July 30, 2020
.Initial unemployment claims for the week of July 25 rose 12 thousand to 1,434 thousand after having risen 114 thousand in the previous week, but having decline declined in each of the previous 15 weeks. Claims have fallen steadily since reaching a peak of 6,867 thousand in the week ending April 25. The spreading corona virus seems to have prevented a further drop in claims for now.
The number of people receiving unemployment benefits rose 867 thousand in the week ending July 18 to 17,018 thousand.
Given the increase in the number of people receiving unemployment benefits the insured unemployment rate rose 0.5% from 11.1% TO 11.6%. Before the shutdown started it was steady at 1.2% so it is still very high. This week’s increase clearly reflects the impact of the rapid spread in the virus. But it is only a single week. Let’s wait and see what happens in the weeks beyond. A rising trend in the insured unemployment rate would clearly trim our projected Q4 GDP growth rate of 7.0%.
Following the 32.9% GDP drop in the second quarter, the $2.5 trillion of stimulus money will provide a dramatic boost to growth in the third quarter. We current expect third quarter GDP growth to rebound by 32.0% with an additional 7.0% gain in Q4.
The economy fell into recession in March with a further decline in April. But with the fiscal stimulus money being disbursed the economy probably turned upwards in May. As a result, the recession that lasted just 2 months — one-quarter of the 8-month duration of the average recession.
Stephen Slifer
NumberNomics
Charleston, SC
Dr. Slifer –
I hope you are correct in your optimistic assumptions, but am skeptical. The restrictions in the US are not as severe as in China, and are not enforced. The rate of increase in confirmed cases in the US (based on the Johns Hopkins Coronavirus Resource Center data) has been running at 40% per day and only in the last three days has any decrease been recorded – to about 25% per day. The curve is bending down only slowly, and it seems unlikely it will be flat by the middle of April. Even when the rate of increase is controlled, if less than half of the population has been infected (and acquired immunity), then a relaxation of restrictions may lead to a resurgence of the infection, requiring even longer quarantine. Lastly, if it goes on for a few months instead of a few weeks, bankrupticies and other business failures, as well as the worldwide collapse in trade, seem likely to impede a robust recovery. I know nothing of economics, but the other factors here seem unlikely to reverse soon.
Hi Frank.
Thanks for sharing your thoughts. Everybody seems skeptical. Most people have responded are in that camp. I seem to be the only relative optimist out there.
Your concerns are all valid. Given that Trump did not declare an emergency until March 13, and many of the governors did not impose stay at home orders until this past week, I suspect it is still a bit too soon to expect some improvement. I am hoping my mid-April time table is not too far off the mark. I keep going back to the China data. They imposed stringent controls towards the end of January, saw hints of improvement by mid-February, and had the thing well under control by mid-March. And, at least thus far, as their economy starts opening up they have not seemed to experience any resurgence of the virus. Not exactly sure why we should be significantly different here, but almost everybody questions my timetable. Who knows? everybody else could certainly be right.
I need this to be a short-term event.
If it goes on a lot longer than I envision, I certainly share your concerns. Businesses, particularly small businesses have contingency plans and lines of credit to hold them over for roughly a month. Longer than that we will have a lot of problems. I think it raises a legitimate question whether the economic fallout from the so-called cure will turn out to be worse than if we had simply let the virus run its course and opted instead for a more targeted approach — isolation and help for the elderly, encourage and provide incentives for manufacturing firms to ramp up production of ventilators, masks, and protective gear for health care workers, and financial assistance for those directly impacted by the virus. We do not need $1,000+ checks for every American
As always, I guess we will see. Stay healthy.
Steve