Friday, October 2, 2020

Top charts

Here's a quick review of important charts recently updated:

Chart #1

Today's September jobs report was viewed by some as evidence that the recovery was slowing. I've always argued that private sector jobs are much more important than public sector jobs, and they increased by an impressive 887,000 in September (vs +661,000 total jobs). Chart #1 focuses on these two sources of jobs, and both use a y-axis with the same ratio. What stands out immediately is that private sector jobs have grown much more than public sector jobs in the past 12 years, and in recent months. Private sector jobs have now recovered about 54% of the losses that occurred due to the Covid shutdown, whereas public sector jobs—despite Census hiring—have rebounded by much less, and are actually lower today than they were prior to the Great Recession. I'd say the private sector recovery looks pretty much like a V-shaped recovery. More than half the jobs lost have been recovered in just 5 months! And meanwhile the public sector has been slow to recover, one more sign that the private sector is inherently more dynamic than the public sector.

Chart #2

Chart #2 makes the same point: the unemployment rate has reversed much more than half its rise in just 5 months. 

Chart #3

Yesterday's ISM report provided further evidence of rapid recovery. Both the US and Eurozone manufacturing indices have rebounded very strongly from their Covid lows, and both are now consistent with relative healthy economic growth conditions. Note that the Eurozone suffered much more than the US as a result of their early and drastic lockdowns, which in the end did little or nothing to eradicate the virus. 

Chart #4

As Chart #4 shows, Sweden continues to shine. Its refusal to order drastic lockdowns not only allowed its economy to flourish relative to its locked-down neighbors, it allowed the virus to run its course in a relatively short period of time.  Daily covid-related deaths have been extremely low for the past two months or so, even as Swedes have enjoyed the freedom to travel, work, and socialize, all while eschewing those dreadful masks that do nothing to filter out viral particles. It all adds up to pretty good evidence that Sweden has achieved herd immunity. I hasten to add that deaths per million in Sweden (583 per Worldometer.com) put it lower than Belgium, Spain, USA, UK and Italy, and only somewhat higher than other Eurozone economies. BUT, with a much lower overall cost in terms of reduced economic output, lost jobs, unemployment, stress, suicides, etc. And Sweden currently looks like one of the few countries in the world that has "beat" Covid.

Chart #5

Chart #5 shows that swap spreads continue to signal very healthy liquidity conditions and very low systemic risk in both the US and the Eurozone. By this important—and often leading—indicator, the fundamentals look great.

Chart #6

Chart #6 shows two all-important measures of the Fed's monetary policy stance. The real Fed funds rate (blue) is decidedly negative (which implies very easy monetary conditions), while the slope of the Treasury yield is positive. Low real rates and a positively-sloped yield curve strongly suggest we are in the early stages of what could prove to be an extended recovery. At the very least it's safe to say that the Fed poses no risk to the economy for the foreseeable future. Note that all previous recessions were preceded by high real rates and a flat or inverted yield curve slope.

Chart #7

As Chart #7 suggests, the equity market is still somewhat cautious, with the Vix fear index still trading at elevated levels, and prices today about the same as they were prior to the Covid crisis. The Treasury market is even more cautious, given that 10-yr Treasury yields (currently less than 0.7%) are extremely low. The demand for security is still very strong.

57 comments:

  1. Unfortunately -- the US is not Sweden Bro...

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  2. Wishful thinking of a cheerleader for a chaotic administration now in crisis.

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  3. Let's not cherry pick Sweden and mislead about what happened thete.

    Neighbors Norway and Denmark had much better results concerning deaths and hospitalizations. Also much of Asia, outside of China.

    All nations had death rates spike in the spring and then fall a lot, not just Sweden -- including the US, although you might not hear it in the news. Death rates are now approaching seasonal flu levels as doctors learned how to keep patients alive. Thete is still much suffering for about 600 of 1000 infections while deaths are only about 1 of 1000 infections. The 1 of 1000 seem to get all the attention while the 600 of 1000 are often ignored.

    Sweden's economy (real GDP) fell 7 percent in the first half of 2020 which is not particularly good.

    Sweden failed to protect nursing homes.

    Swedish schools were locked down for children age 16 and up.

    The other Swedish "partial lockdowns" were from people there VOLUNTARILY avoiding businesses where social distancing was difficult or not possible -- that's why their economy declined almost as much as the US in the first half of 2020.

