Category: Economy

14.7% Unemployment But there are Job Openings

It is the highest unemployment since the Great Depression but the cause of this employment situation is totally different than the 1930s. Many economists are predicting that there will be a quick bounce back once most people return to work.

This situation is dependent on science finding a cure for coronavirus. Despite the opening of businesses many people will not be going out any time soon. Concerts, political rallies, sports events and other large events are not likely to happen for many months.

Meanwhile there are some businesses that are hiring. food and delivery services, security services, and food markets are looking for help. Pizza Hut, 7-Eleven, Papa John’s, GoPuff, FedEx, Dollar General, Dollar Tree, Bytedance, Netflix, General Motors, and Fidelity Investments are in the list of companies that are hiring.

For Donald Trump this will be a very difficult time.  The booming economy was going to be his number one reason for re-election.

US GDP turns negative, worst since 2008

US GDP shrank at a 4.8% annualized rate in Q1 due to the coronavirus pausing the economy.  It is the biggest decline since the Great Recession as depicted in the graph posted here. 

Are we in a recession? Most experts agree that a recession happens when the economy shrinks for at least two fiscal quarters in a row — in other words, six months.  Note that this report is the period ending March 31.  That is a period that does not include all the massive layoffs that has resulted from the coronavirus that started in mid-March.  That leads me to suspect a recession was on the way even before the virus had really impacted the country.  We can all see where this is going.   

Some economists are predicting a rapid turnaround once stay at home orders are lifted.  Personally, I can’t imagine sitting in a restaurant until their is a vaccine for covid 19. I might walk through the mall and I will defintely go places to take picures with my mask in place. The Hollywood Bowl and other theater settings are out of the question.

Source: U.S. Bureau of Economic Analysis

Donald Trump is No Conservative

What happened to the conservative Republican Party?

“America vs. Socialism” was the theme of the Conservative Political Action Conference this past February. “One of the most serious challenges our countries face is the specter of socialism. It’s the wrecker of nations and the destroyer of societies,” Trump said during his 35-minute address to the General Assembly on 09/24/19. But times have changed and now Trump is the promoter of give aways and subsides.

Thanks to the coronavirus, the United States is heading into a recession. 26.4 million people have applied for unemployment insurance aid since the country has been shut down. More high unemployment numbers may be on the horizon. Trump’s solution to high unemployment and closed businesses was ask congress to spend enough money to help everyone and every company pay their bills.

$1200 to each adult and $500 to each minor is being given to every legal resident and $600 per week to every person laid off from their job in addition to each states standard unemployment benefit for up to four months.

Businesses are to receive low interest loans. Some with strings attached and some with no strings.

This is the best example of a form of socialism that I can imagine. Democrats are delighted to go along with the big spending. Bernie Sanders, an avowed Democratic Socialist, is seeing his ideas being instituted. Donald Trump said there will never be socialism in America has proven to be the person most responsible for fulfilling Sanders ideas.

For sure it is Keynesian economics. Keynesian economics is an economic theory of total spending in the economy and its effects on output and inflation. John Maynard Keynes advocated for increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the Great Depression. Keynes argued that an interventionist government could help smooth out recessions by using fiscal policy to prop up aggregate demand. Strategic government spending could spur consumption and investment, argued Keynes, and help alleviate unemployment. Keynes’s theories gave rise to a new dominant paradigm in economic thought, which was subsequently dubbed Keynesian economics. While still popular, some have argued that Keynesian economics has provided a pseudo-scientific justification for short-sighted elected politicians to run fiscal deficits and accumulate massive levels of government debt.

Where is Peter Navarro and Larry Kudlow? If they are supporting Donald Trump actions now they have realized that John Keynes was right all along.

Thank goodness Donald Trump never heard of Milton Friedman.

U.S. Debt to Surge Past Wartime Record, Deficit to Quadruple

Let’s start with understanding the difference between U.S. Debt and U.S. Deficit.

In simple terms, a budget deficit is the difference between what the federal government spends (called outlays) and what it takes in (called revenue or receipts). The national debt, also known as the public debt, is the result of the federal government borrowing money to cover years and years of budget deficits.

