given my outlook and assessment or risks, in my view, monetary policy will need to remain highly accommodative for quite some time because achieving our monetary policy goals is likely to be a journey and not a sprint.
While achieving our goals will take some time, I do not view this as a failure of monetary policy or a lack of commitment on the part of policymakers to achieve our goals.
The economy’s intrinsic dynamics suggest that inflation is not going to move up quickly above 2 percent.
And the severity of the pandemic shock and its disparate impact across households, communities, and sectors suggest that it will take time to return to strong labor market conditions like those we experienced prior to the pandemic.
The FOMC is, and will remain, fully committed to using our policy tools to achieve our goals, in support of a broad-based and sustainable recovery.
Footnotes
1 The net increase in the unemployment rate between February and November was 2.8 percentage points for whites, 4.5 percentage points for Blacks, 4.0 percentage points for Hispanics, 4.2 percentage points for Asians, 4.1 percentage points for those with a high school diploma without any college, and 2.3 percentage points for those with a bachelor’s degree or higher.
2 FOMC Summary of Economic Projections, December 16, 2020 (https://www.federalreserve.gov/monetary ... 201216.pdf).
For more information on the new strategy, see Loretta J. Mester, “The Federal Reserve’s New Monetary Policy Strategy,” 6th Annual Monetary and Financial Policy Conference, Money Macro and Finance Society, London, U.K. (via videoconference), October 21, 2020 (https://www.clevelandfed.org/en/newsroo ... ategy.aspx).
The revised strategy summarizes the outcome of the Federal Reserve’s review of its monetary policy framework, including strategy, tools, and communications (see https://www.federalreserve.gov/monetary ... ations.htm).
https://www.clevelandfed.org/en/newsroo ... overy.aspx
"Patience Will Be a Virtue in Fostering a Broad-Based Sustainable Recovery"
Loretta J. Mester
Maekyung - Korea-America Economic Association Forum - Allied Social Science Associations Annual Meeting (via videoconference)
01.04.21
I thank Professor Yoosoon Chang, president of the Korea-America Economic Association, for the opportunity to speak at this year’s annual forum.
Over the years, the forum has had a number of distinguished speakers and it is truly an honor to speak with you this evening about the outlook for the economy and monetary policy.
Of course, the views I’ll present are my own and not necessarily those of the Federal Reserve System or of my colleagues on the Federal Open Market Committee.
I would like to start with wishing everyone a happy and healthy new year.
Wishing someone good health at the start of a new year is a time-honored tradition.
But it has taken on a deeper meaning this year as we turn the page on 2020, a year in which the coronavirus pandemic inflicted pain and hardship on people all over the world.
The pandemic was an unprecedented shock to global health and to the economy – the largest shock in most of our lifetimes.
With the distribution of vaccines now underway and with further fiscal policy relief for households and businesses on the way, the prospects are good for a much more favorable 2021.
Nonetheless, the next few months will be challenging ones, as the country continues to struggle with increasing new cases of COVID-19, which are putting strains on our healthcare system and limiting economic activity.
I believe patience will prove to be a virtue as the year unfolds.
Until the vaccines have been widely distributed and many people have been vaccinated, we will all need to be patient and continue to follow public health experts’ advice to socially distance, wear a mask, and wash our hands to help control the virus’s spread.
In addition, monetary policy will also need to remain patiently accommodative to support a broad-based and sustainable recovery and achievement of our longer-run goals of maximum employment and price stability.
The Economy
In thinking about the impact of the pandemic on the economy, I find it helps to think in terms of phases.
The pre-pandemic phase at the start of last year found the economy on very solid footing.
It was the 11th year of the expansion, and from the perspective of our monetary policy goals, things looked quite good.
The unemployment rate was at historically low levels, employment growth was strong, and participation in the labor force was higher than what was expected given the aging of the population.
And after several years of running low, inflation was near our longer-run goal of 2 percent.
But the pandemic changed all of that.
In March, the country took aggressive social-distancing measures to limit the spread of the virus and to buy some time for the healthcare system to increase its capacity to care for the sick, learn more about the virus itself, and develop testing and treatments.
