The top-line ISM Manufacturing Index declined to 41.5 from 49.1, confirming that the economy sank into recession in March. The forward-looking new orders component declined to 27.1 from 42.2 and the employment sub-index collapsed to 27.5 from 43.8. … READ MORE >
Economics
New data on spread of coronavirus shows need for caution on relaxing restrictions
After a two-week period of fewer cases of the coronavirus, Americans are moving gingerly toward a resumption of normal social and professional activity. The next few weeks will be instructive as to the logic of reopening the economy, new infections and rising deaths. … READ MORE >
Federal Reserve expands Main Street Lending Program: Changing market and financial structure for middle market firms
The Federal Reserve on Thursday updated the terms of its soon-to-be-launched Main Street Lending Program targeted at middle market companies, expanding eligibility for lending to a broader group. The Fed said businesses with annual revenues of up to $5 billion and staff of up to 15,000 employees may be eligible, up from a prior $2.5 billion in revenue, and 10,000 employees, respectively. The minimum loan size has been dropped to $500,000 from $1 million. … READ MORE >
Initial jobless claims, state by state: Washington, Oregon, Nevada and Georgia report significant increases
While most states showed significant decreases in claims, four states — Washington, Oregon, Nevada and Georgia – reported significant increases. Jobless claims in Iowa also increased, which matches up with the news of the disease spreading through employees at meatpacking plants. … READ MORE >
American Badlands: 30 million unemployed in six weeks
In just over six weeks, 30.2 million Americans have joined the ranks of the unemployed, which implies a near real-time unemployment rate of 23.8%. For the week ending April 25, approximately 3.83 million individuals filed for first-time unemployment claims. … READ MORE >
FOMC meeting: Prelude to policy innovation ahead
In our estimation, the Fed is caught in the interstitial between its current rate, forward guidance polices and what we think will be a policy of yield curve control that will need to be put in place in 2021. … READ MORE >
RSM Manufacturing Outlook Index shows six-standard-deviation hit
The RSM Manufacturing Outlook Index is now tracking at 6.3 standard deviations below normal conditions, surpassing levels seen during Global Financial Crisis of 2007-08 and even the global debacle of the July 1980 “double dip” recession. This reading strongly suggests that the Institute of Supply Management’s Purchasing Managers Index—a closely watched gauge of manufacturing activity—will post a historical low of 36 in the time series when ISM releases its monthly report on May 1. … READ MORE >
First-quarter GDP: Depression-like shock, no depression
Depression-like shock, and no depression, are likely to be the mantras for policymakers following this morning’s 4.8% drop in U.S. first-quarter gross domestic product. That drop in output and the 7.6% decline in household consumption almost certainly understate the depth and breadth of the collapse in economic activity. … READ MORE >
Sources of deflation: Measuring distress in the real economy and financial markets
The magnitude of the economic shocks strongly implies that the probability of a general decline in prices — a dynamic known as deflation — is rising. This is happening despite $3.4 trillion in liquidity commitments and $2.89 trillion in fiscal support. … READ MORE >
Monetary policy in an era of pandemic economics
The Fed has put together nine different lending facilities and put forward liquidity commitments that run in the trillions. While we expect the Federal Open Market Committee to restate its commitment to keeping short-term rates as low as possible for as long as necessary, there will be more policy innovation coming in the near term. … READ MORE >