Getting nowhere
Fed Chairman Jerome Powell spoke to the National Association for Business Economics on Tuesday and restated the need for additional stimulus from the federal government. His argument, which is fair, is that too little support would lead to more businesses declaring bankruptcy and create additional pressure on the labor market. Too much support, on the other hand, doesn’t present as much risk (except our debt continues to pile on astronomically). So, the risk/reward balance is skewed in favor of more federal support.
Moral of the story: Despite what the Fed recommends, we’re in a political battle unlike any I remember in the recent past and unfortunately Americans are losing out. Meanwhile, Democrats and Republicans are having a pissing contest in DC and failing to reach any sort of resolution. Based on the current state of affairs, I’d assume by the time they’ve reached a resolution, we will have moved on from pumpkin spice lattes to peppermint mochas, at least.
Same old, same old
The labor department publishes a report that shows hiring and job openings (on a month delay unfortunately) but it tends to be a good indicator of future job growth just because it gives us an idea of whether employers are looking to hire in the future. Job openings in the private sector fell in August across almost all industries. An interesting number from this report is the quits rate – it tells us how many people left jobs on their own – and it fell to 2.2%, which is a percent lower than last year and indicates people are less confident of leaving their jobs in the current environment (checks out).
Moral of the story: The pace of new jobless claims hasn’t slowed down and continuing jobless claims are still close to 11m. Based on this report (and the September jobs report we saw last week) it seems like the prospects for those unemployed are pretty grim at the moment. This just reiterates the need for additional federal stimulus to help industries like travel, entertainment, and hospitality that are struggling because of no fault of their own, but just because COVID-19 is still a thing.
Services recovery
The services economy – retailers, restaurants, bank, hospitals, all the things that aren’t manufacturing – expanded again in September based on the ISM Services Index. The index is based on surveys of senior executives and asks if things are getting better or worse than the prior month, but it doesn’t necessarily measure how much better. Most promising was the employment picture – it turned positive for the first time since February. This would suggest that companies are hiring more workers than they’re letting go, which makes sense if you had let go of most of your employees earlier during the pandemic and are now slowly bringing them back.
Moral of the story: The services sector employs eight out of every ten people in the US, so improving conditions here are definitely good to see but the way this index is constructed, it’s hard to really pinpoint the extent of the good news because the employment data are indicating that many industries (entertainment, hospitality, travel) are still seriously struggling. It’ll be difficult to make a broad recovery until we can see some meaningful improvement across all industries.