A Couple More Cents: Week of June 15, 2020

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June 19, 2020 – Hey everybody! Here are a few tidbits to chew on over the weekend. Enjoy!

Highlights from the Week

Apple is tripling down on its anti-competition mentality. It already got into a spat with app developer Basecamp over Apple’s alleged 30 percent cut of App Store purchases, resulting in an antitrust investigation probe the European Union. And now Apple’s back in the news for rejecting Facebook’s gaming platform for the iOS App Store.

President Trump’s war against social media intensified this week. We saw Facebook take down some of his campaign ads, Twitter label one of his tweets “manipulated media” and the Justice Department proposed legislation to water down the legal protections afforded to internet companies.

There were two significant bits of government spending this week, as both the U.S. and England attempt to inject life back into their economies. The Federal Reserve launched its corporate bonds spending spree Tuesday, planning to take in $250 billion worth of bonds from eligible issuers. The Bank of England also stepped up with plans to invest $125 billion into bonds by year-end.

Institutional Research Roundup

Thanks to record government a total sum of $3 trillion in U.S. government stimulus, retail sales bounced back rapidly, performing and complete unwind of the Covid-related plunge.

Industrial production and housing had a modest rebound in May – the Q2 average of activity is still roughly 50 percent below Q1 levels on an annualized basis – not early as flashy as retail. But survey indicators show there’s good news ahead for these sectors.

Despite evidence of an initial V-shaped recovery in employment and retail sales, it looks as though we’re due to plateau. Data shows the number of small businesses open and jobs has flatlined recently, and hours worked has hit the lowest level since May. With 1.5 million jobless claims holding the unemployment rate at around 14 percent, there’s a call for caution on the shape of the recovery.

Q2 real GDP trackers, a coalescence of the signals from a variety of other trackers into an estimate that has robustly outperformed alternatives in the past, have edged higher. The numbers are currently consistent with roughly -36 percent annualized contraction in Q2. This is up from -40 in early June.

Downside risks to the economic outlook have not subsided materially. But the decline in unemployment and rebound of retails have created more potential positive outcomes for the economy. Still, it’s unclear if virus trends worsening in some states will translate into a significant hit to economic activity.

Covid-19 Impact Tracker

The daily number of cases in the U.S. seems to be leveling off, but there’s continued evidence of rising infections across several states such as Texas and Florida. Rising mortality rates in nearly one-quarter of states indicate it’s not solely due to more testing. The South seems to be showing troubling trends in both cases in mortality.

Jobless claims held steady at 18.7 million for the week of June 6. While there is a lag in claims data and official statistics, the takeaways are newly unemployed workers aren’t transitioning into work at a high pace and unemployment spells are lengthening.

High-frequency data is showing signs consistent with an estimated 8.1% year-over-year contraction in GDP.

Just like last week, gauges of mobility have risen over the past weeks as stay-at-home orders are relaxed and economies begin to reopen.


See you Monday!

— Justin Birnbaum

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