Many Don’t See A Stimulus Passing In 2020

Update On Stimulus

The latest headlines on the stimulus sound good, but many are actually quite skeptical. On Thursday, McConnell stated he has seen “hopeful signs” for a deal, but he released a $500 billion proposal. He hasn’t moved his stance in the past few months. Pelosi and Schumer backed the $908 billion bipartisan proposal. McConnell stated on the Senate floor. “Compromise is within reach. We know where we agree. We can do this.”

They definitely know where the other side is since this has been going on for months. The problem is neither side is willing to move enough. McConnell wants liability protections for businesses and universities which the Dems don’t want. The Dems want help for state and local governments which McConnell doesn’t want. They are also negotiating on an omnibus spending deal. It's unlikely that there will be a stimulus passed before the Senate special elections. There might be a spending bill passed.

The Georgia Senate elections complicate things. The election is on January 5^th. In an average of 3 polls, the Republican Perdue is up by 0.7%. In an average of 4 polls, the Dem Warnock is up by 2.4%. Some think that Perdue and Warnock will win. Usually, the GOP does well in non-presidential elections. However, Loeffler is dealing with the controversy over her selling stocks after getting briefed on COVID-19 earlier this year.

Moody’s has come up with 3 scenarios of how fiscal policy impacts the unemployment rate. As you can see from the chart above, the unemployment rate will be flat in 2021 if there is a $1.5 trillion stimulus. It will rise modestly with a $650 billion stimulus and get to almost 10% with no stimulus. However, Moody’s has been too negative for the past few months. Unemployment rate will fall below 6% by the end of next year regardless of whether a stimulus is passed. 

Vaccine Headlines

There were 2 news headlines on the vaccines. A study of the Moderna vaccine stated participants had high antibodies after 119 days. The firm still expects to have 20 million doses in America by the end of the year and between 100 and 125 million doses available globally by Q1 2021. 

On the other hand, Pfizer cut its 2020 vaccine rollout target by half because the raw materials in early production didn’t meet its standards. Its 1.3 billion dose expectation in 2021 wasn’t changed. It’s better that Pfizer is getting things right now rather than needing to do a recall in 2021. We are within 1-2 months of the virus being cut down by these vaccines.

Was This A Great Unemployment Claims Report?

Jobless claims fell sharply, these great results were likely due to the Thanksgiving holiday. We must wait until next week to see if this really was a good report. We can expect a jump in initial claims next week. Last week’s initial claims reading was revised up from 778,000 to 787,000. 

In the week of November 28^th, initial claims fell to 712,000 which was dramatically below estimates of 780,000, and the lowest estimate which was 755,000. It’s extremely rare for estimates to be this off. The holiday caused this.

That’s just like how COVID-19 data has been manipulated by Thanksgiving. First, results got better, which really was just because of sparse reporting. Then results go much worse as a boatload of data was dumped. We won’t know if Thanksgiving caused COVID-19 to spread until mid-December. 

For your information, there are now 100,667 people in the hospital because of the virus; the 7 day average of deaths is 1,780 which is the highest since the spring. The reopening stocks would be crashing if it wasn’t for the vaccines. We can expect hospitalizations to start falling in February because of the vaccines.

Unadjusted initial claims fell from 836,000 to 714,000 which was a new cycle low. That was the biggest decline since the week of August 8^th. PUAs fell 30,000 to 289,000. As you can see from the chart above, there was a 13% drop in unadjusted total claims which was the biggest decline since late September. It ended the 2-week increase streak. It was wrong about this streak being long because we didn’t realize Thanksgiving would cause claims to drop like a rock.

Big Problem Coming

Seasonally adjusted continued claims fell from 6.089 million to 5.52 million. If this was an accurate depiction of the labor market, meaning there were no people on pandemic benefits, the labor market would be a few weeks away from being ok. However, it’s not. In fact, 13.4 million people are on the verge of losing their benefits if they aren’t extended before December 26^th.  

As you can see from the chart above, the blue bars show there are 14.9 million short term claimants; the red bars show there are 5.25 million long term claimants. The light red and light blue bars show the 13.4 million people who are on the verge of losing their benefits. It would be so easy for the government to extend these benefits for 2 months, but it won’t do it.

Another Decline In Job Cuts

We got another very good job cuts report. There were 64,797 job cuts announced in November which was up 45% from last year; this was the 2^nd lowest reading of 2020. It was down from 80,666 in October. There have been 2.228 million cuts this year which is a 298% increase from last year. 

In fact, there have been more job cuts in entertainment (857,620) than all the other industries combined in 2019. There have been more cuts in California and New York in 2020 than every state combined in 2019. There were 185,504 hires in November which is higher than every other November since at least 2015. Many are excited to see the massive decline in job cut announcements in 2021.