Coronavirus Economic Weekly News 06June 2020

Written by rjs, MarketWatch 666

The news posted last week about economic effects related to the coronavirus 2019-nCoV (aka SARS-CoV-2), which produces COVID-19 disease, has been surveyed and some articles are summarized here. There are several ‘worst-in-years’ economic metrics, and a lot on the employment report plus some other Main Street economic impacts. I conclude with a handful of reports from other counties around the globe. (Picture below is morning rush hour in downtown Chicago, 20 March 2020.) News items about epidemiology and other medical news for the virus are reported in a companion article.

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Federal Reserve Discloses Holdings of $1.3 Billion in Exchange-Traded Funds – WSJ –The Federal Reserve’s first $1.3 billion of purchases of exchange-traded funds that invest in corporate bonds show that funds that focus on buying non-investment grade debt accounted for around one sixth of the central bank’s ETF purchases. The Fed announced plans to backstop debts of investment-grade firms after the coronavirus pandemic led to a deep freeze across credit markets in mid-March, and it subsequently said in April it would backstop debt for so-called fallen angels, or firms that had been rated investment grade as of March 22 but were subsequently downgraded to junk status. As part of the backstops, the Fed on May 12 began purchasing exchange-traded funds that provide broad exposure to U.S. corporate bond markets. The Fed said the “preponderance” of those holdings would be in funds whose primary investment objective was in the market for debts with investment-grade ratings, but officials said they would allow for some purchases of ETFs with exposure to junk bonds. The decision to invest in junk debt has been controversial. Some investors have argued that the central bank risked a deeper credit freeze that would lead to higher unemployment if the central bank shunned riskier assets, while others warned that doing so would reward firms and their investors that were already vulnerable to an economic downturn before the crisis due to heavy debt burdens. The disclosures of 158 transactions cover purchases made between May 12 and 18. Of the Fed’s $1.3 billion in ETF holdings as of May 19, around 17% were in funds that invest primarily in junk debt. The funds the Fed invested in have appreciated 2.7% on average since purchases began on May 12, according to Roberto Perli of Cornerstone Macro, a research firm. The Fed owned $100 million in iShares iBoxx High Yield Corporate Bond ETF, which as of Thursday included small holdings of bonds issued by rental car company Hertz Global Holdings Inc., which filed for bankruptcy protection on May 22. It also included small holdings of retailers J.C. Penney Co. and Neiman Marcus Group Inc. and oil-shale drillerWhiting Petroleum Corp., all of which filed for bankruptcy in recent weeks. Three ETFs accounted for the majority of the Fed’s investments: iShares iBoxx US Dollar Investment Grade Corporate Bond ETF, Vanguard Intermediate-Term Corporate Bond ETFand Vanguard Short-Term Corporate Bond ETF. The Fed can’t purchase more than 20% of an ETF’s assets.

BlackRock Is Bailing Out Its ETFs with Fed Money and Taxpayers Eating Losses; It’s Also the Sole Manager for $335 Billion of Federal Employees’ Retirement Funds → Pam Martens – BlackRock, the international investment management firm run by billionaire Larry Fink, has played an outsized role in Federal Reserve bailouts of Wall Street. As it turns out, it’s also been quietly managing hundreds of billions of dollars for more than five million federal government employees in their retirement plan, known as the Thrift Savings Plan (TSP). During the last financial crisis of 2007 to 2010, the Federal Reserve gave BlackRock no-bid contracts to manage the toxic assets held in three programs known as Maiden Lane, Maiden Lane II and Maiden Lane III. BlackRock was also one of the investment managers for the Fed’s mortgage backed securities purchase program during the last financial crisis. Today, BlackRock has been selected in more no-bid contracts to be the sole buyer of corporate bonds and corporate bond ETFs for the Fed’s unprecedented $750 billion corporate bond buying program which will include both investment grade and junk-rated bonds. (The Fed has said it may add more investment managers to the program eventually.)BlackRock is being allowed by the Fed to buy its own corporate bond ETFs as part of the Fed program to prop up the corporate bond market. According to a report inInstitutional Investor on Monday, BlackRock, on behalf of the Fed, “bought $1.58 billion in investment-grade and high-yield ETFs from May 12 to May 19, with BlackRock’s iShares funds representing 48 percent of the $1.307 billion market value at the end of that period, ETFGI said in a May 30 report.” No bid contracts and buying up your own products, what could possibly be wrong with that? To make matters even more egregious, the stimulus bill known as the CARES Act set aside $454 billion of taxpayers’ money to eat the losses in the bail out programs set up by the Fed. A total of $75 billion has been allocated to eat losses in the corporate bond-buying programs being managed by BlackRock. Since BlackRock is allowed to buy up its own ETFs, this means that taxpayers will be eating losses that might otherwise accrue to billionaire Larry Fink’s company and investors.

BlackRock Authored the Bailout Plan Before There Was a Crisis – Now It’s Been Hired by three Central Banks to Implement the Plan – Pam Martens — It’s called “Going Direct.” That’s the financial bailout plan designed and authored by former central bankers now on the payroll at BlackRock, an investment manager of $7 trillion in stock and bond funds. The plan was rolled out in August 2019 at the G7 summit of central bankers in Jackson Hole, Wyoming – months before the public was aware of any financial crisis. One month later, on September 17, 2019, the U.S. Federal Reserve would begin an emergency repo loan bailout program, making hundreds of billions of dollars a week in loans by “going direct” to the trading houses on Wall Street. The BlackRock plan calls for blurring the lines between government fiscal policy and central bank monetary policy – exactly what the U.S. Treasury and the Federal Reserve are doing today in the United States. BlackRock has now been hired by the Federal Reserve, the Bank of Canada, and Sweden’s central bank, Riksbank, to implement key features of the plan. Three of the authors of the BlackRock plan previously worked as central bankers in the U.S., Canada and Switzerland, respectively. The authors wrote in the white paper that “in a downturn the only solution is for a more formal – and historically unusual – coordination of monetary and fiscal policy to provide effective stimulus.” We now understand why, for the first time in history, the U.S. Congress handed over $454 billion of taxpayers’ money to the Fed, without any meaningful debate, to eat losses on toxic assets produced by the Wall Street banks it supervises. The Fed plans to leverage the $454 billion into a $4.54 trillion bailout plan, “going direct” with bailouts to the commercial paper market, money market funds, and a host of other markets. The BlackRock plan further explains why, for the first time in history, the Fed has hired BlackRock to “go direct” and buy up $750 billion in both primary and secondary corporate bonds and bond ETFs (Exchange Traded Funds), a product of which BlackRock is one of the largest purveyors in the world. Adding further outrage, the BlackRock-run program will get $75 billion of the $454 billion in taxpayers’ money to eat the losses on its corporate bond purchases, which will include its own ETFs, which the Fed is allowing it to buy in the program. Helicopter money is also spelled out in the BlackRock plan, which explains why simultaneously with the $454 billion Congress carved out for the Fed under the CARES Act, fiscal stimulus was also “going direct” with $1200 checks and direct deposits to the little people of America and Paycheck Protection Program loans and grants “going direct” to small businesses.

Michael Hudson: Fed’s $10 Trillion Defends Assets of the Rich –Yves here. I trust you will enjoy Michael Hudson’s discussion of the Fed’s machinations and on the prospects for the economy. Interview by Paul Jay, with transcript. The Federal Reserve is directly buying stocks, bonds, junk bonds, mortgages, junk mortgages, all to prop up the value of assets owned by the top 5%. This does not spur much new production or create jobs.

The Fed Just Unleashed A Trillion In New Debt: Companies Took The Money And Spent It On Dividends While Firing Millions – In a Bloomberg expose written by Bob Ivry, Lisa Lee and Craig Torres, the trio of reporters show how, 12 years after we first laid out the “New Normal” capital misallocation paradigm, we are again back to square one as the Fed actions – which as even former NY Fed president Bill Dudley admits are brazen moral-hazard – have prompted a record debt binge even as corporate borrowers are firing millions of workers while using the debt to – drumroll – make shareholders richer.Take food-service giant Sysco, which just days after the Federal Reserve crossed the final line into centrally-planned markets on March 23 when it assured that it would make openly purchase corporate debt, Sysco sold $4 billion of debt. Then, just a few days after that, the company announced plans to cut one-third of its workforce, more than 20,000 employees, even as dividends to shareholders would continue.That process repeated itself in April and May as the coronavirus spread. The Fed’s promise juiced the corporate-bond market. Borrowing by top-rated companies shot to a record $1.1 trillion for the year, nearly twice the pace of 2019. What happened then was a case study of why Fed-endorsed moral hazard is always a catastrophic policy… for the poor, while making the rich richer:Companies as diverse as Sysco, Toyota Motor Corp., international marketing firm Omnicom Group Inc. and movie-theater chain Cinemark Holdings Inc. borrowed billions of dollars — and then fired workers.Just two weeks ago, Fed chair Powell testified before Congress, and when asked why the Fed is buying investment grade and junk bond debt, Powell responded “to preserve jobs.” That was a blatant lie, because as Bloomberg notes, the actions of the companies that benefited from the Fed’s biggest ever handout called into question the degree to which the U.S. central bank’s promise to purchase corporate debt will help preserve American jobs.Unlike the Small Business Administration’s Paycheck Protection Program, which has incentives for employers to keep workers on the job and is only a grant if the bulk of the proceeds are used to retain workers, the taxpayer-backed facilities that the Fed and Treasury Department created for bigger companies have no such requirements. In fact, to make sure the emergency programs help fulfill one of the Fed’s mandates – maximum employment – the central bank is simply crossing its fingers that restoring order to markets will translate to saving jobs. Instead, what the Fed’s actions have unleashed so far is a new record debt bubble, with more than $1.1 trillion in new debt issuance in just the first five months of the year, even as companies issuing debt are quick to lay off millions!

Coronavirus will cost U.S. economy $8 trillion through 2030, CBO says – WaPo – Fallout from the coronavirus pandemic will shrink the size of the U.S. economy by roughly $8 trillion over the next decade, according to new projections released by the Congressional Budget Office on Monday.In a letter to U.S. lawmakers, the CBO said the U.S. economy will grow by $7.9 trillion less from 2020 to 2030 than it had projected in January. That amounts to a 3 percent decline in U.S. gross domestic product compared to its initial estimate.The stark illustration of the pandemic’s potential economic impact comes one week after White House officials confirmed they would not release their own updated projections this summer in their annual “mid-session” budget review.The pandemic will hamper U.S. economic growth by reducing the amount of consumer spending and closing numerous businesses, the CBO said. Part of the impact will be mitigated by the more than $2 trillion the federal government has already approved in emergency spending for households and businesses.“Business closures and social distancing measures are expected to curtail consumer spending, while the recent drop in energy prices is projected to severely reduce U.S. investment in the energy sector,” said Phillip L. Swagel, the CBO director and former economic expert at the American Enterprise Institute, a center-right think tank.The pandemic’s impact on the U.S. economy has been swift. The unemployment rate jumped from 3.5 percent in February to 14.7 percent in April. Tax revenue plummeted, spending skyrocketed, and the economy quickly contracted after years of growth. The CBO report was requested by Senate Minority Leader Charles E. Schumer (D-N.Y.) and Sen. Bernie Sanders (I-Vt.), who serves on the Senate Budget Committee. The CBO had previously released forecasts for 2020 and 2021.

Budget Office Finds US Economy Won’t Return To Normal Until 2030 – In its first official forecast incorporating the impact from the coronavirus shutdowns, today the Congressional Budget Office said that over the 2020 – 2030 period, cumulative GDP will be $15.7 trillion, or 5.3%, less in nominal dollars than what the agency projected in January. Putting that number in context, the nominal GDP of the US today is $21.5 trillion, in other words over the next decade, the Coronavirus will have wiped out almost one full year of output potential from the US economy.In real, or inflation-adjusted dollars, some $7.9 trillion in economic activity over the next decade will be lost even with the trillion of rescue funding being poured in to offset the pandemic’s impact.Comparing its interim, May 2020 projections to the last official forecast made in January 2020, the CBO said that the level of nominal GDP in the second quarter of 2020 would be $790 billion (or 14.2%) lower than the agency had previously forecast in January 2020 (a number which unfortunately will only grow larger with time especially if the Atlanta Fed’s 52% GDP drop forecast is accurate). Subsequently, the difference between those projections of nominal GDP narrows from $533 billion (9.4% lower in the latest projection) ) by the end of 2020 to $181 billion (2.2 percent lower) by 2030.In real terms, the difference between those projections of real GDP shrinks, to $422 billion in 2019 dollars (7.6% lower in the more recent projection) by the end of 2020 and roughly disappears by 2030. In other words, it will take a decade for the impact of the coronavirus to fully fade away and for the economy to return to its pre-coronavirus normal.The difference between the CBO’s January baseline and the nominal and real cumulative GDP projections is shown below. Curiously, while on a real basis the economy takes a decade to revert to normal, in nominal dollars it appears the US can’t ever recover its previous trendline.

Coronavirus Stimulus Funds Are Largely Depleted After Nine Weeks – WSJ – Nine weeks after Congress approved its largest-ever economic relief measure to counter the coronavirus pandemic, most of the direct cash assistance aimed at keeping the economy afloat has been spent or committed. The so-called Cares Act included a projected $1.2 trillion in direct aid, ranging from expanded unemployment benefits and forgivable business loans to cash payments for households, hospitals, cities and states. Congress topped up that sum in April with an additional $400 billion for small businesses and hospitals. Of the total $1.6 trillion in aid, roughly $1.12 trillion, or about 70%, has been distributed, according to a Wall Street Journal analysis of government data and estimates by the Committee for a Responsible Federal Budget, a bipartisan nonprofit group. “This fiscal stimulus has spent out very quickly relative to reasonable expectations, certainly relative to historical expectations, which is to the credit of the administration,” said Ernie Tedeschi, an economist with Evercore ISI who served in the Treasury Department under President Obama. “In terms of the core assistance to households and businesses, we’re already past the peak,” Mr. Tedeschi said. Direct cash assistance is just one form of coronavirus-related spending; but some economists say it has the biggest impact because it is intended to fill the void in economic activity created by social-distancing measures. “We’re getting most of the benefit from that stimulus right now,” Mr. Tedeschi said. “Virtually everything is committed, and a great deal of it has gone out the door already.” The pace of spending and its impact are at the center of a debate over how much more money is needed to support economic recovery, alongside judgments about how quickly lockdowns should be eased, the progress of the disease and prospects for developing a vaccine. All told, Congress has passed four pieces of emergency legislation authorizing about $3.3 trillion in new spending and tax breaks. Aside from cash assistance, Congress approved measures to make coronavirus testing free, increase health-care funding for states and subsidize paid sick leave for workers affected by the virus. It also allocated to federal agencies more than $330 billion that doesn’t have to be spent until the end of 2021 or later, including funds to the Department of Health and Human Services for researching treatments and a vaccine.

