A look forward at the April 6 week shows a quiet one in advance of the Easter observance on Sunday, April 12. Thursday will see an early close for bond markets and Good Friday will be a full market close even though it is not an official federal holiday in the US. Friday is also a full close for stock markets. I also note that the Passover observance begins on Thursday. This is likely to be a week in which Fed policymakers avoid the spotlight unless necessary.
The minutes of the March 15 FOMC meeting will be released at 14:00 ET on Wednesday. This was the emergency meeting that replaced the previously scheduled routine meeting on March 17-18. There may not be much that will offer guidance on the future path of monetary policy given actions taken in the intervening period and the unknowns about the economy in the wake of measures taken to stem the spread of COVID-19. However, these may be illuminating about just how dire conditions in markets looked to Fed policymakers makers at the time and what other central banks had to say that contributed to the all-in decision to take rates to the effective lower bound, redeploy forward guidance, and begin massive asset purchases that would end the program of balance sheet normalization.
The size of the Fed’s balance sheet crested $4.6 trillion as of April 1. There’s no where to go but up as the Fed will continue buying Treasurys and Agency MBS until credit markets start to function normally again. The next report on Factors Affecting Reserve Balances (H.4.1) is at 16:30 ET on Thursday.
The March data on the Final Demand Producer Price Index is at 8:30 ET on Thursday and the Consumer Price Index is at 8:30 ET on Friday. Plunging gasoline prices will probably be the main factor keeping inflation in check at present. Shortages of some goods – particularly medical supplies – could drive some segments higher, but overall there is not much reason to look for more than tame price movements.
Due to the timing of Good Friday, the preliminary April University of Michigan Consumer Sentiment Index will be released at 10:00 ET on Thursday. Sentiment was down sharply in March to 89.1 from 101.0 in February in large part due to a deteriorating six-month outlook, although current conditions were lower as well. However, April is expected to see the six-month index remain gloomy combined with the rapid deterioration in the current labor market. The index may not reach the bottoms seen in the Great Recession, but it will be definitely for an economic downturn.
Data on initial jobless claims in the week ended April 4 is another big unknown. I would not anticipate another doubling of levels in the week like the massive increase of 2.904 million to 5.824 million claims (unadjusted), but it could still be an enormous number. For the present, I am ignoring the seasonally adjusted number as unrealistic. The seasonal factors simply have no relation to the present circumstances. The four-week moving average has the same problem as it is calculated from seasonally adjusted data and does not encompass enough time to make any reasonable inferences. The insured rate of unemployment is in the same situation and I will be watching the unadjusted rate. For the week ended March 28, I would look for another sharp rise after the up 0.9 point to 2.3% in the March 21 week. Also note that the claims data is for workers eligible for benefits only. Workers who are ineligible may apply, but also may be denied and not move on to the rolls of continuing claims, and additionally won’t be used for the unemployment rate.
The numbers on Job Openings and Labor Turnover (JOLTS) for February at 10:00 ET on Tuesday is so far behind the other data for the labor market that it will get scant attention, expect perhaps to illustrate the stark contrast of how a healthy labor market in one month can see a hard stop in the next.
Wholesale trade for February at 10:00 ET on Thursday will provide a little more information to shape expectations for first quarter GDP when the advance estimate is released at 8:30 ET on Wednesday, April 20.
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