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Covid-19 Causing Unprecedented Social and Economic Upheaval in the US
July 12, 2020
Not since the 1960s and 70s has the United States experienced social upheaval like it is experiencing today. We have both peaceful and violent protests, a massively divided political landscape and a reinvention of the civil rights consciousness. On top of that, we have a virus that is spreading across the country, creating fear and a politicization of economic and social responses.
Scientists called for a 15-day shutdown but have consistently lengthened the time they believe keeping the economy relatively closed is a good idea. Yet, as case originations slowed, people revolted, and some red states began to reopen. Now a massive increase new cases, which many call a "surge," caused a reversal of prior moves and politicians are re-closing bars and restaurants.
But many Americans are ignoring the case surge, the beaches are full of people w/o masks and ignoring social distancing, On June 22nd, just as reports of a surge in new cases started to appear, TSA counted 607,540 passengers vs. 352,947 on May 1, and on July 5th, 732,123 passengers entered airports. Gasoline usage, which had been down about 50% Y/Y in April, is now down just 10%. And Apple mobility data, which reflects requests for directions, bottomed in April, down nearly 60% from the January 13, 2020 benchmark. Since April, the mobility data has rebounded 19%.
While the new cases and some reversals in openings will do the same kind of damage to economic activity that occurred in April and May, there is a clear negative reaction, which is likely one of the reasons that equity markets are recovering from their "surge-related" drop. Over the last two weeks (9- trading days), the S&P 500 was up 5%.
The second straight month of job gains is one reason as is the Fed’s market liquidity initiative. The US added 4.8 million jobs in June, and the unemployment rate fell to 11.1%. Over the past two months, manufacturing has recovered 606,000 of its lost jobs, and these are unlikely to be affected much by the closure of bars and restaurants. The M2 measure of money is up record 25% Y/Y. With this flood of new money, and an improvement in economic data, equity markets could continue to rise.
Consider some poignant historical precedents: in the Civil War, the US lost 620,000 men, 2% of the population, the equivalent of more than 6 million people today. World War I, World War II and the Spanish Flu were devastating. Yet, in every case, the United States recovered to prosper, and this time may be different. But the country will recover even if it does not happen immediately. Just like 9/11, people will fly again, go to restaurants and sporting events and theaters.
A "V-shaped" recovery for the economy would be great but is unlikely as Covid-19 drags on. These first few months will look like a V, but then things will grow more slowly unless we get a widely distributed vaccine. We may not see 4% or lower unemployment rates again until 2023. Maybe longer. Day-by-day, week-by-week, month-by-month, progress will be made. Companies, like the rest of us, are adapting. They are figuring out how to limit losses - and grow - in this uncertain time. They too will emerge stronger when this storm has passed. From: ftadvisors
July 12, 2020
Not since the 1960s and 70s has the United States experienced social upheaval like it is experiencing today. We have both peaceful and violent protests, a massively divided political landscape and a reinvention of the civil rights consciousness. On top of that, we have a virus that is spreading across the country, creating fear and a politicization of economic and social responses.
Scientists called for a 15-day shutdown but have consistently lengthened the time they believe keeping the economy relatively closed is a good idea. Yet, as case originations slowed, people revolted, and some red states began to reopen. Now a massive increase new cases, which many call a "surge," caused a reversal of prior moves and politicians are re-closing bars and restaurants.
But many Americans are ignoring the case surge, the beaches are full of people w/o masks and ignoring social distancing, On June 22nd, just as reports of a surge in new cases started to appear, TSA counted 607,540 passengers vs. 352,947 on May 1, and on July 5th, 732,123 passengers entered airports. Gasoline usage, which had been down about 50% Y/Y in April, is now down just 10%. And Apple mobility data, which reflects requests for directions, bottomed in April, down nearly 60% from the January 13, 2020 benchmark. Since April, the mobility data has rebounded 19%.
While the new cases and some reversals in openings will do the same kind of damage to economic activity that occurred in April and May, there is a clear negative reaction, which is likely one of the reasons that equity markets are recovering from their "surge-related" drop. Over the last two weeks (9- trading days), the S&P 500 was up 5%.
The second straight month of job gains is one reason as is the Fed’s market liquidity initiative. The US added 4.8 million jobs in June, and the unemployment rate fell to 11.1%. Over the past two months, manufacturing has recovered 606,000 of its lost jobs, and these are unlikely to be affected much by the closure of bars and restaurants. The M2 measure of money is up record 25% Y/Y. With this flood of new money, and an improvement in economic data, equity markets could continue to rise.
Consider some poignant historical precedents: in the Civil War, the US lost 620,000 men, 2% of the population, the equivalent of more than 6 million people today. World War I, World War II and the Spanish Flu were devastating. Yet, in every case, the United States recovered to prosper, and this time may be different. But the country will recover even if it does not happen immediately. Just like 9/11, people will fly again, go to restaurants and sporting events and theaters.
A "V-shaped" recovery for the economy would be great but is unlikely as Covid-19 drags on. These first few months will look like a V, but then things will grow more slowly unless we get a widely distributed vaccine. We may not see 4% or lower unemployment rates again until 2023. Maybe longer. Day-by-day, week-by-week, month-by-month, progress will be made. Companies, like the rest of us, are adapting. They are figuring out how to limit losses - and grow - in this uncertain time. They too will emerge stronger when this storm has passed. From: ftadvisors
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