One-Third of America’s Record Unemployment Payout Hasn’t Arrived – Almost one-third of unemployment benefits estimated to be owed to the millions of Americans who lost their jobs as a result of the coronavirus slump haven’t been paid yet, as flagship policies struggle to cope with the unprecedented wave of layoffs. The Treasury disbursed $146 billion in unemployment benefits in the three months through May, according to data published Monday — more than in the whole of 2009, when jobless rates peaked after the financial crisis. But even that historic figure falls short of a total bill that should have reached about $214 billion for the period, according to Bloomberg calculations based on weekly unemployment filings and the average size of those claims. Estimated total claims cost calculated by Bloomberg based on unadjusted continuing claims plus Pandemic Unemployment Assistance claims. Claims data for the last two weeks of May are averages of the prior four weeks, PUA data for the last two weeks are averages of the prior two weeks. The estimated gap of some $67 billion shows how emergency efforts to boost payments, and deliver them via creaking state-level systems, are lagging the needs of a jobs crisis that’s seen more than 40 million people file for unemployment as the economy shut down. The gaps in America’s social safety net are becoming apparent at the same time as protests erupt over longstanding racial inequities. The debate over how and when to reopen businesses even as the pandemic continues is also turning acrimonious, in a nation that increasingly feels like a tinderbox. There’s “a huge hole,” said Jay Shambaugh, an economist at Brookings Institution who has been tracking the unemployment payments. “There’s a lot more money that should have gone out that has not gone out.” The bill is still mounting. Economists estimate that another 1.8 million people filed for unemployment last week. That data is due out on Thursday, while Friday’s monthly numbers are forecast to show a jobless rate of 19.5% in May, the highest since the Great Depression.

Trump, Congress face huge economic decisions over aid as country is rocked by protests – The escalating protests across the United States could intensify a political standoff between the White House and Congress over whether to continue emergency economic assistance for millions of Americans.Policymakers must decide in the coming weeks whether to extend emergency unemployment benefits for more than 25 million Americans. They face growing calls to provide billions of dollars in assistance for states and cities, even as President Trump increasingly feuds with governors and mayors. If lawmakers do not act, about $1 trillion in emergency federal aid used to stabilize the economy will disappear in the next quarter.The expiring aid risks creating a “fiscal cliff” that, if not addressed by lawmakers, could arrest or reverse a rebound, economists say. White House officials and several Republicans have resisted pressure to approve more spending, but they are at odds over how to proceed, and the path forward is unclear.The economic damage continues to come into sharper focus, with the Congressional Budget Office on Monday predicting the coronavirus pandemic’s economic fallout will shrink growth by $8 trillion over 10 years. But political fighting has only worsened since the protests began, and emotions turned raw on Monday. Sen. Edward J. Markey (D-Mass.) called Trump “scum for fueling racist hate and violence in our country” while Trump lit into Illinois Gov. J.B. Pritzker (D) for his handling of the coronavirus during a call with governors.Congress does appear poised to approve changes to a small-business loan program as soon as this week that would give certain business owners more time to access government-backed loans and have them forgiven.Even with that breakthrough, the potential for a sudden cessation of emergency federal help could risk catalyzing extremely heated standoffs across major U.S. cities, many of which are also asking for urgent financial assistance to avoid layoffs and service cuts.

Senate passes changes to Paycheck Protection Program The Senate cleared changes to the popular Paycheck Protection Program on Wednesday that will allow small businesses more flexibility in using the rescue loan funds. The bill, which passed the House last week on a 471-1 vote, now heads to President Trump’s desk for his signature. Senators gave unanimous consent for the legislation hours after Wisconsin GOP Sen. Ron Johnson had raised objections. The coronavirus program provides forgivable loans to help small businesses make their payrolls during the COVID-19 crisis. The bill would extend an eight-week period – when proceeds must be spent for loans to be forgiven – to 24 weeks or until the end of the year, whichever comes first. Businesses would also have as long as five years, instead of two years, to repay any money owed on a loan, and they could use a greater percentage of proceeds on rent and other approved non-payroll expenses. Timing is urgent because the eight-week spending period began expiring last Friday for the first loan recipients after the Small Business Administration program opened April 3. Businesses – especially in the restaurant and hospitality industry, which are only recently getting the green light to reopen – say they need more time to distribute pay. Utah Sen. Mike Lee had also objected to language he and Johnson said would lengthen the application deadline. Maine Sen. Susan Collins didn’t oppose the bill but said she was concerned about the way the House drafted a provision reducing the current requirement that 75% of a loan be used on payroll. Restaurants and other small businesses have said they want flexibility to spend more on overhead expenses, especially in high-rent areas. The bill, HR 7010, would instead require that 60% of a loan be used on payroll. The House bill creates a “cliff,” Collins said in a statement. The current PPP program allows partial loan forgiveness if a company uses less than 75% of a loan for payroll, but the House bill appears to state that none of the loan would be forgiven if the 60% threshold isn’t met. “Instead, the employer is saddled with a debt for the entire amount, and no portion of the loan is forgiven or converted to a grant,” Collins said. Senate Small Business Chairman Marco Rubio last week sought guidance from Treasury on whether that issue can be addressed through regulation. Treasury and the SBA haven’t responded to requests for comment. About $130 billion remains from the second round of $320 billion that Congress approved for PPP. The initial round of $349 billion was tapped in just 13 days.

Close to one in four workers are either on unemployment benefits or are waiting to receive them: Congress must take action –Last week, 2.2 million workers applied for unemployment benefits. This is the 11th week in a row that initial unemployment claims have been more than twice the worst week of the Great Recession.Of the 2.2 million who applied for unemployment benefits last week, 1.6 million applied for regular state unemployment insurance (UI), and 0.6 million applied for Pandemic Unemployment Assistance (PUA). PUA is the new federal program for workers who are out of work because of the virus but who are not eligible for regular UI (e.g. the self-employed). At this point, only 36 states and Puerto Rico are reporting PUA claims. This means PUA claims are still being undercounted. Many commentators are reporting the cumulative number of initial regular state UI claims over the last 11 weeks as a measure of how many people have applied for UI in this pandemic. At this point, I believe we should abandon that approach because it ignores PUA – and is thus an understatement on that front – but may overstate things in other ways (for example, some who were laid off and applied for UI two months ago may now be going back to work). Instead, we can calculate the total number of workers who are either on unemployment benefits, or have applied and are waiting to see if they will get benefits, in the following way: A total of 19.3 million workers had made it through at least the first round of regular state UI processing as of May 23 (these are known as “continued” claims), and 3.5 million had filed initial UI claims on top of that but had not yet made it through the first round of processing. And, 10.7 million workers had made it through at least the first round of PUA processing by May 16, and 3.2 million had filed initial PUA claims on top of that but had not yet made it through the first round of processing. Even further, by May 16, another 436,000 workers had made it through at least the first round of processing in one of the other unemployment benefits programs, the largest of which are Pandemic Emergency Unemployment Compensation – which is available to workers who have exhausted their regular state benefits – and Short-Time Compensation (more on that below). Altogether, that’s 37.2 million workers who are either on unemployment benefits or who have applied very recently and are waiting to see if they will get benefits – 61.4% UI, 37.4% PUA, and 1.2% other programs. Together, that is close to one in four people in the U.S. workforce.

Trump Says He Will Ask Congress To Pass More Stimulus As He Praises V-Shaped Recovery – One day after Bloomberg reported that the White House envisions as much another $1 trillion in the next round of economic stimulus, during his morning press conference praising the payrolls data, President Trump said he’ll ask Congress to pass more economic stimulus, including a payroll tax cut, even after the government reported a surprise improvement in U.S. unemployment on Friday.”We’ll be going for a payroll tax cut,” Trump said as he was celebrating the jobs report that left most economists speechless. “It’s going to be a tremendous incentive for businesses. We’ll be asking for additional stimulus money.”Unironically, just before he announced the need for even more stimulus, the president was praising the V-shaped recovery in both the economy and the stock market.The job surge we’re seeing is widespread across American industries! pic.twitter.com/zLyqEykO3Y – The White House (@WhiteHouse) June 5, 2020I n the same presser, Trump declared Friday a “great day for equality” and a “great day” for George Floyd following a jobs report that showed unemployment falling – except for African Americans – and days of unrest sparked by Floyd’s killing.”Equal justice under the law must mean every American receives equal treatment in every encounter with law enforcement regardless of race, color, gender or creed,” Trump said. “They have to receive fair treatment from law enforcement.””We all saw what happened last week. We can’t let that happen,” he continued, referencing Floyd’s death.”Hopefully George is looking down right now and saying this is a great thing that’s happening for our country. This is a great day for him, it’s a great day for everybody. This is a great day for everybody. This is a great, great day in terms of equality.”

The Secret, Absurd World of Coronavirus Mask Traders and Middlemen Trying To Get Rich Off Government Money – I was watching footage of secret stockpiles of N95 masks, so-called proof-of-life videos sent to me by strangers, when Tim, the juicer salesman, called.“My name is Tim, and I heard you’re looking into VPL,” the man said in a squeaky, nervous timbre. “I distanced myself from the company because they weren’t delivering what they said.”A few hours earlier, I had called the owner of VPL Medical LLC, a company outside Los Angeles that had gotten a $6.4 million contract from the Department of Veterans Affairs to supply 8 million three-ply surgical masks to hospitals dealing with the COVID-19 crisis. My call freaked them out, Tim said, and someone at the company had passed my number along to him.Tim, whose last name is Zelonka, said he had driven halfway to that office park from West Hollywood with his briefcase stuffed with cash when his deal to buy a relatively small amount of masks from VPL fell through. He said he thought perhaps he had asked too many questions of a company representative – about where the masks were sourced, if they were kept in sanitary conditions and about the company’s credentials. “He said: ‘They’re not in boxes. They’re in Ziploc bags,’” Zelonka said, recounting his conversation with VPL’s representative. “And I said: ‘That’s not what you’re advertising. You’re advertising made in the U.S.A. and in sealed packaging.’” That’s when Zelonka said the deal was abruptly canceled by the representative, whom I’d later learn was sued by the Federal Trade Commission in 2018 for a robocalling scheme that involved bogus smoking cessation treatments and sexual performance enhancement pills. I had called VPL because records showed the company incorporated just four days before it won the VA deal, and it went on to win another $14.5 million no-bid contract the next day from the federal office in charge of the national stockpile. Its new website featured a photo of the sort of “ear loop” mask the federal government has since branded as ineffective Chinese knockoffs. The moniker stands for Viral Protection Labs, but the labs exist only in the stock art chosen for the website.

Hydroxychloroquine debate spills into congressional campaigns – Five months ahead of the general election, Democrats are escalating their attacks against Republicans over the use of a malaria drug to treat Covid-19, dragging a highly polarized medical debate even further into the political realm. The Democratic Congressional Campaign Committee in recent weeks has vocally criticized two GOP incumbents and two challengers for echoing President Trump’s enthusiasm for hydroxychloroquine in March and April. Joe Biden, Trump’s presumptive Democratic challenger, has seized on the president’s remarks, calling his hydroxychloroquine advocacy “totally irresponsible” after the president announced he was taking the drug as a preventive measure. For his part, Trump has dismissed concerns about a growing body of evidence that the drug is not an effective Covid-19 treatment, and concerns about potential side effects, as politically motivated. “If you look at the one survey, the only bad survey, they were giving it to people that were in very bad shape, they were very old, almost dead. It was a Trump enemy statement,” Trump said of one study. Since Trump first began touting hydroxychloroquine, the debate has turned its attention from promising anecdotes from individual patients and doctors to a growing body of scientific research that shows the drug is not effective. In late April, the Food and Drug Administration, led by a commissioner Trump appointed,warned against using hydroxychloroquine outside of a hospital or clinical trial setting. The French government and several others have since banned use of the drug to treat Covid-19. The debate has effectively served as a dividing line in U.S. politics: In large part, Trump’s supporters and sympathetic media outlets echoed the president’s enthusiasm, while Democrats, with some notable exceptions, generally sided with scientists who insisted there was no reliable science indicating hydroxychloroquine could help treat Covid-19. Robyn Patterson, a DCCC spokeswoman, said the group’s messaging aimed to highlight Republicans pushing hydroxychloroquine “like hotcakes” even as other governments have banned its use for Covid-19. “It’s reckless and irresponsible for Washington Republicans and their candidates to promote a potentially lethal and scientifically-discredited cure because they think it will improve their lot in the President’s eyes,” she said.

Experts warn of dire global health consequences if U.S. withdraws from the World Health Organization An American withdrawal from the World Health Organization could wreak profound damage on the global effort to eradicate polio and could undermine the world’s ability to detect and respond to disease threats, health experts warned. The experts, from the United States and beyond, are aghast at President Trump’s announced intention to leave the organization, which he publicly blames for not being tougher on China in the early days of the Covid-19 pandemic – at a time when he himself was praising China’s unprecedented efforts to control the SARS-CoV-2 virus. The agency has not yet commented on Trump’s announcement. If it leaves the organization, which was established in 1948, the United States will give up an outsized role in the global health agency and the setting of global health priorities. While Trump has accused the WHO of kowtowing too much to China, in reality, experts acknowledge, other countries have sometimes bristled at how much sway the U.S. has at the Geneva-based agency. “The U.S. has always had an extraordinary influence at the WHO – I mean to the extent that other countries have complained about American influence,” Ilona Kickbusch, a long-time former WHO official and chair of the Global Health Centre at the Graduate Institute of International and Development Studies in Geneva.In fact, when the WHO underwent a series of reforms following its catastrophic early response to the 2014 West African Ebola outbreak – including setting up a permanent health emergencies program – a lot of the changes implemented were made at the behest of the United States, said Ashish Jha, director of Harvard’s Global Health Institute. The ranks of WHO’s staff are swollen with Americans, some hired directly – such as Stewart Simonson, one of the agency’s assistant director generals – others on secondment from the Centers for Disease Control and Prevention or other agencies. Were the U.S. to pull out of the WHO, it’s unclear what would happen to the Americans in its ranks – including Maria Van Kerkhove, the WHO’s leading expert on coronaviruses, who flanks Director General Tedros Adhamon Gheybreyesus during the agency’s three-times-weekly Covid-19 press conferences.