In this shutdown phase, there were swift and severe effects across the economy as nonessential businesses stopped operating and many activities came to a halt.
But as public health statistics began to improve and many parts of the country began to relax some of their stay-at-home restrictions, a reopening phase began in May.
This reopening phase saw sharp rebounds in activity and hiring in those parts of the economy that did not involve close physical contact.
As the summer wore on, the economy entered its current phase – a pre-vaccination recovery phase.
The economy continued to recover but, as expected, at a slower pace than in the reopening phase.
More recently, the pace of activity has also been constrained by the current surge in new virus cases, which has resulted in mandatory and voluntary restrictions on some activities.
In this phase, the recovery has varied considerably across sectors.
Interest-rate-sensitive sectors, like housing and autos, have been particularly strong.
Sales of single-family homes, both new and existing, are now well above pre-pandemic levels, and so is spending on durable goods, including autos.
Spending on food in grocery stores surged in March and has remained elevated.
But spending in other sectors, including travel, leisure, and hospitality, which involve more person-to-person contact, is still very constrained compared to pre-pandemic levels.
Performing arts institutions continue to struggle and lost a substantial income source with the cancelation of holiday performances.
The commercial real estate sector is also feeling the strains as many businesses fight to stay afloat.
These phases of the economy – shutdown, reopening, pre-vaccination recovery – are clearly seen in the data.
So I would like to illustrate where things stand with a couple of slides before turning to the outlook.
Economists tend to look at growth rates when assessing the economy, but in this unprecedented situation, looking at the level of activity also provides an important perspective.
[FIGURE 1] The official GDP data clearly show the deep plunge in activity associated with the shutdown followed by a rebound as the economy reopened.
Economic activity peaked in February and the U.S. economy entered a recession.
Real GDP fell at a 5 percent annual pace in the first quarter and a record 31 percent annual pace in the second quarter.
The level of real GDP in the second quarter was back down to its level in early 2015 – a loss of over five years of output growth.
Growth rebounded in the third quarter as the economy reopened, with real GDP rising at a 33 percent annual pace; its level was back to where it was in early 2018.
The rebound in activity was stronger than many analysts were anticipating, a good reminder that we should never count out the resiliency of the U.S. economy or of the American people.
Growth continued in the fourth quarter, but at a slower pace, and I expect 2020 ended with real GDP still somewhat below where it was at the end of 2019.
[FIGURE 2] The economic phases are also clearly seen in the labor market data.
April saw an unprecedented rise in unemployment and loss of jobs, particularly in sectors where people could not work from home.
The unemployment rate hit 14.7 percent in April, up from 3.5 percent in February.
But as the economy reopened, there was a rapid decline in the unemployment rate as people on temporary furlough or layoff began to be rehired.
The improvement in the labor market was faster than anticipated, but the pace has slowed and the overall unemployment rate remains very elevated, at 6.7 percent in November.
[FIGURE 3] Moreover, some of the disparities in the recovery thus far can be seen in labor market outcomes for different racial/ethnic groups and different educational attainment groups.
All groups’ unemployment rates surged last spring and have fallen since then but, as of November, there has been less progress for nonwhites and for those without a college education.
Relative to their pre-pandemic levels, the unemployment rates of Blacks, Hispanics, and Asians remain higher than that of whites, and the unemployment rate of high school graduates without any college is higher than that of college graduates. 1
[FIGURE 4] These unemployment rates would be even higher if people had not left the labor force over the course of last year.
As of November, the labor force participation rate for those age 16 or older was almost 2 percentage points lower than it was in February.
Among workers in the prime working ages of 25 to 54, women’s participation is down 2-1/2 percentage points compared to about 2 percentage points for men.
In part, this reflects the types of jobs held by women and men, with a higher share of women working in industries hit the hardest by the pandemic.
Reports from regional contacts, as well as survey results from the Cleveland Fed’s national daily Consumers and COVID-19 Survey, indicate that the need to provide childcare for pre-school children or those being schooled remotely is disproportionately impacting the ability of women to remain in the workforce or work their usual number of hours.