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Today this item was posted on Bloomberg News website.

U.S. Debt to Surge Past Wartime Record, Deficit to Quadruple

By Christopher Condon and Dave Merrill

April 21, 2020, 5:00 AM

The U.S. budget deficit may quadruple this year to almost $4 trillion. Projections from the Committee for a Responsible Federal Budget (CRFB) say that by 2023 U.S. debt held by the public will surpass records set in the post-World War II years. (1)

And these projections only include spending enacted so far—in a three-month-old crisis that has seen emergency Congressional appropriations top $2.3 trillion. Additional spending is almost certain as the coronavirus pandemic destroys millions of jobs and thousands of businesses while slashing tax revenues for local and state governments.

Even before the crisis, U.S. debt-to-GDP had more than doubled to 79% in 2019 from 35% in 2007. Deficit hawks, already hard to find, disappeared once the virus shut down whole swaths of the U.S. economy. The Coronavirus Aid, Relief, and Economic Security (CARES Act) legislation passed on a unanimous voice vote. Lawmakers understood that frugality made no sense in the face of impending economic collapse.

Will the candidates for president in the November election even touch this issue?  Probably not.

Oil prices turned negative. Hundreds of US oil companies could go bankrupt

In an unprecedented move, U.S. oil prices went negative Monday — meaning, companies paid to sell their oil — but don’t expect to get paid to fill up your tank at the gas station.

A oil futures contract expiring Tuesday went negative in bizarre move showing a demand collapse. … West Texas Intermediate crude for May delivery fell more than 100% to settle at negative $37.63 per barrel, meaning producers would pay traders to take the oil off their hands.

US crude for June delivery is still trading above $20 a barrel — but even that’s disastrous. “$30 is already quite bad, but once you get to $20 or …

Why is this happening?

The coronavirus pandemic has caused oil demand to drop so rapidly that the world is running out of room to store barrels. At the same time, Russia and Saudi Arabia flooded the world with excess supply.

 That double black swan has caused oil prices to collapse to levels that make it impossible for US shale oil companies to make money. US crude for May delivery turned negative on Monday — something that has never happened since NYMEX oil futures began trading in 1983. It was easily the oil market’s worst day on record.

US crude for June delivery is still trading above $20 a barrel — but even that’s disastrous.

“$30 is already quite bad, but once you get to $20 or even $10, it’s a complete nightmare,” said Artem Abramov, head of shale research at Rystad Energy.

Many oil companies took on too much debt during the good times. Some of them won’t be able to survive this historic downturn.

In a $20 oil environment, 533 US oil exploration and production companies will file for bankruptcy by the end of 2021, according to Rystad Energy. At $10, there would be more than 1,100 bankruptcies, Rystad estimates.

“At $10, almost every US E&P company that has debt will have to file Chapter 11 or consider strategic opportunities,” Abramov said.

The president did try to intercede on behalf of American oil companies. He tried to negotiate reduced oil pumping to stabilize the price. Obviously he did not succeed.

It will be interesting to learn what happens next.

The End of The Shopping Mall?

Coronavirus closings: Macy’s, Apple, Sephora say they’ll reopen soon. But will they?

While it is impossible to forecast the recovery once the coronavirus crises has passed, you can easily see the result will be an impact on many store chains from restaurants to clothing retailers. The question is will shopping habits be permanently impacted?

Sears, JCPenney, Neiman Marcus and J. Crew were some of the most distressed companies prior to the outbreak, according to analysts. Forever XXI was in the process of being bought by Simon Shopping Centers.

7th Ave in Times Square April 7 2020
7th Ave in Times Square April 7, 2020

The Cheesecake Factory has seen a decline in same store sales decline as far back as August 2017. Most recently the CEO sent a letter to all the property owners saying they are unable to pay April’s rent at all 300 of their locations.

Sephora, a subsidiary of LVMH, announced that all stores in the U.S. and Canada will close indefinitely due to the spread of COVID-19.