Why the Neoliberal Agenda is a Failure at Fighting Coronavirus The utter failure of private capitalism to prepare for the coronavirus should have surprised no one. Private capitalism, as business school graduates repeat, focuses on profit. The “profit incentive,” they learn, makes private capitalism the superior, “most efficient” economic system available. That is its “bottom line” and “chief goal.” The problem is that to produce adequate numbers of testing components, masks, gloves, ventilators, hospital beds, etc., and then to store, secure, monitor, maintain and demographically stockpile them were not and are not privately profitable businesses. Of course, private capitalism’s failures could have been offset if governments compensated for them. Governments might have purchased the necessary medical supplies from private capitalists as they emerged from production at prices yielding them good profits. Governments could then have stored, monitored, replenished, and stockpiled them, and absorbed the costs and risks involved. Indeed, governments in many countries did that. But few maintained stockpiles sufficient for “abnormal” or “serious” viral threats. Most stockpiled only smaller “normal flu” levels of the needed medical supplies. Another pertinent example is government intervention to procure military supplies. It is privately unprofitable to produce, store, secure, monitor, and strategically stockpile tanks, missiles, guns, airplanes, etc., needed for war or “defense.” Private capitalists would not likely produce or import them given the risks and uncertainties of future military conflict. So governments contract to buy them as they are produced at prices profitable for private producers of military supplies. Governments cover the costs and risks of storing, securing, and stockpiling. These immense government subsidies to private capitalists get justified as requirements of national security. What governments do to prepare for military security they do not do (or do inadequately) for health security from, for example, dangerous microbes. Yet viruses have threatened human beings at least as long as military conflict has. Many more Americans were killed by the 1918 influenza pandemic than died in the 1914-1918 world war. Coronavirus has already killed many more Americans than died in the Vietnam War.

New Poll Says a Majority of Americans Would Privilege Slowing the Spread of COVID-19 Over Restarting the Economy (Despite the Relentless Assault of Get Back to Work, Slackers! Propaganda) – Jerri-Lynn Scofield – A hot-off-the-presses Washington Post- ABC News poll says the majority of Americans surveyed would prefer policies that slow the spread of COVID-19, even if they come at the expense of restarting the economy. This poll was taken before the recent riots swept across the country to slam businesses with physical damage as they were just beginning to reopen their doors, according to the Wall Street Journal, Retailers and Restaurants Hit in Protests, Adding to Coronavirus Damage: Many retailers and restaurants, already crippled by the coronavirus pandemic, are grappling with damage to their properties and new closures following protests sparked by the death of George Floyd that have sometimes turned violent. From Minneapolis, where Mr. Floyd died while handcuffed and in police custody, to California and Georgia, big and small retailers and restaurants have shut locations in anticipation of violence or are working to rebuild after destruction over the past week. And poll results show resistance to business interest-driven propaganda that purport to show many Americans (of the US variety) either itching to get back to work for the sheer pleasure of so doing, or beg to be able to resume their jobs driven by desperation and the failure of U.S. politicians to assist their constituents economically – as by contrast virtually every other developed country has done – so they can shelter in place and not have to trade off their health against their basic economic survival. More telling I think is the observation that the polling results correspond to the partisan preferences of respondents. As the Washington Post tells the story in Despite widespread economic toll, most Americans still favor controlling outbreak over restarting economy, Post-ABC poll finds: Nearly 6 in 10 Americans say the coronavirus outbreak has exacted a severe economic toll on their communities, but a majority of a divided country still says controlling the virus’s spread is more important than trying to restart the economy, according to a Washington Post-ABC News poll. The nationwide survey finds that despite the shared disruption of their daily lives since stay-at-home orders began, partisans differ sharply on how the country should move forward. In the starkest split, 57 percent of Americans overall and 81 percent of Democrats say trying to control the spread of the coronavirus is most important right now, even if it hurts the economy. A far smaller 27 percent of Republicans agree, while 66 percent of them say restarting the economy is more important, even if it hurts efforts to control the virus. Nearly 6 in 10 independents say their priority is trying to control the virus’s spread.

US Federal Bureau of Prisons implements full lockdown amid mass protests across the country – The Federal Bureau of Prisons (BOP) has placed its facilities on full lockdown as protests triggered by the police murder of George Floyd have spread across the United States and internationally. The BOP runs all federal prison facilities which house nearly 13 percent of all prisoners in the US. This is the first action of this kind since 1995, when a series of prison rebellions beginning in Talladega, Alabama engulfed the system. On Sunday, the BOP sent an announcement to its employees stating, “The BOP has implemented a national lockdown as of 4 p.m. due to the ongoing unrest and riots nationwide.” It continued, “We will assume lockdown protocols for everyone’s safety and until it is calm around the nation.” The BOP oversees 122 prisons across the country with 165,575 inmates and 36,846 employees. This action coincides with an increasingly acute health crisis within the entire US prison system due to the spread of COVID-19. As of May 27, in all US prisons and jails, at least 34,584 people have tested positive for the virus and 455 have died. In BOP facilities alone, there have been 5,239 cases and 64 deaths. Given the widespread lack of testing, these figures are likely an underestimations of the virus’ true toll. Despite a widely-publicized release order by US Attorney General William Barr on April 23, since the beginning of the pandemic only 3,000 BOP inmates have been released. This mirrors slow releases across the entire US prison system since the beginning of the COVID-19 pandemic. As federal law enforcement agents, BOP personnel have also been intimately involved in the violent and unconstitutional attacks by the capitalist state on protesters across the US in recent days. On Tuesday, Barr directed the BOP to send prison riot teams to Miami and Washington, D.C. As early as 7:30 a.m. on Wednesday morning, heavily armed riot teams were seen guarding roads approaching the White House in Washington, D.C. The federal prison lockdown does not only condemn thousands of inmates to indefinite isolation in the midst of the coronavirus pandemic. Politically, it exposes the ruling class’s fear of the ongoing international mass protest movement. As the Trump administration intensifies its criminal repression of protesters, it fears that conditions in prisons and the mass sympathy for the strike movement amongst US prisoners will combine and lead to a huge wave of prison rebellions. In conditions where the class lines that divide society are becoming increasingly clear and hundreds of thousands have taken to the streets, the ruling class is not willing to take any chances with its prisons. The potential for prisoner unrest has been exacerbated by their criminal mistreatment during the COVID-19 pandemic.

Trump says he will move Republican convention out of North Carolina – President Trump on Tuesday night signaled he will move the Republican National Convention out of North Carolina after the state and the GOP clashed over potential restrictions due to the coronavirus. “Had long planned to have the Republican National Convention in Charlotte, North Carolina, a place I love. Now, @NC_Governor Roy Cooper and his representatives refuse to guarantee that we can have use of the Spectrum Arena,” Trump tweeted. “Governor Cooper is still in Shelter-In-Place Mode, and not allowing us to occupy the arena as originally anticipated and promised,” he continued, saying the party is “now forced to seek another State to host the 2020 Republican National Convention.” The decision capped weeks of tension between Republican officials and Cooper over whether the massive event could take place without limits on crowd size and requirements that guests wear masks due to the coronavirus pandemic. The convention, which is scheduled to begin Aug. 24, typically attracts thousands of people from across the country. Convention organizers said they wanted 19,000 delegates, staff, volunteers, elected officials and guests to attend the event. Health experts have cautioned against holding large gatherings as the coronavirus outbreak persists. Similar concerns have increased the likelihood that the Democratic convention may take place virtually, but Trump has been adamant he wants an in-person event to mark his nomination for reelection. Cooper said in a letter to Republican National Committee (RNC) leaders earlier Tuesday that it was a “necessity” to plan for a “scaled-down convention with fewer people, social distancing and face coverings.” “With the Nation, the State of North Carolina and the City of Charlotte still under states of emergency it’s important to conduct the RNC convention accordingly,” Cooper wrote to RNC Chairwoman Ronna McDaniel and Republican National Convention President Marcia Lee Kelly.

Judges Try To Balance Legal Rights And Courtroom Health – It’s tough getting people to report for jury duty in normal times. It’s even harder during a pandemic. The kidnapping and rape trial of Kenneth Weathersby Jr. opened Feb. 24 in Vallejo, California, but three weeks later two jurors refused to show up after the state ordered people to stay home. Then the state’s chief justice stopped jury trials for 60 days, later extending the suspension into June. Eventually, Solano County Superior Court Judge Robert Bowers had had enough. At 10:24 a.m. on May 20, Bowers called the jurors who were left ― 11, and an alternate ― into Courtroom 101. Bailiffs offered each of the six men and six women a squirt of hand sanitizer before showing them to their seats. Four were led into the jury box, the rest to the gallery, with yellow tape covering groups of three seats to enforce social distancing. “Citizens have a right to trials,” the tall, furrow-browed Bowers told the jurors, pulling down his blue mask to speak. “We have to find a way going forward.” Solano was the first California county to resume a jury trial. Three others – Contra Costa, Santa Clara and Monterey – have notified Chief Justice Tani Cantil-Sakauye that they are resuming trials in the coming weeks, despite rising COVID-19 infection rates in the state. In reopening, judges are trying to balance the constitutional rights of the accused to a speedy trial against the safety of jurors, bailiffs, clerks, attorneys, court reporters and others who work in their courthouses. But courtrooms can be snug. Jury rooms almost always are. It will be very hard for people to keep the recommended distance, even as they abstain from the usual buttonholing, emoting and hugging in courthouse hallways. Judges are conferring with health departments to limit the risks. Some courts, but not all, are requiring masks. Some are checking people’s temperatures before allowing them to enter the courthouse. Others may install plexiglass or plastic barriers. Gone, for now at least, are the days when jury duty began with scores of prospective jurors packed into halls and waiting rooms. Courthouses in Contra Costa and Monterey are staggering the times and days of the week when potential jurors report, and calling only 50 people at a time to prevent large groups from gathering. Some are adding temperature checks to their usual security screenings.

Extraordinary popular delusions: Endless bull markets and mining on the moon – Fortune-telling remains a mainstay among the financial elite and the lowliest retail investor on the planet alike. The U.S. Federal Reserve Bank has a sort of running fortune-telling tool called GDPNow that takes up-to-date indicators and plugs them into its formula for projecting the current direction of U.S. GDP. GDPNow is revised every few days as new values for its many components become available. The latest reading as of May 29 is minus 51.2 percent. That’s an annualized number that is seasonally adjusted. It’s a number that suggests that economic activity may have fallen at least as much since January as it did in the first four years of the Great Depression (1929 to 1933). At the bottom of the depression in 1933 the U.S. economy had contracted by about 30 percent. Unemployment in the United States reached 25 percent. The Dow Jones Industrial average has lost almost 90 percent of its value. The current official U.S. unemployment rate at the end of April was 14.7 percent. Expect higher numbers for May. Some 40 million people have filed for unemployment benefits in the last 10 weeks. No one has ever seen anything like it. The pandemic behind these numbers continues to dominate the news. In the face of this economic disaster the U.S. stock market first crashed by about 35 percent and now has risen to within about 10 percent of all-time highs. The explanation is that the United States and the world are about to reverse all the damage that the pandemic inflicted on the economy and go on to greater heights. Investors know this, and the stock market is a discounting mechanism. That’s fancy Wall Street talk for fortune-telling mechanism, one that captures all relevant future developments. One could ask why the stock market didn’t take into account the impact of the coronavirus pandemic until it was upon us; but that would ruin the story! Another explanation is a blizzard of new brokerage accounts opened by inexperienced investors this year who are throwing money at the stock market as they sit home with little to do but watch cable news and CNBC. They are apparently buying the quick recovery story and for as long as they have money to throw at stocks, the markets may stay aloft. But then there’s that nagging GDPNow number that has done nothing but trend downward dramatically for the entire month of May. It’s hard to imagine that conditions have turned around or even stabilized at this point.

Citi warns markets are out of step with grim reality – Citigroup said financial markets were “way ahead of reality” with tougher times to come, warning corporate clients that they should raise as much money as they could before the pandemic’s true cost is factored in by investors. “We definitely feel that the markets are way ahead of reality. We really are telling every client to tap the market if they can because we think the pricing now couldn’t get any better,” Manolo Falco, investment banking co-head at Citigroup, told the Financial Times. “As the second quarter comes along and we start seeing the pain, and the collateral effects of that, we think this is going to be much tougher than it looks.” His comments came at the end of a week when stock markets largely rallied even as millions of businesses around the world remained shut and economies lurched towards their worst recessions in memory. “Markets are pricing a V [shaped recovery], everyone’s coming back to work, and this is going to be fine,” Mr Falco said. “I don’t think it’s going to be that easy quite frankly.” Investors’ optimism led highly rated companies to raise a record $1tn of debt in the first five months of the year, putting investment banks such as Mr Falco’s on course for a big jump in debt capital markets revenues in the second quarter of the year compared with 2019. Mr Falco said the demand for funding could prove to be a “great opportunity” for Citi. Last week senior executives at some of the biggest banks also predicted another strong quarter for trading. This was especially true at JPMorgan Chase, where investment bank boss Daniel Pinto said trading revenues in the second quarter could be up as much as 50 per cent compared with a year earlier. Mr Falco was more circumspect on the prospect of a wave of activist investment in the aftermath of the coronavirus crisis. Low asset prices can tempt activist investors to buy into companies on the cheap and then look for ways to make them more profitable, often by cutting costs and jobs. “You gotta be careful though because an activist can become very quickly a focus of governments if they really step in too hard at a time when people, what they want is to protect employment and to actually get things going in the economy,” Mr Falco said. “We’ve got to be careful because in some cases . . . maybe those [investments] are at the wrong time and could create a lot of anger.”