Firms also tell us that maintaining productivity is now harder because of the variability they are experiencing in their workforce levels – on any given day there are some workers who unexpectedly have to stay home because a school is closed or because they have been exposed to the virus.
On a more positive note, our contacts from staffing companies report that while they have few people looking for job placements, they have seen a significant increase in people taking their online training courses.
This suggests that people are preparing themselves to re-enter the labor force when their circumstances allow them to do so.
[FIGURE 5] The payroll employment data also tell a similar story across the economic phases caused by the pandemic.
In just the two months of March and April, the economy lost 22 million jobs, the same number of jobs it had added over the entire previous expansion, which lasted over 10 years.
More than three-quarters of those losses were in the sectors paying below-average wages.
When the economy reopened in May, hiring picked up rapidly.
As expected, the pace has slowed since that rebound, and more recently, hiring has slowed even more given the re-imposition of some restrictions on activity due to the increase in new COVID cases.
As of November, employment remained more than 6 percent, or almost 10 million jobs, below its level in February, and a larger share of those currently unemployed are on permanent rather than temporary layoff compared to earlier in the year.
It will take some time for these workers to get re-employed as they may need to retrain for other occupations.
[FIGURE 6] Weakness in economic activity and the uncertain outlook throughout last year put downward pressure on inflation, even though supply disruptions caused the prices of certain goods and services to rise.
During the shutdown phase in the spring, total PCE inflation fell to 1/2 percent and core PCE inflation, which excludes food and energy prices, fell to under 1 percent.
As the economy reopened and started to recover, inflation firmed.
This is especially true for durable goods, where high demand has driven inflation for these goods to a 25-year high.
The inflation rates for services, which include sectors hardest hit by the pandemic, including travel and hospitality, have remained near the bottom of their ranges over the last decade.
Overall, inflation remains below the FOMC’s longer-run goal of 2 percent.
The Economic Outlook
That is a brief review of where the economy is, but I bet you are even more interested in where the economy is headed.
It continues to be the case that the path of the economy depends largely on the path of the virus, which is affected by our actions to control its spread, treat it, test for it, and vaccinate against it.
This means there is still a high degree of uncertainty around the outlook, although some of the worst-case scenarios and downside risks have lessened over time.
As shown in the December Summary of Economic Projections, fewer FOMC participants see the balance of risks as weighted to the downside than they did in September. 2
Three key factors are shaping my thinking about the economic outlook.
They suggest that the near-term outlook is likely to be weak, while the medium-run outlook is likely to show considerable improvement.
First, the U.S. and many other countries are experiencing a surge in new virus cases.
The latest data for the U.S. show some tempering over the past two weeks, but new case counts still well exceed those seen last spring and summer.
They are straining hospital capacity, necessitating more voluntary and mandated restrictions on activity and casting a shadow on the near-term economic outlook.
A second factor shaping my outlook is the positive developments on the vaccine front, which have made me more confident about the economy’s recovery over the medium run.
It will take several months for vaccines to be widely distributed and for a large segment of the population to be vaccinated.
But widespread vaccinations will create economic conditions that look very different from the current conditions in the midst of the rapid rise in virus cases, hospitalizations, and deaths.
The third factor shaping my outlook is the fact that while the pace of the recovery is slowing from the strong rebound seen in the third quarter of last year, so far the recovery has generally been stronger than anticipated.
This suggests that we may have been underestimating the economy’s resilience and underlying momentum, as well as the ability of households and businesses to adapt to this unprecedented environment.
Taking these factors into account, I expect the recovery to continue, but to be uneven over the year.
In the near term, the current surge in virus cases is likely to weigh on activity this winter as the surge is managed through social distancing and targeted shutdowns, albeit ones that are less severe than those last spring.
As the surge is brought under control and more people become vaccinated, I expect economic activity to pick up.
Assuming that most people are vaccinated by the third quarter of the year, I expect to see a strong pickup in economic activity in the second half of this year as people and businesses feel it is safe to re-engage in a broad range of activities.
