NAM: Monday Economic Report
With Americans negatively impacted by the COVID-19 outbreak, the Index of Consumer Sentiment plummeted to the lowest level since December 2011, falling from 89.1 in March to 71.0 in April, according to preliminary data from the University of Michigan and Thomson Reuters. The drop in the index of current economic conditions was nearly twice the largest monthly decline in the Great Recession (in October 2008).
There were 6,606,000 initial unemployment claims for the week ending April 4. Nearly 16.8 million Americans filed for unemployment insurance in the past three weeks as the economic toll of the COVID-19 crisis takes hold. As such, the unemployment rate is likely 14–15% right now, a major reversal from the 50-year low in February, which was 3.5%.
Meanwhile, continuing claims increased from 3,059,000 for the week ending March 21 to 7,455,000 for the week ending March 28 in this report, a new all-time high, surpassing the peak of 6,635,000 during the Great Recession (week ending May 30, 2009).
The National Federation of Independent Business reported that the Small Business Optimism Index fell below 100—a key threshold consistent with small firm growth—for the first time since November 2016, declining from 104.5 in February to 96.4 in March. Thirteen percent of respondents said the next three months were a “good time to expand,” down from 26% in February and the lowest rate since November 2016.
Interestingly, the NFIB survey found that difficulties in finding talent remained the top “single most important problem” for 24 straight months, even as hiring has decelerated. That was consistent with the NAM’s recent outlook survey (conducted in late February), which also continued to cite the inability to attract and retain workers as the top challenge.
Last week’s job openings data provide another “time capsule” view of strength in the labor market before the major disruptions in employment due to the COVID-19 outbreak, with postings in the manufacturing sector up in February. There continued to be more job openings in the U.S. economy in February than the number of people looking for work—a trend that lasted for 24 straight months but ended in March with sharp increases in unemployment.
The minutes from the Federal Open Market Committee’s March 15 meeting illustrated the extent to which Federal Reserve participants felt extremely worried about the economic damage from the COVID-19 outbreak, leading to the extraordinary monetary policy measures that have been implemented since then. Last week, Federal Reserve Chair Jay Powell outlined how active the Federal Reserve has been in recent weeks to provide a financial backstop and to help lay the groundwork for economic recovery, using its emergency powers in this crisis.
Along those lines, the Treasury Department and Federal Reserve announced new and expanded lending programs, as authorized by the CARES Act. For details on the new lending facilities, click here.
The Federal Reserve remains concerned about deflationary pressures from the sharp drop in economic activity due to COVID-19. Consumer and producer prices both declined in March, with the data reflecting changes in behavior related to the crisis, and energy costs pushing both measures lower in the latest release. For its part, core producer price inflation was the slowest since August 2016.