‘Bankrupt in Just Two Weeks’ – Individual Investors Get Burned by Collapse of Complex Securities – WSJ -When William Mark decided to get back into investing after the 2008 financial crisis, he looked past stocks and bonds. Needing to play catch-up with his retirement portfolio, the piping engineer decided to bet on a complicated product he hoped would deliver double-digit annual returns. It worked so well – earning him 18% a year in dividends, on average – that he eventually poured $800,000 into the investments, called leveraged exchange-traded notes, or ETNs. When the coronavirus pandemic hit, he lost almost every penny. “I’m 67 years old and I’m basically bankrupt in just two weeks,” Mr. Mark said. The pandemic-fueled economic downturn has sparked turmoil in nearly every financial market. It has taken a particularly brutal toll on investors like Mr. Mark, who wagered on the roughly $7 trillion market for structured products: complex instruments that include ETNs, options-based strategies and certificates of deposits whose returns are tied to stocks or currencies. Mr. Mark bought a leveraged ETN issued by UBS that bet on companies that invest in the mortgage market, known as mortgage real-estate investment trusts. For others, the search for income led to investments in companies that bundled small business loans or oil pipeline rights, their payouts inflated by borrowed money. Banks and brokerages advertised them as offering payouts both steadier and more lucrative than plain-vanilla investments such as bonds or index-tracking funds. Most professional money managers avoided them. For many less sophisticated retail buyers, the market blowup taught the kind of painful lesson that comes with just about every economic crisis: There is no such thing as an investment that is both safe and highly profitable. The market’s collapse punished some banks that sold the products, which are considered derivatives. Société Générale, BNP Paribas SA and Natixis SA each lost more than $200 million on their structured-products businesses this year.

Why The World’s Largest Asset Manager Has Seen Its Shares Soar – At a time when the majority of Wall Street’s mega banks are just starting to buy into the green investing ethos, BlackRock has quickly established itself as the purveyor of ESG and renewables investing. BlackRock owns one of the largest global renewable power platforms, with $5.5 billion in equity assets under management (AUM). In January, the firm pledged to grow its ESG and green portfolio from $90 billion to more than a trillion dollars in the space of a decade. BlackRock now appears desperate to be seen as the kingpin of the green drive, even recently bowing to the demands of Canadian oil and gas producer Ovintiv (NYSE:OVV) shareholders, a move it probably would have considered infra dig just a few years back. And the Fed and the investing universe are loving it. BLK shares have been on a tear, surging 21% over the past two weeks and 8.8% in the year-to-date after the company clinched a deal with the Fed to run a junk-bond purchase program as part of its multi-pronged stimulus effort, never mind the fact that BlackRock happens to be one of the biggest issuers of said ETFs. BlackRock has a similar equities-buying program with the Central Bank of Israel. Even PNC Financial Services Group (NYSE:PNC) recent sale of its 22% stake in BlackRock worth $17 billion due to fears of a torrid U.S. economy was not enough to stop the BLK momentum with large institutional investors from as far off as the Middle East scooping up the shares. In contrast, the Financial Select Sector SPDR Fund (NYSEARCA:XLF), an ETF that holds Wall Street bank stocks such as JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC),Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C), is down 22% in the year-to-date.

Fed urged to widen eligibility for pandemic loan programs – – Senators raised concerns Tuesday that two Federal Reserve credit facilities meant to aid localities and midsize businesses hit by the coronavirus pandemic will not work as intended because of eligibility restrictions.At a Senate Banking Committee hearing, members of both parties said thresholds for obtaining aid from the Municipal Liquidity Facility and Main Street Lending Program could hamper the recovery for middle-market firms as well as for state and local governments.“Excessive restrictions not only risk ineffectiveness for the Main Street Lending facilities, but also for other facilities, as well,” said Senate Banking Committee Chairman Mike Crapo, R-Idaho. The two facilities are among roughly a dozen credit backstops the Fed unveiled to combat the economic effects of the pandemic, which combine the central bank’s preexisting emergency powers with added funding under the Coronavirus Aid, Relief, and Economic Security Act enacted in March.Tthe Municipal Liquidity Facility and the Main Street Lending Program were funded through money appropriated by the CARES Act; the law also specifically mandated the creation of the Main Street program.Crapo said he was concerned that the minimum population threshold for communities eligibile for the Fed’s municipal facility, which was lowered from 500,000 to 250,000, will still cut off small counties and municipalities. “The Fed updated the term sheet for the Municipal Liquidity Facility to lower the population thresholds for cities and counties, despite not being included in the CARES Act at all,” Crapo said. “While this was a step in the right direction, it still leaves many smaller and rural communities without direct access to financial resources, including no cities or counties in Idaho.”Sen. Bob Menendez, D-N.J., said the loan terms associated with the Municipal Liquidity Facility would prevent localities from utilizing it.“You suggested the Fed’s Municipal Liquidity Facility hasn’t been particularly successful so far possibly because the terms are too tight,” Menendez said to American Action Forum President Doug Holtz-Eakin, a witness at the hearing. “Currently any loans under the Municipal Liquidity Facility would have to be paid back in three years. … Wouldn’t a longer term make more economic sense?”

Federal Reserve expands MLF program to allow more issuers to participate – The Federal Reserve is expanding the number and types of local governments eligible to use its short-term muni note program.The central bank said it would allow all U.S. states to be able to have at least two cities or counties eligible to directly issue notes to its Municipal Liquidity Facility program regardless of population.“Governors of each state will also be able to designate two issuers in their jurisdictions whose revenues are generally derived from operating government activities (such as public transit, airports, toll facilities, and utilities) to be eligible to directly use the facility,” the Fed said in a press release Wednesday. The Fed also released a table, detailing the number of cities and counties, on a combined basis, that governors may designate to participate in the $500 billion program. Before, only cities and counties with populations of 250,000 and 500,000 respectively, were able to directly access the program. Those numbers “were selected to ensure that each U.S. state has at least two total cities and counties (on a combined basis) that may participate in the facility,” the Fed explained. This means large, populous states generally cannot designate additional issuers. “A governor that has the ability to designate one designated city or designated county may choose either (i) the most populous city in his or her state that has less than 250,000 residents or (ii) the most populous county in his or her state that has less than 500,000 residents,” the Fed said. For governors that can designate two cities and counties, they can decide to choose – the most populous city and most populous county, the most populous city and second-most populous city or the most populous county and second most populous county.

After PPP reform, more flexibility but same complexity – Legislative fixes to the Paycheck Protection Program should make the forgiveness process more attractive for borrowers, but not much easier to navigate. Bankers said they view the changes, including a lower threshold for payroll expenses and a longer qualification period, as a way for them to reintroduce the program to small businesses that have been wary about participating. While bankers will also have more flexibility in allocating resources, they will also have to adjust the financial implications of their participation since loans will likely stay on their books longer than originally forecast. The adjustments “help lenders from the perspective of the conversation we can now have with our customers” about the new terms, said Clem Rosenberger, CEO of NexTier Bank. “We believe most customers will breathe a sigh of relief as a result of these changes. That’s a great message to be able to share.” Lawmakers late Wednesday intervened in the administration of the $659 billion PPP, lowering the amount that must be spent on payroll to secure forgiveness to 60% from 75%. They also increased the amount of time borrowers have to qualify for forgiveness from eight weeks to 24 weeks.The Small Business Administration and Treasury Department, as the program’s administrators, set the initial payroll requirement and coverage period.A surge of new applications is unlikely, but more small businesses will likely show an interest given the added clarity and flexibility, bankers said. About $124 billion in funds remain under the program’s second phase.Potential borrowers who thought the program would be too much trouble early on are now inquiring about the loans, said Matt Flannery, team leader of SBA lending at the $9.9 billion-asset Provident Financial in Jersey City, N.J. “From a borrower’s perspective, anything that makes forgiveness easier is a welcome relief,”

Lenders, businesses say confusing rules hampered virus rescue – Representatives of lenders as well as businesses that received pandemic bailout money told an oversight board Wednesday that delayed and confusing instructions from the government hampered the effectiveness of the main rescue program for smaller companies. Guidelines for Paycheck Protection Program loans were released on a fragmented basis and underwent several revisions that made it difficult for businesses to know if they qualified for the money and what they must do to get the loans forgiven, said Anthony Wilkinson, president of the National Association of Guaranteed Government Lenders. The guidance, which is at times contradictory, also puts banks making those loans at risk, he said. “Is it any wonder why borrowers and lenders are questioning whether Treasury has set everyone up to fail?” “Is it any wonder why borrowers of all sizes have been returning their loans out of fear of their own government?” Some big restaurant chains like Potbelly Corp. and Ruth’s Chris Steak House got loans, while many mom-and-pop companies were left stranded. Both businesses said they would give the loans back after facing criticism from lawmakers and pressure from the Treasury Department. The forum was the first public event for the independent committee created to oversee spending under the $2.2 trillion CARES Act that Congress approved and President Trump signed into law in March. The panel is made up of inspectors general from more than a dozen federal agencies. The effort to help small businesses retain their workers has been the subject of criticism from businesses and lenders who were charged with distributing the money. Some businesses said lenders gave priority to larger companies where the bank could generate larger fees, and lenders have said the spotty regulations and “know your customer” rules left them exposed to losses as businesses rushed to apply for the stimulus funds. PRAC is one of several panels in charge of overseeing government spending to combat the economic fallout of the coronavirus pandemic. The Senate on Tuesday confirmed former White House lawyer Brian Miller to serve as a special inspector general for pandemic recovery. There’s also a bipartisan congressional oversight panel. PRAC investigations are underway looking into airlines receiving federal support, the validity of tax credits claimed by businesses, the accuracy of economic stimulus payments and the Health and Human Services Department’s adherence to safety protocols during the outbreak. The U.S. Chamber of Commerce urged the committee to refrain from investigations focused on politically unpopular industries. “There’s already growing concern that congressional oversight will in part focus on companies or sectors that various elected officials view as unworthy,” said Neil Bradley, the Chamber of Commerce’s chief policy officer. “There will likely be numerous requests for this committee to investigate entities not based on evidence of wrongdoing but because of a belief that an industry or entity shouldn’t have been allowed to receive assistance in the first place.” Even before it was fully operating, Trump had challenged and undercut the power of PRAC, indicating contentious times ahead for the effort to hold agencies accountable for spending and managing a bailout program for small businesses.

Banks have a mountain of deposits, so they don’t need PPP funding – A record surge in bank deposits has given U.S. lenders more cash than they know what to do with. One thing they don’t need: help from the Federal Reserve to fund the government-backed loans they made to small businesses. Banks had tapped only $49 billion from the Paycheck Protection Program Liquidity Facility by May 27 as they loaned $511 billion, according to the central bank and the U.S. Small Business Administration. That’s largely because lenders are sitting on $1.8 trillion of new deposits that have flooded in since March 11 – a 13% increase, and the biggest two-month jump since at least 1973, when comparable data is available. “It looks like this excess liquidity in the banking system is going to stick around much longer,” said Brian Klock, a bank analyst at Keefe, Bruyette & Woods. “So if you don’t really need it, why get the Fed loan?” Deposits have surged as drops in securities markets and interest rates for bonds and money market funds pushed savers and investors to banks. Also, a jump in corporate borrowing amid the pandemic has ended up as deposits back at the banks. The Fed loans are pretty cheap at 0.35%, but then deposit costs have gone down considerably as well. Interest-bearing deposits cost JPMorgan Chase 0.52% in the first quarter, and Bank of America paid 0.47% while the average was around 1% for smaller lenders. Meanwhile, non-interest-bearing accounts made up about 30% of all deposits at the four biggest banks, giving them cheaper funding than the Fed’s rate. Among the top U.S. firms, only Citigroup’s name showed up on the list of 574 banks that used the Fed’s lending facility as of May 6. Citigroup has borrowed $1.3 billion from the central bank to fund some of the $3.3 billion loans it had made by May 1. It had the highest deposit cost among the four biggest banks in the first quarter at 1.1%, and the smallest deposit base. A Citigroup spokesman declined to comment. While the PPP loans stay on the banks’ balance sheets, they’re risk-free because the SBA guarantees payment – and many will become government grants if companies meet certain criteria. Only a small portion are likely to mature to full term, KBW’s Klock estimates. Depending on how much of the loans are still outstanding and if liquidity gets tighter, banks can still access the Fed’s facility in the next two years.

Big banks call for blanket forgiveness of PPP loans under $150,000 – Two bank lobbying organizations asked Congress on Tuesday to automatically forgive small-business loans of less than $150,000 that are made under the Paycheck Protection Program. The request comes as the Senate eyes potential changes to the massive emergency relief effort. Last week, the House of Representatives passed legislation that would make it easier for small businesses to get their PPP loans forgiven. One of its provisions would extend the period of time in which companies must use the funds in order to qualify for forgiveness. The Consumer Bankers Association and the Bank Policy Institute, both of which represent big banks, want Congress to go further. In a letter Thursday to Sen. Marco Rubio, R-Fla., and other key lawmakers, they argued that blanket forgiveness of small loans would save recipients substantial time and money. Under a $150,000 threshold, some 26% of all PPP loan dollars would qualify for automatic forgiveness, according to the banking trade groups. But 85% of PPP loan recipients would benefit. “Their time and resources would be better focused on getting the economy safely back up and running, not processing burdensome paperwork,” the banking trade groups wrote. Blanket loan forgiveness would also help banks. Under the program’s current rules, loans to borrowers who fall short of the standards necessary for forgiveness may remain on banks’ balance sheets. While those loans are government-guaranteed, they have interest rates of just 1%, and banks would have to spend money to service them. Loans of less than $50,000 in the Paycheck Protection Program can ultimately be expected to cost banks about $500 million, according to an analysis by the consulting firm AQN Strategies. The banking trade groups cited that analysis in their letter Tuesday. The Paycheck Protection Program, which was enacted in late March, has made approximately $660 billion available to small businesses affected by the coronavirus pandemic. Under the program’s existing rules, 75% of loan proceeds must be tied to payroll in order to qualify for forgiveness. The House-passed bill would reduce that threshold to 60%. Senate Majority Leader Mitch McConnnell has reportedly been checking with senators to see if the House bill can get unanimous support in the Senate, which could enable passage as soon as this week.