I expect this post-vaccination phase of the recovery to continue over the next few years, with growth above trend, declines in the unemployment rate, and gradually rising inflation.
Given the severity of the pandemic shock, it will take time to move to a more broad-based sustainable recovery.
The recovery will likely remain uneven for some time, as some sectors will recover faster than others.
It will take time for some of the workers who have lost jobs to find new ones, either at another firm in their current industry or in a new industry after they retrain.
Changes in consumer preferences with respect to shopping, dining, and housing, firms’ demand for office space, and the re-establishment of more robust supply chains could all necessitate structural changes to the economy that will take time to unfold.
Policy
My modal outlook, which I just described, depends on appropriate policy.
In my view, both fiscal policy and monetary policy will continue to be needed to limit lasting damage to the economy from the pandemic and support the achievement of a broader, sustainable recovery.
Monetary and fiscal policy are not substitutes; they are complements and we saw them working together very effectively earlier last year when the pandemic hit.
Fiscal policy actions included grants to individuals, certain businesses hit hardest by the pandemic, and states and municipalities; expanded unemployment benefits; and loans to small businesses that became grants for firms maintaining their payrolls.
The recently passed $900 billion of additional fiscal relief will help support households and businesses hardest hit by the pandemic in the first half of 2021, helping to provide a bridge until the economy improves later in the year.
Further investment in vaccine deployment and aid to states responsible for distributing the vaccines would support a broader and faster recovery.
For its part, the Federal Reserve took actions to ensure that financial markets had enough liquidity to continue to function well, that credit could continue to flow to households and businesses, and that the stance of monetary policy was highly accommodative.
These actions have included buying Treasury and agency mortgage-backed securities (MBS), implementing emergency facilities to backstop the flow of credit throughout the economy, ensuring our central bank counterparties abroad have access to dollar funding, temporarily relaxing some of the regulatory requirements on banks so they have greater capacity to lend, and lowering the target range of our policy rate, the fed funds rate.
The FOMC has been maintaining the fed funds rate target range at 0 to 1/4 percent since March.
We expect it will be appropriate to maintain that range until labor market conditions have reached levels consistent with our assessments of maximum employment, and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.
The FOMC also continues to increase its holdings of Treasury securities by at least $80 billion per month and of agency MBS by at least $40 billion per month.
We expect to continue doing so until substantial further progress has been made toward our maximum employment and price stability goals.
The forward guidance on our policy rate and asset purchases is entirely consistent with our revised monetary policy strategy, which was summarized in a statement we released last August.3
The forward guidance ties the stance of monetary policy to progress on our mandated goals.
The guidance is also consistent with my view that policy patience will prove to be a virtue.
The current stance of policy is well calibrated to my outlook.
A slowdown in the economy in the first part of the year along the lines I am expecting would not require a change in monetary policy so long as the medium-run outlook remains intact.
Nor would the strengthening in growth I expect to see later this year necessitate a change in our policy stance because I expect that the economy will still be far from our employment and inflation goals.
Of course, if the economy evolves materially differently than expected or if risks, including those to financial stability, emerge that could impede attainment of our monetary policy goals, we would be prepared to respond appropriately.
But given my outlook and assessment or risks, in my view, monetary policy will need to remain highly accommodative for quite some time because achieving our monetary policy goals is likely to be a journey and not a sprint.
While achieving our goals will take some time, I do not view this as a failure of monetary policy or a lack of commitment on the part of policymakers to achieve our goals.
The economy’s intrinsic dynamics suggest that inflation is not going to move up quickly above 2 percent.
And the severity of the pandemic shock and its disparate impact across households, communities, and sectors suggest that it will take time to return to strong labor market conditions like those we experienced prior to the pandemic.
The FOMC is, and will remain, fully committed to using our policy tools to achieve our goals, in support of a broad-based and sustainable recovery.
Footnotes
1 The net increase in the unemployment rate between February and November was 2.8 percentage points for whites, 4.5 percentage points for Blacks, 4.0 percentage points for Hispanics, 4.2 percentage points for Asians, 4.1 percentage points for those with a high school diploma without any college, and 2.3 percentage points for those with a bachelor’s degree or higher.
