{"id":1693,"date":"2020-04-02T12:31:56","date_gmt":"2020-04-02T16:31:56","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1693"},"modified":"2020-04-02T12:31:56","modified_gmt":"2020-04-02T16:31:56","slug":"weekly-jobless-claims-and-february-trade-deficit","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1693","title":{"rendered":"Weekly Jobless Claims and February Trade Deficit"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Claims: 6.65 million\/ Deficit: $39.5 Billion\n(down $5 bil.); Imports: -2.5%; Exports: -0.4%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cWith some states, such as Florida, just\ndiscovering there is a pandemic, look for the unemployment claims to remain in\nthe millions for a few more weeks.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Last week, it was reported that new claims for\nunemployment insurance hit a record level that was five times the previous\nhigh.  We doubled that number in today\u2019s\nreport.  In just two weeks, ten million\npeople have applied for unemployment insurance.<\/em><\/strong>  Have we topped out?  That is not clear,<\/em><\/strong> as it appears there\nare still a lot of new claims that could come in from the epicenter, New York,\nas well as other areas that are starting to see more and more shutdowns.  And, of course, those states that were living in\ndenial are starting to wake up and face reality, so claims in those states\nshould begin to skyrocket.<\/em><\/strong>  It is\nnot unlikely that upwards of twenty million people will wind up applying for\nunemployment compensation<\/em><\/strong> and that total will not include those\nineligible, for whatever reason, for the program. There is one really big and\nimportant difference this time: Under the CARES Act, some business owners who\nwould not have been eligible under the old laws can now collect unemployment\ninsurance.  <\/p>\n\n\n\n

The trade deficit narrowed sharply in February<\/em><\/strong>.  The sharp decline in imports point to what\nis likely to be continued significant cutbacks in U.S. purchases of foreign\nproducts.<\/em><\/strong>  As much of the\nFebruary trade numbers reflect decisions made months before, the details really\nare not very relevant to the current or future economy.  But there was distressing news for farmers.  Sales of soybeans, which were expected to\njump after the phase-1 China trade agreement, collapsed.  The idea that China will ramp up its\npurchases of U.S. goods this year is gone.<\/em><\/strong> Maybe next year.  We also sold a lot of energy products, but\ngiven the collapse in demand and price, that will not likely be repeated when\nthe March data are repeated.  And vehicle\nsales, which also rose solidly, you can forget that for a while.  As for imports, fuel and computers were the\nchief products that saw less U.S. demand.  \nBut to the extent that more computers are needed to support the remote\neconomy, that could turnaround.<\/em><\/strong> <\/p>\n\n\n\n

LABOR\nMARKET IMPLICATIONS:<\/strong>  We are headed toward double-digit\nunemployment rates that could breach 20%.<\/em><\/strong>  The CARES Act will soften that rise as it\nmoves workers from the unemployment rolls to private sector payrolls.  One thing it does not do is necessarily create\nmore output.  Businesses don\u2019t have to\nhave the workers do anything to get the money.<\/em><\/strong>  The intention is to create what I would call\na \u201creserve army of the employed\u201d.<\/em><\/strong> \nThese are people who are getting paid by the government but technically\n\u201cemployed\u201d by businesses, no matter what they do or not do.  (Remind you of any other economic system?)  <\/p>\n\n\n\n

For some firms, such as family run businesses, this\nis the greatest thing ever created.  They\ncan hire their family members, to the extent that is legal (<\/em><\/strong>and according to some\naccountants I talked with, to some extent that is the case), and\nkeep the income within the family.  That\nwill allow them to subsidize the business and likely keep them from failing.<\/em><\/strong>  That may also be a rational strategy that\nfirms that didn\u2019t employfamily members might employ.  What that means for the unemployment rate is\nunclear.  If some of the family members\nhired were not part of the labor force previously, their hiring will not reduce\nthe unemployment rolls.<\/p>\n\n\n\n

Ultimately, the government payroll payments will\nhave to end and private sector companies will have to start earning the money\nto pay those workers.<\/em><\/strong>  That is when demand will become\nkey and for any economic recovery that results, the rubber will meet the road. When\nthe upturn in the economy does appear, we could get a quarter or two of very\nstrong growth, but only because we fell so far so fast.  It is the second and third and fourth\nquarters after the bottom is hit that matter. <\/em><\/strong> Given that as well intentioned as the CARES\nAct is,<\/em><\/strong> and it is targeted more toward workers and small to mid-sized\nbusiness than most previous so-called stimulus packages, it can only do so much.<\/em><\/strong>  <\/p>\n\n\n\n

Thus, what we should really be calling the CARES\nAct is a stabilization plan, not a stimulus plan.  We need that desperately right now.  But it is just a start.  The lasting strength of the recovery will be\ndetermined by how well we wean businesses and households off the welfare state\nand return them to an economy based on capitalism.  <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Claims: 6.65 million\/ Deficit: $39.5 Billion (down $5 bil.); Imports: -2.5%; Exports: -0.4% IN A NUTSHELL:  \u201cWith some states, such as Florida, just discovering there is a pandemic, look for the unemployment claims to remain in the millions for a few more weeks.\u201d WHAT IT MEANS:  Last week, it was reported that new … Continue reading Weekly Jobless Claims and February Trade Deficit<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1693","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1693","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1693"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1693\/revisions"}],"predecessor-version":[{"id":1694,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1693\/revisions\/1694"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1693"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1693"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1693"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}