Should PPP be extended to vandalized businesses? – Leaders at community development financial institutions are lobbying for looser restrictions on the Paycheck Protection Program so they can use earmarked funds to help small businesses rebuild after days of civic unrest. The Small Business Administration and Treasury Department have allocated $10 billion in the program’s second phase for CDFIs, which focus on minority and other underserved communities. While the money would be helpful for businesses damaged and destroyed from recent riots, PPP funds were intended for borrowers harmed by fallout from the coronavirus pandemic. “We’re looking for everyone and anyone who can help” businesses stung by vandalism and curfews, said David Reiling, chairman and CEO of the $1.2 billion-asset Sunrise Banks in St. Paul, Minn. “Whether that’s with a broom, or whether that’s financially or with your brain, or with prayers, we’ll take them,” Reiling said.“We need more flexibility and a different toolkit,” said Randell Leach, CEO of the $1 billion-asset Beneficial State Bank.Reiling and Leach would like to see PPP adjusted to allow more funds to be used on nonpayroll expenses, as well as longer repayment windows, particularly in light of setbacks many borrowers have encountered in the past week.“We need to start thinking about these loans on a 10- to 15-year horizon,” Leach said.

Stimulus debit cards cause confusion – Many Americans are receiving prepaid debit cards instead of a U.S. Treasury stimulus check, but some recipients “thought the cards were junk mail or scams,” the Post says. “The cards, issued by the Treasury’s financial agent, MetaBank, were sent to four million Americans in an effort to speed up the process of getting out the payments. The delivery caught a lot of people by surprise, resulting in skepticism about the legitimacy of the payment.” “The prepaid debit cards can be used to make purchases online and at any retail location where Visa is accepted. Recipients can also receive cash from ATMs and transfer funds to their personal bank accounts. But many people are discovering that there are limits on how much money they can access at one time. Many seniors reached out concerned that they would have to make multiple trips to an ATM to get the cash from the card.”

‘Indefinite shutdowns’ harming U.S. economy, new OCC chief says – Acting Comptroller of the Currency Brian Brooks took an extraordinary step for a bank regulator Monday, calling on states and municipalities to end “essentially indefinite” shutdown orders that were put in place to limit the spread of the coronavirus. Brooks, who has only been on the job since Friday, said protracted stay-at-home policies pose risks to the economy that must be weighed against the benefits. He noted more specifically of potential fallout for banks, such as declining commercial real estate values, and even “the very real risk of increases in bank robberies” because of a proliferation of face masks. “Your members should consider these risks carefully and weigh them against the scope and duration of continued lockdown orders in making your decisions, because certain aspects of these orders potentially threaten the stability and orderly functioning of the financial system the OCC is charged by law to protect,” Brooks said in a letter to the the National League of Cities, the U.S. Conference of Mayors and the National Association of Governors. Brooks was the first federal bank regulator to wade into the debate over the pace of reopening that has largely pitted business advocates against public health experts. The latter have pleaded for caution in easing stay-at-home policies amid the risk of additional waves of coronavirus outbreaks. But bank trade groups have largely stayed on the sidelines of the debate as well. The acting comptroller said banks involved in commercial real estate must contend with the risk of “lengthy property vacancies that result from extended stay-at-home orders,” which, Brooks said, could lead to a spike in burglary and vandalism. He argued that the loss of typical business revenue from local lockdowns would make it much more difficult for banks to make loans, particularly if the lockdowns stretched on indefinitely. “Banks lend to customers based in part on their assessment of customers’ current and expected future income, which largely determine their ability to repay the debt,” Brooks wrote. If delinquency rates began a rapid ascent, he continued, it would “threaten the community and mid-size banks that are the economic lifeblood of local communities, a factor that your members should take into account in weighing the risks and benefits of lengthy continued lockdown orders.” The letter did not acknowledge the potential health risks of re-opening businesses before local officials have contained the spread of the coronavirus, which many experts have warned could lead to a second wave of infections and deaths within months and the economy being re-shuttered. Citing news reports, he criticized “certain cities” that had turned off the utilities of businesses that operated in defiance of lockdown orders, saying that such an act could “impair their condition, structural integrity, and value, thus impairing the collateral that secures real estate loans.” “While some cities and states are reopening their economies, others reportedly are extending their lockdown orders for weeks or even months,” Brooks said. “Such essentially indefinite requirements that businesses remain closed increases other risks to properties securing bank loans.”

Waters criticizes OCC chief’s comments on stay-at-home orders – House Financial Services Committee Chairwoman Maxine Waters blasted a recent letter by acting Comptroller of the Currency Brian Brooks suggesting that states and municipalities should end “indefinite shutdowns” related to the coronavirus.Within days of taking the helm of the Office of the Comptroller of the Currency, Brooks drafted a letter Monday to groups representing mayors, governors and others saying that extended stay-at-home orders pose economic risks that will be felt by banks. He noted that face-mask requirements in bank branches could stoke “the very real risk of increases in bank robberies.”But Waters accused Brooks of adopting a view that is counter to the public health recommendations. “With this inappropriate letter pressuring city and state officials to end important public safety measures put in place to combat the spread of the novel coronavirus, the new Acting Comptroller is transparently pandering to President Trump, who has made clear that he would prefer that we all pretend that there is no pandemic, that more than a hundred thousand Americans have not lost their lives already, and that many more are not at risk,” the California Democrat said in a press release late Thursday. It was the second time during Brooks’s first full week as acting comptroller that he drew criticism from Waters. On Monday, Waters said it was “shameful” for Brooks to finalize a rule clarifying that a loan’s interest rate remains legally intact after it is acquired by a purchaser in a state with a lower rate cap.Waters said Brooks should not be issuing new rules or sending directives to state and local officials as acting comptroller.“He should focus on temporary stewardship of the agency, not issuing new rules, as he did on the first day on the job with a harmful rule on transferred loans which allows rent-a-bank schemes to evade state usury laws, or distributing inflammatory and ill-advised missives to state and local officials on the front lines of the pandemic, as he has done with this letter,” Waters said.

Acting comptroller warns on masks – Acting comptroller of the currency Brian P. Brooks “is not letting his first full week on the job pass quietly, warning that measures meant to contain the spread of the coronavirus – including mandates for the use of masks in public – could endanger the financial system. Mr. Brooks, a former banker, sent letters to the country’s mayors and governors about the negative effects of restrictions on public activity. Among them, he said: Face masks could lead to more bank robberies.”“Citing reports that some places would consider shutting off utility services to businesses that violate lockdown orders, the letter warned that cutting off water and electricity could hurt the value of the properties those businesses occupied. That, in turn, could hurt the banks that held mortgages on them. Mr. Brooks also warned that forcing small businesses to stay closed could harm them financially – perhaps making them unable to pay back their loans. That, too, could harm the banks.”“Finally,” Mr. Brooks wrote, “lengthy and potentially permanent requirements that individuals wear face masks in many or even all public spaces create the very real risk of increases in bank robberies. Broadly applicable face mask requirements are not safe or sustainable on a permanent basis.”“Brooks was the first federal bank regulator to wade into the debate over the pace of reopening that has largely pitted business advocates against public health experts,” American Banker’s Brendan Pedersen reports.’

May 2020: Unofficial Problem Bank list Increased to 65 Institutions – The FDIC’s official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public (just the number of banks and assets every quarter). Note: Bank CAMELS ratings are also not made public. CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest. As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest. Here is the unofficial problem bank list for May 2020. Here are the monthly changes and a few comments from surferdude808: Update on the Unofficial Problem Bank List for May 2020. During the month, the list increased by one to 65 banks after two removals and three additions. Aggregate assets were little changed at $48.5 billion from last month. A year ago, the list held 73 institutions with assets of $54.6 billion. Actions were terminated against Sevier County Bank, Sevierville, TN ($332 million) and Nantahala Bank & Trust Company, Franklin, NC ($157 million). Florida Capital Bank, National Association, Jacksonville, FL ($496 million); Bank of Louisiana, New Orleans, LA ($78 million); and State Bank of Nauvoo, Nauvoo, IL ($33 million). The order against the Bank of Louisiana does have a certain entertainment value, should you have time on your hands you may want to give it a read. Normally by this time after a calendar quarter-end, banks would have filed updated financials and the FDIC would have provided an update on the Official Problem Bank list, but 30 days was added to the financial filing deadline because of the COVID-19 pandemic. Look for that update in next month’s comment.

Coronavirus still a threat to credit scores despite congressional relief – The coronavirus relief bill enacted by Congress in March aimed to shield credit scores from the fallout of consumers skipping loan payments due to the pandemic. But observers say borrowers benefiting from the provision still face risks.The legislation aims to treat pandemic-related forbearance plans similar to the relief provided after hurricanes or other natural disasters. Creditors can now attach a “disaster code” to a loan telling the credit bureaus that a consumer was hurt financially by the coronavirus, and their score should be unaffected.But experts warn that consumers may not realize that their credit reports could still become impaired once a forbearance plan or other type of relief expires. “As soon as the lender stops reporting with the disaster code, it ostensibly unfreezes the credit report to the consumer and they will be evaluated based on any negative events that happened,” said James Garvey, founder and CEO of Self Financial Inc., a Texas fintech firm that tries to help unbanked consumers build their credit.Use of such disaster codes has never been so widespread and it is not even clear yet how many borrowers have sought relief. The credit reporting industry plans to release a report in the coming weeks indicating how many of the 220 million consumer credit files have been flagged with a disaster code. So far, credit reporting advocates say the implementation of the measure in the Coronavirus Aid, Relief, and Economic Security Act is going smoothly.“We are not seeing a lot of pushback from consumers and it appears that credit reporting under the CARES Act is going well,” said Francis Creighton, president and CEO of the Consumer Data Industry Association, which represents the three major credit bureaus Equifax, Experian and TransUnion.Yet some borrowers have faced apparent blowback from forbearance plans in their credit files.

How lenders are preparing for a wave of loan modifications – For the first weeks of the coronavirus crisis, mortgage servicers were in triage mode. As the government issued a flurry of measures to deal with financial hardships resulting from widespread economic shutdown, servicers rushed to grant the CARES Act mandated forbearances for GSE conforming loans.But as the growth rate in forbearances has slowed, lenders are gaming out their plans for the moment when the 12-month forbearance period ends, puzzling over how to prepare themselves for what may come next. “How many people are ultimately going to request forbearance and how quickly will the economy recover?” said Peter Carroll, executive of public policy and industry relations at CoreLogic. “And based on that how many homeowners will the industry be having to assist?” While the government has in recent weeks issued additional guidance, allowing borrowers to tack missed payments onto the end of Fannie and Freddie loans for example, many loans will still need to be modified. But the extraordinary amount of unknowns to do with the question of when and how widespread economic recovery could happen make it difficult to design proactive measures to get ahead of the problem. “Servicers are reacting with incredible speed to address this crisis,” said Laurence Platt, a mortgage industry attorney with Mayer Brown. “But they’re just a service provider, they can’t make it up as they go along. They have to get directions from the owners or the insurers of the loan. And the owners or the insurers of the loan are evolving their standards trying to address the crisis.”Offering a consumer a modification at this point in time might be a waste of energy, for example, since investor and regulatory guidelines regarding these forbearances are in a state of flux.What the requirements are now regarding the end of forbearance period may be different from what they might be when the borrower actually exits; those rules have been updated several times already. “So a premature modification doesn’t make any sense, you’ve got to wait and see where the borrower is at the time,” said Platt.

MBA Survey: “Share of Mortgage Loans in Forbearance Increases to 8.46%” of Portfolio Volume — Note: To put these numbers in perspective, the MBA notes “For the week of March 2, only 0.25% of all loans were in forbearance.” From the MBA: Share of Mortgage Loans in Forbearance Increases to 8.46% The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance increased from 8.36% of servicers’ portfolio volume in the prior week to 8.46% as of May 24, 2020. According to MBA’s estimate, just over 4.2 million homeowners are now in forbearance plans. .. “MBA’s survey continues to indicate that fewer homeowners are seeking forbearance as more states across the country reopen their economies and prospects begin to improve. The share of loans in forbearance increased by only 10 basis points over the week of May 24th,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Policy support for households, including expanded unemployment insurance benefits and other transfers, have helped many stay on their feet during this crisis. With 11.82 percent of Ginnie Mae loans currently in forbearance, FHA and VA borrowers are struggling the most.” Added Fratantoni, “Forbearance requests and call volume declined relative to the prior week and led to further declines in wait times and abandonment rates.” This graph shows the percent of portfolio in forbearance by investor type over time. Most of the increase was in late March and early April. The MBA notes: “Forbearance requests as a percent of servicing portfolio volume (#) dropped across all investor types for the sixth consecutive week relative to the prior week: from 0.28% to 0.20%.”

Black Knight: Number of Homeowners in COVID-19-Related Forbearance Plans Declines Slightly – Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance. From Black Knight: Black Knight: Number of Homeowners in COVID-19-Related Forbearance Plans Falls for First Time Since Crisis Began; 8.9% of All Mortgages Now in Forbearance:

• According to the McDash Flash Forbearance Tracker, as of June 2, 2020, 4.73 million homeowners – or 8.9% of all mortgages – are in COVID-19 mortgage forbearance plans

• Active forbearance volumes decreased by a net 34,000 over the past week, marking the first weekly decline since the crisis began

• According to the McDash Flash Payment Tracker, as of May 26, a significantly lower share of homeowners in forbearance had remitted May payments (22%) than did in April (46%), pointing to another likely rise in the delinquency rate for May

“After rising sharply in April and then leveling off toward the end of May, the number of American homeowners in forbearance plans has now decreased for the first time since the crisis began,” said Jabbour. “There were a net 34,000 fewer homeowners in forbearance as of June 2. The decline was actually greater among government-backed mortgages, which saw 43,000 fewer total forbearance plans than last week, but this was partially offset by an increase of 9,000 new plans on mortgages held in bank portfolios and private-label securities. “The McDash Flash Forbearance tracker shows that the 4.73 million loans in forbearance represent 8.9% of all active mortgages and account for a little over $1 trillion in unpaid principal. An estimated 7.1% of all GSE-backed loans and 12.3% of FHA/VA mortgages are now in forbearance.

States try to help borrowers left out of federal forbearance plans – One criticism of a federal law granting forbearance to homeowners affected by the coronavirus pandemic was it only applied to government-backed loans. Two states are aiming to cover the rest of the mortgage sphere.Industry experts say bills in New York and California could be the impetus for other states to provide necessary relief for the 30% of the mortgage market not backed by Uncle Sam.Lawmakers in both states want to enable homeowners with non-government loans to obtain forbearance for up to a year and to prohibit servicers of such loans from charging lump-sum payments right after the forbearance ends. “I would expect similar legislation by states to ensure customers are receiving forbearance relief, no matter who holds or services their mortgage,” said Allison Schoenthal, a partner and head of consumer finance litigation at Hogan Lovells.In March, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, which provided 180 days of forbearance and another 180 days, if needed, to struggling borrowers while waiving late fees and additional interest. But that relief only applied to loans backed by Fannie Mae, Freddie Mac, the Federal Housing Administration and other smaller agencies. Meanwhile, whereas the CARES Act largely left it up to agencies such as the Federal Housing Finance Agency and FHA to instruct servicers on how they can collect payments post-forbearance, the New York and California bills more clearly restrict mortgage servicers and state-chartered banks from collecting payments immediately.