2 FOMC Summary of Economic Projections, December 16, 2020 (https://www.federalreserve.gov/monetary ... 201216.pdf).
For more information on the new strategy, see Loretta J. Mester, “The Federal Reserve’s New Monetary Policy Strategy,” 6th Annual Monetary and Financial Policy Conference, Money Macro and Finance Society, London, U.K. (via videoconference), October 21, 2020 (https://www.clevelandfed.org/en/newsroo ... ategy.aspx).
The revised strategy summarizes the outcome of the Federal Reserve’s review of its monetary policy framework, including strategy, tools, and communications (see https://www.federalreserve.gov/monetary ... ations.htm).
https://www.clevelandfed.org/en/newsroo ... overy.aspx
Re: THE ECONOMY
CNBC - Federal Reserve
"Markets will get plenty of notice before Fed cuts back on bond purchases, minutes show"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Wed, Jan 6 2021
Key Points
* Federal Reserve officials agreed at their December meeting to make sure the public gets plenty of notice before the central bank’s bond purchases are reduced.
* Meeting minutes released Wednesday showed the Federal Open Market Committee was largely in agreement about the program.
* Markets were looking for whether some members were in favor of changing the program, but the minutes indicated little move in that direction.
The Federal Reserve will do what it can to prevent a taper tantrum when it finally decides to scale back on its bond purchases, minutes from the central bank’s most recent meeting showed Wednesday.
Following a two-day session Dec. 15-16, the policymaking Federal Open Market Committee voted to keep its benchmark short-term interest rate anchored near zero.
Markets, though, were focused on discussion surrounding the Fed’s asset purchase program.
The central bank has been buying at least $120 billion in Treasurys and mortgage-backed securities each month, and at the meeting pledged to keep doing so until it sees “substantial further progress” towards its goals regarding inflation and employment.
Minutes noted unanimous approval around the “outcome-based” approach to the program, though members noted that doesn’t mean the purchases will be tied to specific numeric goals.
Officials agreed that markets would get plenty of notice before the asset purchases were curtailed.
The last time the Fed cut back on its asset purchases, it triggered a “taper tantrum” in the market that officials want to avoid this time.
“Various participants noted the importance of the Committee clearly communicating its assessment of actual and expected progress toward its longer-run goals well in advance of the time when it would be judged substantial enough to warrant a change in the pace of purchases,” the minutes said.
Members further noted that once the “substantial further progress” threshold has been reached, the tapering of purchases would be “gradual” and along the lines of what the Fed did starting in 2013.
During the previous reduction of purchases, the Fed cut how much it was buying each month.
Later, it allowed a capped amount of proceeds from the bonds it was still holding roll off each month while reinvesting the rest.
There had been some anticipation that the committee either might accelerate the pace of purchases or extend the duration of the bonds.
The latter move would be an effort to stimulate the economy through lowering longer-term interest rates.
Though markets were watching for how much favor committee members had to adjust the duration of purchases, the minutes noted that only “a couple” officials indicated they were “open to” the idea of buying longer-dated bonds.
Also at the meeting, members adjusted their economic estimates for the next several years.
On balance, the committee grew less pessimistic about economic growth than it was in September and lowered its projections for the unemployment rate.
Officials noted that the economic data around the time of the meeting was mostly better than expected, but the accelerate Covid-19 spread was posing a challenge and growth overall remained considerably below its pre-pandemic level.
“They noted that the economic recovery thus far had been stronger than anticipated — suggesting greater momentum in economic activity than had been previously thought — but viewed the more recent indicators as signaling that the pace of recovery had slowed,” the minutes stated.
“With the pandemic worsening across the country, the expansion was expected to slow even further in coming months.”
There was virtually no change in the post-meeting statement from the previous meeting except for the language around asset purchases.
