“New applications for unemployment benefits fell sharply last week, suggesting layoffs are easing as the broader economy flashes signs of improvement,” WSJ writes.
Initial Unemployment Claims Last Week: 709,000 (down from 757,000)
Weekly claims have significantly declined from the near 7 million peak at the end of March but continue to remain above the average pre-pandemic level of around 200,000.
“U.S. consumer prices were flat in October following four straight months of gains, a sign of subdued inflation as coronavirus cases again climbed across the U.S,” WSJ writes.
What is the consumer-price index? It measures “what consumers pay for everyday items including groceries, clothing and vehicles.”
CPI Percent Change From September To October: Zero
Declines for items such as apparel and household furnishings were offset by higher costs for groceries and dining out, among others. This all comes amid a U.S. Covid-19 resurgence, which poses a threat to recovery.
“The federal government ran a $284 billion budget deficit in the first month of the fiscal year, more than double the monthly shortfall a year ago, the Treasury Department said Thursday,” WSJ writes.
- Budget Gap: +111%
- Government Outlays: $522 Billion (+37%)
- Revenue: $238 Billion (-3.2%)
What’s behind the change? Well, Congress enacted emergency measures, such as stimulus payments and small business loans, to protect the U.S. economy against pandemic fallout. Health care, food assistance and jobless benefits have pushed up outlays. Meanwhile, tax revenues have fallen due to widespread layoffs and decreased consumer demand.
“Home prices rose in every corner of the U.S. during the third quarter, as the pandemic boosted activity in a way not seen in recent history,” WSJ writes.
Nationwide Media Single-Family Home Price: $313,500 (+12%)
“Record-low mortgage-interest rates have also motivated shoppers to enter the market. And a longstanding shortage of homes for sale has worsened, increasing competition among buyers and sparking bidding wars.”
I am reiterating what we’ve been saying for months. We’re not seeing much overall CPI inflation on consumer goods, but we are seeing continued strength in financial assets. Beware of isolated bubbles in the financial markets; for example, I think single-family homes look too inflated to buy into right now. I’d want to see how home prices perform when we’re in a return-from-home environment.