Millions Of Americans Skip Payments As Tidal Wave Of Defaults And Evictions Looms – NPR – Americans are skipping payments on mortgages, auto loans and other bills. Normally, that could mean massive foreclosures, evictions, cars repossessions and people’s credit getting destroyed.But much of that has been put on pause. Help from Congress and leniency from lenders have kept impending financial disaster at bay for millions of people. But that may not last for long.The problem is that these efforts aim to create a financial bridge to the future for people who’ve lost their income in the pandemic – but the bridge is only half-built. For one thing, the help still isn’t reaching many people who need it.”My wife has filed, certified every week for her unemployment for 10 weeks now, and they have done nothing,” says Jonathan Baird of Bruceton, Tenn. “We’ve struggled.”Baird is a disabled veteran, not injured in wartime, who gets a small disability pension. When the pandemic hit, his wife lost her job as a home health aide. That was most of their income. And like many other contract workers, she has run into long delays trying to collect unemployment.Meanwhile, Baird says his mortgage company told him that he didn’t qualify for a federal program to postpone payments. Many homeowners have been given wrong ormisleading information from lenders about that. And it appears that is what happened in Baird’s case.Baird also called Ford to try to get a break on the payments for his pickup truck. “When I contacted them, they told me that there was nothing they could do,” he says. “Just basically make your payment or suffer the late fees.”

Hotels: Occupancy Rate Declined 43.2% Year-over-year, Seventh Consecutive Week of Higher Demand -From HotelNewsNow.com: STR: US hotel results for week ending 30 May: STR data ending with 30 May showed another small rise from previous weeks in U.S. hotel performance. Year-over-year declines remained significant although not as severe as the levels recorded previously. 24-30 May 2020 (percentage change from comparable week in 2019):

• Occupancy: 36.6% (-43.2%)

• Average daily rate (ADR): US$82.94 (-33.3%)

• Revenue per available room (RevPAR): US$30.34 (-62.1%)

“A seventh consecutive week of higher demand and occupancy was highlighted by three submarkets actually showing positive year-over-year occupancy comparisons for the weekend,” said Jan Freitag, STR’s senior VP of lodging insights. “Two of those areas, Titusville/Cocoa Beach and Melbourne/Palm Bay, likely received a boosted from the SpaceX launch activities on Saturday. The third submarket, Corpus Christi, further supports previous analysis that there is demand ready to return, but for now, it is more visible from leisure sources and in destinations that are set up well for drive-to business. “Because the situation intensified more toward the end of the week, and because there has not been a great deal of demand in downtown areas because of the pandemic, there wasn’t a noticeable impact from protests and the unrest occurring in major cities. That is something to monitor in our next dataset and perhaps beyond depending on how the situation plays out.” The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. The red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels). During 2009 (black line), many hotels were struggling. At this point in the year, the 4-week average in 2009 was 56%. Now it is just at 33.6%! (The median is 65%).

Las Vegas Visitor Authority: “No Convention Attendance, Hotel Occupancy 1.7%” in April –From the Las Vegas Visitor Authority: April 2020 Las Vegas Visitor Statistics With global travel restrictions and stay‐at‐home orders in place due to the COVID‐19 pandemic, Las Vegas visitation in April was a small fraction of normal levels (107k visitors), limited to est. stays with friends or relatives and/or those in non‐gaming properties that remained open for essential transient lodging.No measurable convention attendance occurred during the month. With the vast majority of the destination’s hotel rooms temporarily unavailable to book, occupancy was 1.7% while the average day rates (ADR) among those properties that were open came in at approximately $60. Here is the data from the Las Vegas Convention and Visitors Authority.The blue and red bars are monthly visitor traffic (left scale) for 2019 and 2020. The dashed blue and orange lines are convention attendance (right scale). Convention traffic in April was down 100% compared to April 2019. And visitor traffic was down 97% YoY. The numbers for May will be very low too.

“We Still Expect To Be Paid” – America’s Largest Mall Operator Sues Gap For $70M In Back-Rent -Largely shafted by the stimulus bills as Democrats tried to prevent any federal money from going to “Trump’s real-estate friends”, landlords have grown so desperate for revenue that they’re resorting to extreme and potentially burdensome tactics, like taking tenants to court to try and squeeze more blood from a stone. Simon Property Group, one of the biggest – if not the biggest – mall operator in the US, us suing GAP, one of its largest tenants, claiming the retailer failed to pay more than $65.9 million in rent and other charges due during the coronavirus pandemic.CNBC, which brought us the story, says the battle is unfolding in a Delaware state court. The lawsuit “highlights the mounting tension between retail landlords and their tenants, many of which stopped paying rent after the crisis forced them to shut stores.” It was filed on Tuesday. And a reporter at CNBC was apparently told to “expect more” lawsuits, apparently by somebody at SPG.That GAP hasn’t been paying rent isn’t a surprise; the company shared its plans to stop paying rent and other monthly expenses with shareholders, savings that it projected would put $115 million a month in GAP’s coffers. In total, SPG’s malls have 412 GAP stores, which makes GAP – and its Banana Republic and Old Navy brands – as one of the company’s biggest “in-line” tenants.And GAP warned its shareholders about the prospects for litigating stemming from this decision back in April.Gap also warned in late April that litigation could arise as a result of its skipped payments. “Although we believe that strong legal grounds exist to support our claim that we are not obligated to pay rent for the stores that have been closed…there can be no assurance that such arguments will succeed,” the company said in a filing with the Securities and Exchange Commission at the time.SPG CEO David Simon said his company still expects to be paid for the months those stores were closed, payments that would be a massive burden on GAP, which is already allowing burdensome debt service to eat into profits.

US Consumer Credit Crashes As Americans Repay A Record Amount Of Credit Card Debt – One of the striking changes to US consumer behavior spawned by the economic shutdowns from the coronavirus pandemic, was the unprecedented surge in personal savings which as we learned last week, exploded to a record 33% of disposable personal income… … as the annualized amount of Personal Savings soared by a mindblowing $4 trillion in May, rising from $2.1 trillion to $6.1 trillion. Now, thanks to the latest consumer credit data released by the Fed, we know what much of that saving went to: paying down debt. According to the Fed’s latest G.19 statement, in April total consumer credit plunged by a record $68.8 billion, smashing expectations for a modest $20 billion drop sparked by last month’s $6.8 billion (revised) drop, and more than 3x greater than the biggest consumer credit drawdown observed during the financial crisis. Just like March, the bulk of the credit repayment took place in revolving credit although to a far greater degree as Americans repaid a record $58 billion on their credit card bills as US consumer society literally went into reverse and instead of spending wildly as it does every other month, usually spending what it can’t afford, US consumers repaid the most on their credit cards ever. However, in perhaps a more notable departure from March when total consumer credit also tumbled even as non-revolving credit rose, in April non-revolving credit – auto and student loans – also posted a sharp drop. In fact, the drop, while not the biggest on record, was the biggest since the financial crisis. It wasn’t immediately clear if this particular drop was due to shrinkage in student or auto loans: the full detail will be published in two months time when the Fed reveals the quarterly change in those two series.

Two-Thirds of Public Restaurants Are Seen at Risk of Bankruptcy – Nearly two-thirds of publicly traded restaurants are at risk of bankruptcy as the Covid-19 pandemic batters the industry, according to a new study. The concern is higher for small companies and restaurants that specialize in dine-in, consulting firm Aaron Allen & Associates said in an analysis. It identified Bloomin’ Brands Inc., Potbelly Corp. and Chili’s owner Brinker International Inc. among those at greater risk. “It’s really the full-service model that’s in the biggest danger,” principal Aaron Allen said. “Some of those that are in casual dining — a lot of those had already been bleeding cash, bleeding locations.” The study paints a bleak picture for an industry already upended by broad stay-at-home orders that led to sharp declines in restaurant sales. While Americans are starting to venture out again, the dining recovery may be slow with unemployment on the rise, cautious spending and also ongoing concerns about health and safety.That could create an opportunity for a lucky few companies at the top of the food chain, Allen said. Some of the largest firms entered the downturn with the financial wherewithal to survive and perhaps lead an industry consolidation. “The big will eat up the smaller and weaker competition.” Bloomin’ Brands said it’s tightly managing expenses and fortified its finances with a recent bond offering that gave the company $470 million in liquidity. Dining rooms are starting to reopen and sales at Outback Steakhouse — the company’s biggest brand — are improving, down 38% for the week ended May 3, said Chief Financial Officer Chris Meyer. “Bloomin’ Brands is among the best positioned in casual-dining to weather this environment,” he said. “We believe we’re going to emerge from this pandemic a stronger company.” A representative of Potbelly declined to comment, while Brinker didn’t respond to requests for comment. Allen’s analysis, which calculated risk scores for 46 companies using metrics such as working capital and earnings, finds 65% in what it calls the “distress zone.” The at-risk companies account for about 73,000 individual restaurant locations in the U.S. and $85 billion in annual sales. Another 22% of companies are in the “gray zone,” with lower potential for default but which are still not entirely safe, the analysis found.

Chain restaurants have permanently closed over 500 locations so far in 2020. Here’s the full list. – As soon as the pandemic hit, restaurant-industry experts knew that many restaurants wouldn’t make it through. On April 1, UBS predicted that one in five restaurants may close as a result of the pandemic. While independent restaurants have been hit much harder than many chains, chains aren’t immune. Chains often rely on independent owner-operators to run restaurants, and these franchises often don’t have the same robust financial resources of the brands they represent. Even though much of America is opening up, most locales have implemented social-distancing guidelines that make it impossible for restaurants to generate a profit even if they reopen dining rooms. And early data has indicated that reopening isn’t the fiscal cure-all some hoped it would be, especially for restaurants. Some chains have already filed for bankruptcy protection or closed all restaurants. Others are taking a slower, quieter, or more measured approach to closures. However, this is likely only the beginning of a large wave of closures for casual-dining concepts, which are much less likely to make it through the pandemic unscathed than delivery-oriented restaurants. Here’s a list of chain-restaurant closures since the pandemic started.

Retailers and Restaurants Hit in Protests, Adding to Coronavirus Damage – WSJ – Many retailers and restaurants, already crippled by the coronavirus pandemic, are grappling with damage to their properties and new closures following protests sparked by the death of George Floyd that have sometimes turned violent. From Minneapolis, where Mr. Floyd died while handcuffed and in police custody, to California and Georgia, big and small retailers and restaurants have shut locations in anticipation of violence or are working to rebuild after destruction over the past week. Target Corp., TGT -2.11% Walmart Inc., WMT +0.09% Nike Inc. and small family businesses have collectively closed hundreds of locations or are recovering from looting and physical damage related to protests. Adidas said it was temporarily closing all its U.S. stores, while Amazon. com Inc. said it had scaled back or adjusted delivery routes in a handful of cities to protect employees. Many executives and business owners expressed solidarity with protesters, who object to broader issues of racism and social justice. Around a dozen Walmart stores have been damaged, with more closed pre-emptively over the past few days. On Sunday evening, Walmart closed several hundred stores throughout the country. The damage so far has included looting and other property damage, but no employees have been hurt, a Walmart spokesman said Sunday. “What’s disturbing over the last 24 hours is it isn’t just at night,” the spokesman said. “We’ve even had issues this morning in broad daylight. We want to make sure our associates are safe.” Walmart Chief Executive Doug McMillon said in a statement Friday that “this week is further proof we must remain vigilant in standing together against racism and discrimination.” Target Corp., which is based in Minneapolis, over the weekend closed more than 200 U.S. stores, boarding up many of them pre-emptively, said a spokesman. The situation is fast-moving and some stores have reopened, in some cases with more limited hours, the spokesman said.

US food prices see historic jump and are likely to stay high (AP) – As if trips to the grocery store weren’t nerve-wracking enough, U.S. shoppers lately have seen the costs of meat, eggs and even potatoes soar as the coronavirus has disrupted processing plants and distribution networks. Overall, the cost of food bought to eat at home skyrocketed by the most in 46 years, and analysts caution that meat prices in particular could remain high as slaughterhouses struggle to maintain production levels while implementing procedures intended to keep workers healthy. While price spikes for staples such as eggs and flour have eased as consumer demand has leveled off, prices remain volatile for carrots, potatoes and other produce because of transportation issues and the health of workers who pick crops and work in processing plants. In short, supermarket customers and restaurant owners shouldn’t expect prices to drop anytime soon. “Our biggest concern is long-term food costs. I believe they will continue to go up,” “You can pick an ingredient and I can tell you there are shortages,” she said. Big fluctuations in food prices began in March, when the coronavirus pandemic began to sink in for U.S. consumers. The Labor Department reports that the 2.6% jump in April food prices was the largest monthly increase in 46 years. Prices for meats, poultry, fish and eggs increased the most, rising 4.3%. Although the 2.9% jump in cereals and bakery products wasn’t as steep, it was still the largest increase the agency has recorded.

Energy expenditures as a percentage of PCE at All Time Low – Note: Back in early 2016, I noted that energy expenditures as a percentage of PCE had hit an all time low. Here is an update through the recently released April PCE report. Below is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through April 2020.This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices. Data source: BEA.The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.In April 2020, energy expenditures as a percentage of PCE was at a record low of 3.54% of PCE. This was below the previous low of 3.66% in February 2016.This new record happened even with a 13.6% annual rate decrease in overall PCE in April (energy expenditures declined more in April than overall PCE).