Data also provided by Reuters
https://www.cnbc.com/2021/01/06/federal ... eting.html
"Markets will get plenty of notice before Fed cuts back on bond purchases, minutes show"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Wed, Jan 6 2021
Key Points
* Federal Reserve officials agreed at their December meeting to make sure the public gets plenty of notice before the central bank’s bond purchases are reduced.
* Meeting minutes released Wednesday showed the Federal Open Market Committee was largely in agreement about the program.
* Markets were looking for whether some members were in favor of changing the program, but the minutes indicated little move in that direction.
The Federal Reserve will do what it can to prevent a taper tantrum when it finally decides to scale back on its bond purchases, minutes from the central bank’s most recent meeting showed Wednesday.
Following a two-day session Dec. 15-16, the policymaking Federal Open Market Committee voted to keep its benchmark short-term interest rate anchored near zero.
Markets, though, were focused on discussion surrounding the Fed’s asset purchase program.
The central bank has been buying at least $120 billion in Treasurys and mortgage-backed securities each month, and at the meeting pledged to keep doing so until it sees “substantial further progress” towards its goals regarding inflation and employment.
Minutes noted unanimous approval around the “outcome-based” approach to the program, though members noted that doesn’t mean the purchases will be tied to specific numeric goals.
Officials agreed that markets would get plenty of notice before the asset purchases were curtailed.
The last time the Fed cut back on its asset purchases, it triggered a “taper tantrum” in the market that officials want to avoid this time.
“Various participants noted the importance of the Committee clearly communicating its assessment of actual and expected progress toward its longer-run goals well in advance of the time when it would be judged substantial enough to warrant a change in the pace of purchases,” the minutes said.
Members further noted that once the “substantial further progress” threshold has been reached, the tapering of purchases would be “gradual” and along the lines of what the Fed did starting in 2013.
During the previous reduction of purchases, the Fed cut how much it was buying each month.
Later, it allowed a capped amount of proceeds from the bonds it was still holding roll off each month while reinvesting the rest.
There had been some anticipation that the committee either might accelerate the pace of purchases or extend the duration of the bonds.
The latter move would be an effort to stimulate the economy through lowering longer-term interest rates.
Though markets were watching for how much favor committee members had to adjust the duration of purchases, the minutes noted that only “a couple” officials indicated they were “open to” the idea of buying longer-dated bonds.
Also at the meeting, members adjusted their economic estimates for the next several years.
On balance, the committee grew less pessimistic about economic growth than it was in September and lowered its projections for the unemployment rate.
Officials noted that the economic data around the time of the meeting was mostly better than expected, but the accelerate Covid-19 spread was posing a challenge and growth overall remained considerably below its pre-pandemic level.
“They noted that the economic recovery thus far had been stronger than anticipated — suggesting greater momentum in economic activity than had been previously thought — but viewed the more recent indicators as signaling that the pace of recovery had slowed,” the minutes stated.
“With the pandemic worsening across the country, the expansion was expected to slow even further in coming months.”
There was virtually no change in the post-meeting statement from the previous meeting except for the language around asset purchases.
Data also provided by Reuters
https://www.cnbc.com/2021/01/06/federal ... eting.html
Re: THE ECONOMY
CNBC
"Weekly jobless claims little changed despite signs that hiring is slowing"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Thu, Jan 7 2021
Key Points
* First-time filings for unemployment claims totaled 787,000 for the week ended Jan. 2, the Labor Department reported.
* That was below the Wall Street estimate for 815,000 and the previous week’s total of 790,000.
* The number of Americans on all unemployment compensation programs fell to 19.2 million.
First-time filings for unemployment insurance were little changed over the past week despite other indicators that the labor market weakened at the end of the 2020.
Weekly claims totaled 787,000 for the week ended Jan. 2, the Labor Department reported Thursday.
That was less than the Dow Jones estimate of 815,000 and a slight decrease from the upwardly revised total of 790,000 for the previous week.
The report also showed a drop of 126,000 in continuing claims, taking the total down to 5.07 million.
Those receiving benefits from all programs also fell, declining by 420,000 to 19.2 million.
Claims remain well above pre-pandemic levels as a continued surge in Covid-infections has caused economic restrictions in states and municipalities across the country.
