Key Takeaways
- Real-time high-frequency economic data for the U.S. is hinting that the lockdown-led plunge may now be behind us and that normalization has begun.
- As restrictions on economic and social activities are gradually lifted, mobility is on the rise, new business applications and mortgage applications have bounced, and consumer confidence appears to have found a bottom.
- Still, unemployment claims remain uncomfortably high, but are ebbing. Activities directly affected by social distancing--retail, recreation, leisure, traveling, restaurants, and hospitality--are off their lows, but have improved only modestly.
Shelter-in-place rules have minimized close contact between people, which, in turn, has helped reduce the spread of coronavirus (see chart 1). A reduction in new cases has provided confidence to states to start letting businesses reopen, with varying constraints (see chart 2). The absence of credible treatment for COVID-19 leaves many wary of the trade-off between health risks and economic risks.
As restrictions are gradually loosened, mobility comes first. Apple and Google mobility data shows a marked pickup in driving, walking, and park visits (see charts 3-4). While mobility is still well below normal in other areas, the bounce in new business applications and mortgage applications is a green shoot of the coming recovery (see charts 5-6).
Chart 1
Chart 2
Chart 3
Chart 4
Chart 5
Chart 6
Consumer confidence appears to have stabilized, and retailers that have survived the shutdown appear to have at least found the bottom, for now (see charts 7-8). But pressure on people-facing businesses and industries remains unprecedented--a result of a mix of government restrictions on capacity and a curbing of customers' demand based on fear of venturing out (see charts 9-12).
Chart 7
Chart 8
Chart 9
Chart 10
Chart 11
Chart 12
Machines are starting to hum again after finding a bottom, but they are far from roaring. A lower oil price will help cost of production in manufacturing sectors and consumer travel, but it leaves the energy industry itself still looking to find a bottom (charts 13-16).
Chart 13
Chart 14
Chart 15
Chart 16
As industries are warming to producing and shipping again, weekly rail traffic has also stabilized, albeit at recent lows, with none of the 10 carload commodity groups posting an increase compared with the same week last year (see chart 17).
We like to follow the New York Fed's composite Weekly Economic Index (WEI) closely to see how our forecast from more than a month ago is holding up. WEI is an index of real economic activity using timely and relevant high-frequency data. It represents the common component of 10 daily and weekly series covering consumer behavior, the labor market, and production. Current WEI implies an 11% decrease in real GDP year over year, close to our forecast of second-quarter growth with more than a month left in the quarter (see chart 18).
Chart 17
Chart 18
Meanwhile, jobless claims remain high but are ebbing. In the past, weekly claims have been the best indicator of normalization, and the most recent jobless claims data reflects the labor shakeout that the economy went through. Initial jobless claims have totaled 38.6 million since mid-March, suggesting that roughly 25% of the 152 million people employed in February have lost jobs because of this crisis.
Continuing claims (which adjusts for some folks that may have gone back to work after some measures of lockdown were lifted) appeared to have stabilized in the beginning of May, but the most recent data reflecting the week of May 9 was disappointing as they ticked back up again. Some of the numbers could reflect a clogging up of the system that has been backlogged for a while. Still, the uptick in continuing claims last week is what keeps us wary about the recovery path. The sooner and faster this indicator turns back down, the better the prospects of a smoother recovery (see charts 19-20).
As businesses begin to reopen in coming weeks and start to reemploy workers, the number of continuing claims (25.1 million in the week of May 9) should begin to recede. Aside from the increasing product demand effect as social distancing restrictions loosen, continuing jobless claims should recede in coming weeks as portions of the Paycheck Protection Program (PPP) program's loans used by businesses for payrolls will be forgiven if they rehire workers by June 30, 2020.
Chart 19
Chart 20
This report does not constitute a rating action.
The views expressed here are the independent opinions of S&P Global's economics group, which is separate from, but provides forecasts and other input to, S&P Global Ratings' analysts. The economic views herein may be incorporated into S&P Global Ratings' credit ratings; however, credit ratings are determined and assigned by ratings committees, exercising analytical judgment in accordance with S&P Global Ratings' publicly available methodologies.
| U.S. Chief Economist: | Beth Ann Bovino, New York (1) 212-438-1652; bethann.bovino@spglobal.com |
| U.S. Senior Economist: | Satyam Panday, New York + 1 (212) 438 6009; satyam.panday@spglobal.com |
| Research Contributors: | Debabrata Das, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai |
| Arun Sudi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai | |
| Shruti Galwankar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.