Auto Sales Plunge 33% In May, Set For Worst Year Since 2009 – US auto sales are expected to continue their historic plunge in May, further pressuring an industry that is on the brink of all out collapse due to the pandemic lockdowns, plunging used car prices and suffering from a pre-virus recessionary environment.Sales figures for May are expected to fall 33% to just 1.05 million units, according to Cox Automotive and CNBC. Even worse, data from Bank of America indicates that demand for new vehicles could be dropping off a cliff at the same time the industry is getting ready to ramp up production again. The numbers show a sequential improvement from April, but still offer an ominous outlook for the auto industry heading into the second half of 2020. Cox Automotive estimates the pace for U.S. car sales to be about 11.4 million units sold by the end of the year, which would make 2020 the worst year for car sales since 2009. These numbers compare to 17.4 million cars sold in 2019. And it may not be because drivers are staying home anymore. Bank of America data from gas stations shows that drivers are back on the road again. “We estimate that gas consumption (in gallons) was still down about 30% YoY in April, but improved to -14% for the week ending May 23rd (latest available),” the bank wrote in a May 29 note. May’s numbers are in focus since the month kicks off summer sales season, traditionally the point in the year when dealers try to move inventory to make room for new models. Last weekend, some dealers offered incentives like 0% financing and 84 month financing offers to try and entice buyers into showrooms. Some of the most generous incentives, offered around the time the virus started, are already being roped in as sales dead-cat bounce off their 2020 monthly lows. Auto analysts are blaming a lack of readily available inventory for the drop in sales, which is hilarious since the country is suffering from an unprecedented glut.

BEA: May Vehicles Sales increased to 12.2 Million SAAR — The BEA released their estimate of May vehicle sales this morning. The BEA estimated light vehicle sales of 12.21 million SAAR in May 2020 (Seasonally Adjusted Annual Rate), up 40.0% from the revised April sales rate, and down 29.8% from May 2019.Sales in April were revised up from 8.58 million SAAR to 8.73 million SAAR. This graph shows light vehicle sales since 2006 from the BEA (blue) and an estimate for May 2020 (red).The impact of COVID-19 is significant, and it appears April was the worst month. The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate of 12.21 million SAAR.Sales collapsed in the second half of March, and really declined in April. However sales rebounded somewhat in May (but were still down almost 30% YoY).

DOT: Vehicle Miles Driven decreased 18.6% year-over-year in March –This will be interesting to track. The most recent release is for March 2020. The Department of Transportation (DOT) reported:: Travel on all roads and streets changed by -18.6% (-50.6 billion vehicle miles) for March 2020 as compared with March 2019. Travel for the month is estimated to be 221.0 billion vehicle miles.The seasonally adjusted vehicle miles traveled for March 2020 is 221.1 billion miles, a -18.5% (-50.3 billion vehicle miles) decline from March 2019. It also represents -19.3% decline (-52.9 billion vehicle miles) compared with February 2020.Cumulative Travel for 2020 changed by -5.4% (-40.1 billion vehicle miles). The cumulative estimate for the year is 706.5 billion vehicle miles of travel.

ISM Manufacturing index Increased to 43.1 in May – The ISM manufacturing index indicated contraction in May. The PMI was at 43.1% in May, up from 41.5% in April. The employment index was at 32.1%, up from 27.5% last month, and the new orders index was at 31.8%, up from 27.1%. From the Institute for Supply Management: May 2020 Manufacturing ISM® Report On Business® “The May PMI® registered 43.1 percent, up 1.6 percentage points from the April reading of 41.5 percent. This figure indicates expansion in the overall economy after April’s contraction, which ended a period of 131 consecutive months of growth. The New Orders Index registered 31.8 percent, an increase of 4.7 percentage points from the April reading of 27.1 percent. The Production Index registered 33.2 percent, up 5.7 percentage points compared to the April reading of 27.5 percent. The Backlog of Orders Index registered 38.2 percent, an increase of 0.4 percentage point compared to the April reading of 37.8 percent. The Employment Index registered 32.1 percent, an increase of 4.6 percentage points from the April reading of 27.5 percent. The Supplier Deliveries Index registered 68 percent; though down 8 percentage points from the April figure of 76 percent, this high reading elevated the composite PMI®. Here is a long term graph of the ISM manufacturing index. This was close to expectations of 43.0%, but the readings for new orders and employment were even worse than the headline. This suggests manufacturing contracted further in May.

Markit Manufacturing: “Ongoing COVID-19 impact drags output down further in May” – The May US Manufacturing Purchasing Managers’ Index conducted by Markit came in at 39.8, up 3.7 from the 36.1 final April figure. Markit’s Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.Here is an excerpt from Chris Williamson, Chief Business Economist at IHS Markit in their latest press release:“Manufacturing remained in a deep downturn in May, as measures taken to contain the spread of COVID-19 continued to cause production losses, disrupt supply chains and hit demand. Job losses meanwhile continued to run at one of the highest rates in over a decade, and pricing power has collapsed.“With increasing numbers of companies restarting production, we should see some improvements in the output trend in coming months, and it was reassuring to see signs of the downturn already starting to ease in May, suggesting April was the eye of the storm as far as the production collapse is concerned.“There remains a high risk that any recovery will be frustratingly slow as ongoing social distancing measures, high unemployment, job insecurity and damaged balance sheets constrain consumer and business spending. The recovery will of course also fade quickly if virus infections start to rise again. For now, however, we focus on the good news that we may be past the worst in terms of the economic decline.” [Press Release] Here is a snapshot of the series since mid-2012. Here is an overlay with the equivalent PMI survey conducted by the Institute for Supply Management (see our full article on this series here).

Output Decline at Factories Eases, But Recovery Set to Be Slow – WSJ – Factories in the U.S. and abroad continued to reduce output and shed jobs in May, though the pace of deterioration moderated as governments moved to ease coronavirus-related restrictions on their economies. Surveys of purchasing managers at manufacturers in the U.S., Asia and Europe offered signs that the decline in global factory activity is starting to bottom out after the record fall seen in April. But sentiment remained negative, suggesting any recovery in the months ahead could be tentative. The U.S. Institute for Supply Management’s manufacturing index for May rose to 43.1 from an 11-year low of 41.5 in April. The index’s core components all remained well below the 50 level that marks the threshold between contraction and expansion. A majority of survey respondents said both production and new orders worsened in May from April, and two-fifths reported lower employment levels. The factory indexes add to other signs the U.S. and other countries may have reached an economic bottom, though recoveries could be slow. Unemployment is up sharply across the globe. Services industries, hit particularly hard by the virus, are just starting to recover. And consumer spending, an important catalyst for the U.S. and other economies, remains weak. “We’re probably past the worst in terms of rates of decline, but things are still quite bad,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. He said forward-looking aspects of the ISM survey are still “extremely weak,” suggesting little evidence of the V-shaped economic recovery that policy makers are hoping for. Tim Fiore, who manages the ISM’s factory survey, said he expects further improvement in June as state governments allow more nonessential economic activities to resume. But until a vaccine or an effective treatment for Covid-19 becomes available, social-distancing efforts will limit the number of workers allowed on factory floors, likely restraining production. Only in China, the first major economy to begin reopening after the novel coronavirus outbreak, did factories report an increase in activity. But the surveys suggested that its nascent economic recovery is already beginning to stall, with export orders falling sharply amid continued global efforts to contain the pandemic. The surveys indicate the worst might be over for manufacturers, and activity could start to increase in coming months. But the road back to the levels of output and employment seen at the end of last year is set to be long and bumpy.

AAR: May Rail Carloads down 27.7% YoY, Intermodal Down 13.0% YoY – From the Association of American Railroads (AAR) Rail Time Indicators. Huge swaths of the U.S. and global economies remained shut in May and the impact on rail traffic was predictable. Total U.S. carloads fell 27.7% in May 2020 from May 2019, the biggest year-over- year decline for any month on record (our year-over-year comparisons begin in 1989) and worse than the 25.2% decline in April. For intermodal, things were bad but not as bad: originations were down 13.0% in May, better than the 17.2% decline in April. This graph from the Rail Time Indicators report shows the six week average of U.S. Carloads in 2018, 2019 and 2020: Average weekly total carloads in May 2020 of 185,043 were also the lowest on record. Of the 20 commodity categories we track, just one (farm products excluding grain) had carload gains over last May.In 2020 through May, total U.S. carloads were down 14.7%, or 815,413 carloads, from last year. The second graph shows the six week average of U.S. intermodal in 2018, 2019 and 2020: (using intermodal or shipping containers): U.S. intermodal originations were down 13.0% in May 2020, an improvement from the 17.2% decline in April 2020 but still the 16th straight year-over-year monthly decline for intermodal. Prior to the pandemic, the average monthly decline was around 6%, which is clearly much less than the declines of the past two months. Intermodal is suffering from, among other things, weak consumer demand and fewer cargo ships calling on U.S. ports. Note that rail traffic was weak prior to the pandemic.

Trade Deficit increased to $49.4 Billion in April – From the Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $49.4 billion in April, up $7.1 billion from $42.3 billion in March, revised. April exports were $151.3 billion, $38.9 billion less than March exports. April imports were $200.7 billion, $31.8 billion less than March imports. Both exports and imports decreased in April. Exports are down 28% compared to April 2019; imports are down 22% compared to April 2019. Both imports and exports have decreased sharply due to COVID-19. The second graph shows the U.S. trade deficit, with and without petroleum. U.S. Trade Deficit The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Note that the U.S. exported a slight net positive petroleum products in recent months. Oil imports averaged $34.72 per barrel in April, down from $47.09 in March, and down from $63.47 in April 2019. The trade deficit with China decreased to $22.5 billion in April, from $26.8 billion in April 2019.

U.S. Exports, Imports Fell Sharply in April Amid Coronavirus Disruptions – WSJ – U.S. exports and imports both posted their largest monthly decreases on record amid coronavirus-related shutdowns around the world. Imports fell 13.7% in April from March, and exports dropped 20.5%, the largest declines since record-keeping began in 1992, the Commerce Department reported Thursday. The trade deficit expanded 16.7% to a seasonally adjusted $49.41 billion. “Beyond the fact that we’re seeing a significant widening of the trade deficit, what really strikes me is the pace at which trade flows are declining,” with imports and exports down about a quarter since the coronavirus outbreak. Exports of aircraft and cars have dropped as manufacturers such as Boeing Co. were hit by the world-wide disruption of travel and auto makers including Ford Motor Co. closed factories to prevent the spread of the virus. Global trade flows may start to pick up again as some factories reopen and the easing of social-distancing measures revives consumer demand. “Much of the disruption may have already occurred,” Exports of goods in April were the lowest since late 2009, when the nation was recovering from a deep recession, Thursday’s report showed Imports of goods were the lowest since late 2010. A similar trend was seen in Canada, where the goods trade deficit widened in April as exports plunged to their lowest level in over a decade. Statistics Canada attributed the dramatic drops in exports and imports to factory shutdowns, weaker energy prices and widespread economic restrictions as authorities moved to contain the spread of the new coronavirus. While the U.S. usually runs a deficit in goods, it runs a surplus in services. That surplus, in services such as medical care, travel, higher education and royalties, decreased by $1.3 billion in April to $22.4 billion, its lowest since December 2016. In the first quarter, a narrowing trade deficit helped limit a sharp contraction in the U.S. economy. As a whole, the economy still shrank at a 5% annual rate, the steepest drop since the last recession. Trade is expected to subtract from gross domestic product this quarter should the deficit continue to widen. How will trade look different in a post-pandemic world? Join the conversation below. The U.S. deficit in goods with China widened to $25.96 billion from $16.99 billion the prior month. Year to date, the deficit with China amounts to $87.60 billion, compared with $123.68 billion in the same period of 2019. Chinese state-controlled companies have canceled some shipments from U.S. farm exporters, according to maritime officials, as tensions between Washington and Beijing rise over China’s handling of pro-democracy protests in Hong Kong and the coronavirus pandemic. The cancellations involve orders made following the phase-one trade pact between the two countries signed in January, in which China committed to increasing farm imports from the U.S. Lockdowns associated with the pandemic, which originated in China late last year, have sapped global commerce and growth, disrupted supply chains and closed factories and stores. Detroit’s car companies agreed in March to temporarily shut down factories in the U.S., Mexico and Canada to limit the spread of the new coronavirus. The companies started reopening the factories in May. Boeing Co., the country’s largest exporter, said in late March that it would suspend airliner production in the Seattle area, and General Electric Co. said it would lay off workers making jet engines for customers including the aerospace giant. The International Monetary Fund said in April that it expected the U.S. economy would shrink 5.9% this year. It predicted the global economy would contract 3% in 2020. China’s growth would slow to 1.2% this year, the IMF projected, from 6.1% last year. Global trade, already experiencing its weakest activity since the 2008-09 financial crisis because of the two-year U.S.-China trade conflict, is likely to contract by 11% in 2020, the IMF said, a collapse that would make it difficult for countries to revive their economies by increasing exports. MORE ON THE ECONOMY

ISM Non-Manufacturing Index increased to 45.4% in May – The May ISM Non-manufacturing index was at 45.4%, up from 41.8% in April. The employment index increased to 31.8%, from 30.0%. Note: Above 50 indicates expansion, below 50 contraction. From the Institute for Supply Management: May 2020 Non-Manufacturing ISM Report On Business® “The NMI® registered 45.4 percent, 3.6 percentage points higher than the April reading of 41.8 percent. This reading represents contraction in the non-manufacturing sector for the second consecutive month, following a 122-month period of expansion. The Business Activity Index increased 15 percentage points from April’s figure, registering 41 percent. The New Orders Index registered 41.9 percent; 9 percentage points higher than the reading of 32.9 percent in April. The Employment Index increased to 31.8 percent; 1.8 percentage points higher than the April reading of 30 percent. “The Supplier Deliveries Index registered at 67 percent, down 11.3 percentage points from April’s all-time-high reading of 78.3 percent, which elevated the composite NMI®. The Supplier Deliveries Index is one of four equally weighted subindexes that directly factor into the NMI®, along with Business Activity, New Orders and Employment. Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases. The higher readings for supplier deliveries the past three months are primarily a product of supply problems related to the coronavirus (COVID-19) pandemic. This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. The headline index understated the weakness in the survey. The Supplier Deliveries index once again boosted the composite NMI, but the employment index was near last month’s record low.