On Wednesday, ADP reported that private hiring contracted for the first time since April as companies shed 123,000 in December.
That tally showed that almost all the layoffs came at big businesses and in the hospitality industry as hotels, restaurants and bars have taken an especially hard hit by the winter resurgence in the pandemic.
“A combination of Covid fear and state-mandated restrictions on activity in the services sector is squeezing businesses, and no real relief is likely until a sustained decline in pressure on hospitals emerges; that’s probably a story for late February at the earliest,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The weekly claims figure comes a day ahead of the closely watched nonfarm payrolls report.
The Labor Department is expected to report Friday that the U.S. economy added just 50,000 jobs as a tumultuous 2020 came to a close, while the unemployment rate is seen edging higher to 6.8%, according to Dow Jones estimates.
Even amid the likelihood that hiring slowed as the year closed, the four-week moving average for claims continued to decrease, falling last week to 818,750.
The labor market, however, remains in deep distress, as the four-week average a year ago was 219,750.
At the state level Illinois reported by far the biggest drop in claims at 62,765, according to unadjusted data.
Multiple states showed gains of more than 10,000, including Colorado, Georgia, Kansas, Virginia and Texas.
Even with the decline in hiring, the fourth quarter is expected to show a considerable growth.
The Atlanta Federal Reserve’s GDPNow tracker of activity is pointing to an 8.9% gain for gross domestic product amid increases in consumption and investment.
Data also provided by Reuters
https://www.cnbc.com/2021/01/07/weekly- ... laims.html
"Weekly jobless claims little changed despite signs that hiring is slowing"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Thu, Jan 7 2021
Key Points
* First-time filings for unemployment claims totaled 787,000 for the week ended Jan. 2, the Labor Department reported.
* That was below the Wall Street estimate for 815,000 and the previous week’s total of 790,000.
* The number of Americans on all unemployment compensation programs fell to 19.2 million.
First-time filings for unemployment insurance were little changed over the past week despite other indicators that the labor market weakened at the end of the 2020.
Weekly claims totaled 787,000 for the week ended Jan. 2, the Labor Department reported Thursday.
That was less than the Dow Jones estimate of 815,000 and a slight decrease from the upwardly revised total of 790,000 for the previous week.
The report also showed a drop of 126,000 in continuing claims, taking the total down to 5.07 million.
Those receiving benefits from all programs also fell, declining by 420,000 to 19.2 million.
Claims remain well above pre-pandemic levels as a continued surge in Covid-infections has caused economic restrictions in states and municipalities across the country.
On Wednesday, ADP reported that private hiring contracted for the first time since April as companies shed 123,000 in December.
That tally showed that almost all the layoffs came at big businesses and in the hospitality industry as hotels, restaurants and bars have taken an especially hard hit by the winter resurgence in the pandemic.
“A combination of Covid fear and state-mandated restrictions on activity in the services sector is squeezing businesses, and no real relief is likely until a sustained decline in pressure on hospitals emerges; that’s probably a story for late February at the earliest,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The weekly claims figure comes a day ahead of the closely watched nonfarm payrolls report.
The Labor Department is expected to report Friday that the U.S. economy added just 50,000 jobs as a tumultuous 2020 came to a close, while the unemployment rate is seen edging higher to 6.8%, according to Dow Jones estimates.
Even amid the likelihood that hiring slowed as the year closed, the four-week moving average for claims continued to decrease, falling last week to 818,750.
The labor market, however, remains in deep distress, as the four-week average a year ago was 219,750.
At the state level Illinois reported by far the biggest drop in claims at 62,765, according to unadjusted data.
Multiple states showed gains of more than 10,000, including Colorado, Georgia, Kansas, Virginia and Texas.
Even with the decline in hiring, the fourth quarter is expected to show a considerable growth.
The Atlanta Federal Reserve’s GDPNow tracker of activity is pointing to an 8.9% gain for gross domestic product amid increases in consumption and investment.
Data also provided by Reuters
https://www.cnbc.com/2021/01/07/weekly- ... laims.html