We are all buying everything on line. Parking at my nearest malls has always been a challenge. Unless you just like window shopping why would you go to a mall? I’m not the only person asking this question. I will miss JCPenny.

U.S. economy is now in recession but there is Good News

The bad news. Ten million people have filed for unemployment insurance in the past two weeks.

We all knew this day would come, so let’s bow our heads in reverence to what will be remembered as the longest bull–market run in history.

THE NINE YEARS OF JOB GROWTH that started in the aftermath of the Great Recession under BARACK OBAMA and continued under DONALD TRUMP came to a screeching halt in March, when the U.S. economy lost 701,000 full-time jobs. The jobless number rose to 4.4%, up nearly a full percentage point.

The monthly BLS survey was taken March 8 to March 14 — well before the nation went into practically full lockdown — so the unemployment rate is probably much, much higher and likely upward of 10%.

Before the stay at home orders were given by most states the U.S. economy was roaring. Most economists are saying that once the stay at home order is lifted things will return to normal rather quickly.

It’s all about buying stuff.  Americans, I believe, are anxious to continue their buying ways. Of course they might be just a bit more cautious.

Goodbye Donald Trump – You Are Not Forgiven

Donald Trump, you want to be re-elected. I’m sorry to tell you this but you have failed to protect the citizens of this country. Even today with the coronavirus spreading you are still saying things that are lies and offering misleading information.

Americans know when their president has failed at his job. President Herbert Hoover presided over the Wall Street crash in 1929 that led to the Great Depression. President Jimmy Carter presided over 10% interest rates, high inflation, and the Iran hostage debacle. President Gerald Ford pardoned Richard Nixon. President George Herbert Walker Bush presided over high unemployment. All four of those presidents were not elected to a second term.

According to you the coronavirus was a Democratic Party hoax. Then it was a disease that would quickly go away effecting very few people. Then it was a disease that would go away quickly in a few months as warmer weather of spring came. Finally it has become a disease that could last 18 months or more.

It’s now become known that you dismantled a National Security directorate at the White House in 2018 that was charged with preparing for a pandemic. You also proposed cuts to the CDC as reported by ABC News. “I was mystified when the White House dissolved the office, leaving the country less prepared for pandemics like COVID-19,” Beth Cameron, the first director of the unit, wrote in an op-ed in The Washington Post.

As “stable genius” like you, you should have no trouble resolving the rising unemployment numbers (new claims have already risen by 70,000) and a stock market that has fallen by over 20%. Or maybe not.

Your latest idea of buying shares of private companies is a brilliant idea if you believe in socialism. Oh, wait, you are opposed to that. What will you call it?

Goodbye. Good riddance.  Don’t let the door hit you on the way out.

The Fed hits the coronavirus panic button and makes things worse

The politics of mismanagement should be the headline of the day. Donald Trump does not understand how markets function but is living in fear that the United States is heading into a recession as we approach an election. Fed chair Jerome Powell seems more inclined to do Trump’s bidding then do the right thing. The right thing is do nothing. I’ve not sold any of my stocks. Panic just results in losses. I believe the country will survive. It’s Trump who is in a panic!

The stock market’s reaction to the coronavirus is big news. Dow Jones Industrial Average had largest point decline in the history of the index! The S&P 500 had dropped more than 11% from Monday through Friday, which made for its biggest weekly decline since the 2008 financial crash.

Last week’s showing was indeed rare. The final week of February 2020 rates as the third- worst Monday-through-Friday by performance by the S&P 500 since 1976.

So the Fed reacting to what it believes will be a harsh condemnation by President Trump slashed interested rates by a half of a percentage point.

But the market seemed to understand that there is the expectation of a recession and that concern has resulted in another 800 point drop in the Dow Jones Industrial Average. A drop of more than 3%.

If this drop in the stock market is a signal for a coming recession the answer to support the economy will have to be federal stimulus like infrastructure projects and perhaps a temporary reduction in payroll taxes.  I doubt the Democrats will do either before the election.  After all they will see a recession as an opportunity to win both the presidency and the senate.