Economy Rebounding UnevenlyTargeted Lockdowns & More Stimulus Needed

Bloomberg Businessweek October 26, 2020 pp28-29 |Economics| “A Bounce You Can’t Trounce”.


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Summary

Since Q2, when the initial response to COVID caused a pull back in economic activity, all metrics are improving but remain below pre-pandemic levels. The data illustrates a clear divide by income-level. Low earners have been hit harder and are slower to recover. “Expectations that the recovery will continue rest on a couple key assumptions: that states are unlikely to reimpose widespread lockdowns even if cases continue to rise, and that Congress is likely to enact fresh coronavirus relief either before or after the November 3 election.”

Facts Presented

· Quarter over Quarter change in GDP fell -30% Q2 2020 then rose +30% Q3 2020 and will steadily decline to typical levels of ~2% ±


· Unemployment rose to >12% in Q2 2020, then fell to about 7% in Q3 2020 and will decline from 7% to traditional 6% over the next six quarters.


· Labor Force Participation is 55% for Women which is lower than a run rate of about 58% prior to the pandemic but higher than April's level of 52%. Men are at 68% slightly lower than nearly 70% before the pandemic but higher than April's level of 66%.


· Consumer comfort for those under $15K/Year is 25% versus 37% before the pandemic while those over $100K/Year is 50% versus >75% before the pandemic.


· Consumer spending hit a low at -16% followed by -9% and will rise to about 3% towards the end of year.


· Savings rate pre-pandemic was at 8% peaked at 30% in August 2020 but has fallen to about 15%. The increase in savings reflects less consumer spending and saving of stimulus money.


· Homebuilders sentiment has increased dramatically from 65% in 2019, then fell to 30% early in 2020 and has increased more than 80% now reflecting historically low mortgage interest rates.


· Bankruptcy for non-commerical has fallen from 555,000 in 2019 to 395,000 for the same January-September period in 2020. Commercial bankruptcy 30,000 in 2019 and 25,000 in 2020. These data reflect the impact of stimulus money and delayed foreclosure by lenders that hold large reserves that they have yet to execute.


· Manufacturing varied within ± 1-2% to -2% to a low point of -20% in September and has now increased to -6% but will flatten near -4%.


· Food insecurity, among sufficient households with children before the pandemic, has increased 2,100,000 with sometimes food insecurity and 354,000 with often food insecurity.