    In the earlier part of 2020, when it was very cold, people in China had little reason to fly to Sweden and spread their disease. Many flew to Italy and US, who were both hit hard. The disease went where planes from China went.

    The continual attacks on masks is an anti-science conspiracy theory -- they don't do much but they do reduce the spray distance when an infected person coughs, sneezes or hollers. Useful indoors when other people are in the same room. If a wearer does not cough, sneeze or holler, the mask has done nothing ... but make the wearer uncomfortable. I bought 10 masks in March and used the fifth one today for a fifth doctor visit. I see people running outdoors wearing masks and can't believe it.

    It's clear to me that after the first months or teo, the partial lockdowns caused excessive economic damage. The stock market is up from a Fed engineered 25 percent increase in the money supply over the past year, which needs its own chart, or a chart of Fed Credit.

    There are still over 26 million people collecting unployment compensation, including federal programs where significant lost paid work hours allows people to collect, not just having zero hours of eork. That's only down from the peak of 32 million in May and reflects economic damage BETTER than the BLS unemployment rate or the S&P500 index.

    The partial lockdowns after May had no scientific justification and were an unprecedented theft of our freedom.

    Wishing President TRUMP and the first lady a speedy recovery

    ReplyDelete
    Replies
    1. Agree with most of the above, but would argue that the negative conclusions @Sweden remain early for another 6-12 months guesstimate.

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  4. People are looking to get back to normal.

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  5. Scott, i appreciate your "glass is half full and getting fuller" rather than "glass is half empty and evaporating". keep up the good work.

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  6. There are still so many unknowns that each side cherry picks whatever country they like to show that whatever doesn't or does work: masks, social distancing, lockdown, big testing numbers, contact tracing, it goes on.

    Sweden's experience is still pretty confusing. Japan is also in that category. Evidently they didn't do much to change everyday life, and have been extremely successful.

    The thing that has definitely gotten better is the medical therapy. The case/motality rate has plummeted. That is always a flawed measure early in the epidemic because of low quality testing data: number of tests, accuracy of tests, etc.

    My opinion: masks and social distancing work. Because they aren't perfect, the data are "statistical/probability"- oriented, so again, each side will cherry pick.

    Having said that, total lockdown MUST be avoided. There needs to be some kind of compromise, featuring protection of at-risk people.

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  7. A good discussion of Sweden's corona virus' strategy from the NY Times:

    https://www.nytimes.com/2020/09/29/world/europe/sweden-coronavirus-strategy.html

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  8. Yet another great post by Scott Grannis.

    It is just overwhelming to ponder Sweden...consider the millions unemployed, the small-business people crushed, the family and religious meetings not held.

    And for what?

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  9. The Financial Times attempts to capture Excess Deaths due virus. I can't verify their methodology, but they show US with 273,000 thru late August, Sweden with 5700 thru early September, Norway with 300 thru late August, and Denmark with 500 thru mid August.

    https://www.ft.com/content/a2901ce8-5eb7-4633-b89c-cbdf5b386938

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  10. This comment has been removed by the author.

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  11. Sweden hit a 3 month high in new cases. As the weather gets colder, people are doing more inside. There is less eating outdoors. If cases continue to rise in October, there will be a spike in deaths in November due to the lag in reporting.

    Sweden(-8.6%)'s 2nd quarter GDP growth is worse than neighboring countries, Norway(-6.3%) Finland(-3.2%).

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  12. This is the only blog that points out the supply of money is being met by the demand. All the goldbugs et. al merely mention the huge supply "money printing bad" without discussing the demand.

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  13. So, don't limit your analysis to Sweden and the focus on only one country. Let's jump over to Taiwan with 27 million people and seven, yes that is seven, deaths from the virus. News stories tell us that the Taiwan success was due to preparation for such an event, something the U.S. was cavalier about.

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  14. "dreadful masks that do nothing to filter out viral particles". An economics blogger is giving epidemiological advice. Be careful folks.

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  15. If the comparison is strict controls compared to loose controls, then South Korea's 2Q gdp of -3.2 was impacted less than Sweden's 2Q gdp of -8.6.

    Sweden's cumulative deaths per capita is worse than 40 other European countries.
    https://www.worldometers.info/coronavirus/#countries

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  16. What do we know about Lael Brainard?

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