New kid on the block
New unemployment claims increased 847k last week, coming in well below expectations for 875k, but this remains significantly higher than the 100k-200k range we were seeing pre-COVID. The total number of Americans receiving some form of unemployment benefits increased 2.29m to 18.28m (most of that’s related to people rolling onto the unemployment funds included in the stimulus package passed in December).
Moral of the story: Unemployment continues to be an issue as government-mandated shutdowns keep fluctuating in different parts of the country. In positive news, Johnson & Johnson announced a successful single-shot vaccine (vs Moderna and Pfizer’s double shots). The US Government is expected to receive 100m of these doses with the option to order an additional 200m. Having an additional vaccine producer out there is good news and should help us get past this quicker, which would also bring some life back into the labor market a bit faster.
Slow starts
The US economy grew 4% in the fourth quarter of 2020, which is slightly below expectations for a 4.3% growth rate. This brings the full-year 2020 growth to a -3.5%, which is the worst year for the US since the end of WWII. Growth for the quarter was positively impacted by increases in exports, nonresidential fixed investment, consumer spending, residential investment (housing market is still red hot), and inventories.
Moral of the story: Economic growth plummeted in the second quarter of 2020, rebounded in the third quarter, and totally lost steam as we closed out the year. The vaccine roll-out has been slower than initially expected and it’s likely that 2021 is going to start off pretty slow. Hopefully we start to see a sustainable recovery in the second half of this year.
Uncle Sam to the rescue
The International Monetary Fund is more optimistic about its expectations for 2021. However, their expectations are tempered by the emergence of new strains of the virus, which are more infectious and potentially more dangerous compared to the original strain. Parts of the world have taken strict measures to help curb the impact of these new strains (Europe has probably been most aggressive). On the other hand, the IMF revised their expectations for US growth higher by 2% driven by the elevated levels of federal stimulus.
Moral of the story: Even as individual countries start getting their affairs in order on the other side of this mess, it’s going to take a while before the global economy starts humming the way it was in 2019.