by Chris Becker
There was an unusual blip in the amount of Americans who died from COVID-19 reported on Tuesday, that could have been written off (as sick as that sounds) as the usual weekend anomaly, whereby deaths over the weekend – in this case a 3 day weekend due to 4th of July holiday – are reported on the first working day of the week.
But with three consecutive days of nearly 1000 deaths recorded each day? That’s a new trend:
As hospitalizations trend up faster and the southern and southwest states get close to full ICU capacity, there’s more to come:
Also, as the number of positive cases keeps hitting new daily records – more Americans in hospital, more deaths, more lockdowns and late containment measures:
The impact on the US economy is going to hit with a lag, because while there’s been a surge in jobs in the last two months off a very low base, the next phase of containment will likely see a further retraction in the most populous US states:
Westpac contends that the trend in new jobs creation is already fully over, as the US labour market has “immense slack”.
At 18%, the broader U6 measure of labour underutilisation is similarly concerning, being more than 10ppts above its pre-COVID level. To see the full effect of COVID-19 reversed, the gains of May and June would have to be repeated twice over. This seems highly unlikely.
The reason this is the case is multi-faceted. First of all, the starting point for this recovery is abnormally weak given the savage nature of the shock. Secondly, despite all the headlines reporting an increase in leisure activities as summer begins, restrictions against COVID-19 remain in force across the economy, limiting the capacity of activity to pick up. Third, this situation seems very unlikely to change for the better anytime soon. Instead, with the daily new case count having reached 59,000 this week, a tightening of restrictions seems more likely than not.
Westpac are slashing their 2020 growth forecast by over 1% to -6.6% as the much awaited recovery looks like disappearing going into the December quarter. As per usual for shaping views on the economic condition of the US, its almost all political. At the federal level, existing fiscal stimulus to households and workers is likely to end soon, while the trough keeps filling up for the looters in corporate America as the so called small business loan program has shown to give most of the funds to sycophants of President Trump.
Then there’s the local/state issues where such troughs and printing presses are unavailable, as Westpac point out they will:
aggressively cut their spending on essential services as their revenue (principally from income, sales and property taxes) falls away. Between February and June, approximately 1.5 million jobs were cut by these public authorities. A third of this loss was seen in May and June even as private jobs surged back. The more stringent and persistent lockdown measures have to become to combat the virus, the worse this job loss will be.
Hanging over them is the overt threat by Trump to slash further federal assistance if they don’t shove their kids and teachers into schools after the northern summer break, thus exposing a vast swathe of the younger population (and their mainly middle aged and old teachers) to the rampant virus.
Then there’s the election in November, where a second Trump term is likely to extend the deadly impact of the virus into 2021, with most forecasts suggesting 200K plus deaths, but at least stock markets will be bid higher.