A look behind at the April 6 week shows a relatively empty one in the lead up to the Easter weekend. There was little data on the economic calendar and comments from Fed officials were few, although Brookings webinars helped freshen the conversation about the central bank’s response to the COVID-19 pandemic.
The release of the FOMC meeting minutes from March 15 on Wednesday and Chair Jerome Powell’s subsequent comments on Thursday emphasized that the Fed’s actions are what they would do in the wake of a natural disaster. The Fed has and will continue to ensure that the financial system functions and that credit is plentiful and of a meaningful size to help businesses and individuals get through the present situation. New liquidity measures were announced on Thursday to add to or expand the ones already in place. Powell said the priority right now is to allow those on the front lines of health care to do their jobs and address the public health crisis. He warned against easing up too soon on efforts to keep the contagion in check as detrimental to ensuring a sound and hopefully faster recovery from the severe and swift economic downturn.
There was no surprise in the onslaught in initial jobless claims in the week ended April 4. The unadjusted level dipped 261,000 to 6.203 million in the week, although that was hardly much relief. In the past three weeks, there have been 15.139 million claims filed. Not all of these will make it on to the continuing claims rolls, although local authorities will probably be generous in approvals. The unadjusted insured rate of unemployment more than doubled to 5.6% in the week ended March 28 from 2.3% in the prior week. A rapid escalation in unemployment is a clear signal of recession.
The preliminary April University of Michigan Consumer Sentiment Index lopped 18.1 points off the final reading of 89.1 in March to reach an over 8-year low of 71.0. In early April, consumers were deeply affected by the rapid and widespread layoffs associated with COVID-19 containment measures. Many were worried that temporary layoffs could turn into permanent job losses. Many of those who are not eligible for unemployment benefits were facing financial hardship that will only be somewhat alleviated by government assistance if and when that arrives.
In the near term, inflation expectations were down again in April due to weak energy prices. The University of Michigan Survey of Consumers put the 1-year reading down a tenth to 2.1%. However, expectations for prices in the 5-year measure – better aligned with what the Fed thinks of as the medium term – rose 0.2 to 2.5%, a reading that is anchored, if low.
The NFIB Small Business Optimism Index for March was released a week sooner than expected, but a welcome development in light of the hunger to have solid information about economic conditions. It was no surprise that the index fell to 96.4 in March from 104.5 in February and was the lowest since 94.1 in September 2016. Essentially, any gain in business confidence in the past three years has been wiped out. Business are anticipating declines in revenues, and planning to make fewer investments in capital equipment as well as hire fewer workers.
As expected, the headlines in the March Final Demand Producer Price Index and Consumer Price Index were pulled down by the energy component where prices were falling substantially at a time of year when these more typically rise. There wasn’t much evidence of other prices seeing a large impact from the measures taken to limit the spread of COVID-19, but April’s data may see the impacts on things like medical commodities and other scarce items.
The data on Job Openings and Labor Turnover (JOLTS) for February was too out-of-date to elicit more than a brief glance. There was a slight hint of loosening in labor market conditions in the numbers, but the March data will be far more interesting.
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