Markit Services PMI: “Business activity slumps further amid COVID-19 pandemic” – The May US Services Purchasing Managers’ Index conducted by Markit came in at 37.5 percent, up 10.8 from the final April estimate of 26.7. The Investing.com consensus was for 36.9 percent.Here is the opening from the latest press release: Commenting on the latest survey results, Chris Williamson, Chief Business Economist at IHS Markit, said:“The PMI numbers indicate that the US economy remained in a steep downturn in May. Encouragingly, the rate of contraction has eased considerably since the height of the lockdown in April as some firms get back to work and economic activity starts to resume.“While views about prospects for the year ahead remained negative on balance, the degree of pessimism has also moderated considerably since April, to hint that sentiment is improving as increasing numbers of companies see the worst of the lockdown being behind them.“A substantial part of the service sector nevertheless continued to be devastated by social distancing measures, and looks set to remain so for some months to come, limiting scope for a v-shaped recovery. The ongoing steep fall in employment remains a particular concern, pointing to a weakened consumer sector but also underscoring heightened risk aversion as companies seek to cut costs in the face of collapsing sales and an uncertain outlook.” [Press Release] Here is a snapshot of the series since mid-2012. Here is an overlay with the equivalent PMI survey conducted by the Institute for Supply Management, which they refer to as “Non-Manufacturing” (see our full article on this series here). Over its history, the ISM metric has been significantly the more volatile of the two.

Weekly Initial Unemployment Claims decrease to 1,877,000 –The DOL reported: In the week ending May 30, the advance figure for seasonally adjusted initial claims was 1,877,000, a decrease of 249,000 from the previous week’s revised level. The previous week’s level was revised up by 3,000 from 2,123,000 to 2,126,000. The 4-week moving average was 2,284,000, a decrease of 324,750 from the previous week’s revised average. The previous week’s average was revised up by 750 from 2,608,000 to 2,608,750. The previous week was revised up.This does not include the 623,073 initial claims for Pandemic Unemployment Assistance (PUA).The following graph shows the 4-week moving average of weekly claims since 1971.

Unemployment Claims Hold Steady as Economy Slowly Reopens – WSJ – The number of workers applying for and receiving unemployment benefits was historically high but eased at the end of May, indicating the U.S. labor market has weathered the worst of the economic fallout from the coronavirus pandemic. The ranks of Americans drawing on unemployment benefits ticked up to 21.5 million in the week ended May 23, though the pace of increase significantly slowed from earlier in the crisis, the Labor Department said Thursday. So-called continuing claims are released with a one-week lag and appeared to hit a peak in early May. New applications for unemployment benefits have trended down since the pandemic and related lockdowns triggered a surge in claims at the end of March. Last week, there were 1.9 million unemployment claims, the first time initial claims have fallen below 2 million a week since the week ended March 14. “The ongoing retreat in the level of initial claims is welcome news,” said Nancy Vanden Houten, lead economist at Oxford Economics. “We still expect the recovery in the labor market to be painfully slow.” While initial claims have been easing from their peak, the weekly totals have remained higher than the prepandemic record of 695,000 claims in October 1982. It will probably take years for the economy to fully regain the millions of jobs lost during the pandemic. Protests after George Floyd was killed while in police custody could delay the economic recovery as large companies including Macy’s Inc. and Kroger Co. postponed store reopenings or cut back hours in response to the social unrest. A separate May report on U.S. employment, to be released Friday, will shed light on the magnitude of the employment losses that have occurred during the pandemic. Layoffs have continued and are expected to cause nonfarm payrolls to fall by 8 million in May, after a combined drop of 21.4 million in March and April. The unemployment rate is projected to rise to 19.5% in May from 14.7% in April, which would be the highest for records tracing back to 1948. Thursday’s report showed that the number of applications for unemployment benefits fell last week in 36 states. The same number of states recorded a decline in the number of Americans receiving unemployment benefits for the week ended May 23. “That suggests maybe we’re starting to see a bit of rehiring taking place as lockdown restrictions are eased,”

Jobless claims: “less awful” trend mainly continues – for now – The monthly May data has started to come in, giving us our first comparable data after the coronavirus recession struck. In housing, vehicle sales, and manufacturing, the theme is “less awful.” Meanwhile, weekly initial and continuing jobless claims give us the most up-to-date snapshot of the continuing economic impacts of the coronavirus to the average worker. Eleven weeks after calamity first struck, the theme is the same: “less awful.” First, here are initial jobless claims both seasonally adjusted (blue) and non- seasonally adjusted (red). The non-seasonally adjusted number is of added importance since seasonal adjustments should not have more than a trivial effect on the huge real numbers: There were 1.603 million new claims, which after the seasonal adjustment became 1.877 million. This is a -249,000 decline from last week’s number, and the lowest so far since the virus struck. Since we are a month after some States “reopened,” these new claims primarily represent spreading second-order impacts. Unfortunately, the “less bad” trend did not occur in continuing claims, which lag one week behind. Both the non-seasonally adjusted number (red), and the less important seasonally adjusted number (blue) rose, by 437,000 and 649,000 respectively, although both remained substantially below their peaks of two weeks ago: This tells us that, as of two weeks ago, the new damage outweighed callbacks to work. Let’s be clear: all of these numbers are awful, Great Depression-scale readings. The “good” news is still that climbing back from recession bottoms always has to start with “less awful” news, and overall this is what we got in this week’s jobless claims report. By way of historical comparison, initial jobless claims peaked in late March 2009, a little over two months before that recession officially ended. The big caveat: the virus does not care about States’ claiming that they are reopened. There is accumulating evidence that new infections have stopped declining on a nationwide basis, and both those and deaths have started to increase again slightly. So restrictions might need to be renewed. Also, given GOP opposition in the Senate, it appears that enhanced unemployment benefits are going to end next month. Since it is almost certain that the economy will still be very depressed at that point, a further huge wave of negative impacts seems increasingly likely.

ADP: Private Employment decreased 2,760,000 in May – From ADP: Private sector employment decreased by 2,760,000 jobs from April to May according to the May ADP National Employment Report®. The report utilizes data through the 12th of the month. The NER uses the same time period the Bureau of Labor and Statistics uses for their survey. As such, the May NER does not reflect the full impact of COVID-19 on the overall employment situation.Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by the ADP Research Institute® in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis…“The impact of the COVID-19 crisis continues to weigh on businesses of all sizes,” said Ahu Yildirmaz, cohead of the ADP Research Institute. “While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses.”This was well above the consensus forecast for 9,000,000 private sector jobs lost in the ADP report. The BLS report will be released Friday, and the consensus is for 8,250,000 non-farm payroll jobs lost in May.

US economy shed 2.76 million private payrolls in May: ADP – U.S. employers cut 2.76 million private payrolls in May, according to a report Wednesday from ADP, as the coronavirus pandemic weighed on domestic economic activity and the labor market for another month.The job cuts reflected in ADP’s report came in again at a historically high level, but was well below the figure many market participants were bracing to receive. Consensus economists expected private sector job losses to total 9 million for May, according to Bloomberg data. Stock futures extended gains following the report. In April, private-sector job losses were at a record high of 19.557 million, following revisions from the 20.236 million cuts previously reported, ADP said.“The impact of the COVID-19 crisis continues to weigh on businesses of all sizes,” Ahu Yildirmaz, co-head of the ADP Research Institute, said in a statement. “While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses.”The services sector again bore the brunt of the payroll declines in May, as ongoing social distancing measures and business closures hammered the restaurant, travel and tourism industry in May. Overall, service-sector payrolls slumped by 1.967 million.Within services, trade, transportation and utilities industries led declines in payrolls, shedding 826,000 jobs, and health-care and social assistance roles fell by 333,000. Education industries were the only category that posted net job gains for May, with these rising by 166,000.The goods-producing sector saw broad-based job losses across all industries. Manufacturing payrolls slid by 719,000 for the month, and each of the mining and construction sectors posted job losses in the tens of thousands.By company size, large businesses – or those with 500 employees or more – posted the largest drop in payrolls for May, with these cuts totaling 1.604 million. Medium-sized businesses with between 50 and 499 employees shed 722,000 payrolls, and small businesses cut 435,000 jobs. Though still a grim print underscoring widespread joblessness in the country, the better-than-feared report Wednesday fueled optimism among some analysts that the early stages of reopening in the economy were helping to cap new job cuts.

U.S. Unemployment Rate Fell to 13.3% in May – WSJ – The U.S. jobless rate fell to 13.3% and employers added 2.5 million jobs in May, early signs the labor market is mending as the economy started to reopen following lockdowns related to the coronavirus pandemic. Employment rose sharply across industries, including leisure and hospitality, construction, education and health services, and retail, the Labor Department said. “These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it,” the department said Friday in a release. The jobless rate fell from 14.7% a month earlier, which was the highest on records dating from 1948. A broader measure of unemployment – which includes part-time workers and those who gave up looking for jobs – fell to 21.2% from 22.8% a month earlier. The economy had lost 22.1 million jobs combined in March and April when states and localities ordered many businesses to shut down to combat the spread of the virus. In May, with some areas starting to reopen, some businesses rehired workers. “The bounceback started earlier than most expected, but don’t get too excited about this one month of data,” Nick Bunker, economist for hiring website Indeed, said in a note. “It’s not clear how enduring this will be.” Despite the gains last month, the jobless rate is still exceptionally high, and 21 million workers remained unemployed. Other data suggest the labor market stabilized in recent weeks, though it likely suffered another setback from riots and looting after George Floyd was killed in police custody May 25 in Minneapolis. Friday’s report showed the unemployment rate was uneven across racial groups.The unemployment rate for African-Americans rose by 0.1 percentage point in May to 16.8%. The rate for Asians increased to 15% from 14.5% in April. The rate for Latinos was 17.6% in May, down 1.3 percentage points from April’s record high. The rate for white workers fell 1.8 percentage points in May to 12.4% The jobless rate fell for both women and men, but the rate for women was higher, 14.5% versus 12.2% for men. In February, before the economic shock due to the pandemic began, the unemployment rate was slightly lower for women, 3.4% compared with 3.6% for men. Of those unemployed due to job loss, 84% reported themselves as on a temporary layoff, meaning they expect to return to their prior employer within six months. While that is historically high, the share is down slightly from 88% in April. Some industries that were the quickest to lay off workers in March added many of those workers back in May.

May Employment Report: 2,500,000 Jobs Added, 13.3% Unemployment Rate – From the BLS: Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate declined to 13.3 percent, the U.S. Bureau of Labor Statistics reported today. These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it. In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, employment in government continued to decline sharply. … The change in total nonfarm payroll employment for March was revised down by 492,000, from -881,000 to -1.4 million, and the change for April was revised down by 150,000, from -20.5 million to -20.7 million. With these revisions, employment in March and April combined was 642,000 lower than previously reported.The first graph shows the year-over-year change in total non-farm employment since 1968. In May, the year-over-year change was -17.665 million jobs. Total payrolls increased by 2.5 million in May. Payrolls for March and April were revised down 642 thousand combined. The second graph shows the job losses from the start of the employment recession, in percentage terms. The current employment recession is by far the worst recession since WWII in percentage terms, and the worst in terms of the unemployment rate. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate increased to 60.8% in May. This is the percentage of the working age population in the labor force. The Employment-Population ratio increased to 52.8% (black line). The fourth graph shows the unemployment rate. The unemployment rate decreased in May to 13.3%. This was well above consensus expectations of 8,250,000 jobs lost, however March and April were revised down by 642,000 combined. This was a surprising employment report since all other data pointed to more job losses in May. …

May Jobs Report: 2.5M Jobs Added, Unemployment Rate Drops to 13.3% – This morning’s employment report for May showed a 2.5M increase in total nonfarm payrolls, which was above the Investing.com forecast of -8M. Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics: Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate declined to 13.3 percent, the U.S. Bureau of Labor Statistics reported today. These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it. In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, employment in government continued to decline sharply. This news release presents statistics from two monthly surveys. The household survey measures labor force status, including unemployment, by demographic characteristics. The establishment survey measures nonfarm employment, hours, and earnings by industry. For more information about the concepts and statistical methodology used in these two surveys, see the Technical Note. Data collection for both surveys was affected by the coronavirus (COVID-19) pandemic. In the establishment survey, approximately one-fifth of the data is collected at four regional data collection centers. Although these centers were closed, about three-quarters of the interviewers at these centers worked remotely to collect data by telephone. Additionally, BLS encouraged businesses to report electronically. The collection rate for the establishment survey in May was 69 percent, slightly lower than collection rates prior to the pandemic. The household survey is generally collected through inperson and telephone interviews, but personal interviews were not conducted for the safety of interviewers and respondents. The household survey response rate, at 67 percent, was about 15 percentage points lower than in months prior to the pandemic. In the establishment survey, workers who are paid by their employer for all or any part of the pay period including the 12th of the month are counted as employed, even if they were not actually at their jobs. Workers who are temporarily or permanently absent from their jobs and are not being paid are not counted as employed, even if they are continuing to receive benefits. The estimation methods used in the establishment survey were the same for May as they were for April. However, after further research, BLS extended the modifications that were made to the April birth-death model back to March, which accounted for a portion of the revision to March data. For more information, see www.bls.gov/cps/employment-situation-covid19-faq-may-2020.pdf . In the household survey, individuals are classified as employed, unemployed, or not in the labor force based on their answers to a series of questions about their activities during the survey reference week (May 10th through May 16th). Workers who indicate they were not working during the entire survey reference week and expect to be recalled to their jobs should be classified as unemployed on temporary layoff. In May, a large number of persons were classified as unemployed on temporary layoff. However, there was also a large number of workers who were classified as employed but absent from work. As was the case in March and April, household survey interviewers were instructed to classify employed persons absent from work due to coronavirus-related business closures as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue. If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We’ve added a 12-month moving average to highlight the long-term trend.

May jobs report: a welcome positive shock HEADLINES:

• 2,509,000 million jobs added. This makes up about 12% of the 22.1 million job losses in March and April.
• U3 unemployment rate improved 1.4% to 13.3%, compared with the January low of 3.5%.
• U6 underemployment rate improved 1.6% to 21.2%, compared with the January low of 6.9%.
• March and April were both revised further downward, by -492,000 and 150,000 respectively, for a net of -642,000 more jobs lost compared with previous reports.
• the average manufacturing workweek rose 0.8 hours from 38.1 to 38.9 hours. This is one of the 10 components of the LEI and will be a positive.
• Manufacturing jobs rose by 225,000. Manufacturing has still lost 1.145 million jobs in the past 3 months, or close to 10% of the total.
• construction jobs rose by 464,000. Even so, in the past 3 months -596,000 construction jobs have been lost, or about 8% of the total.
• Residential construction jobs, which are even more leading, rose by 65,600. Even so, in the past 3 months there have still been -58,800 lost jobs, or about 7% of the total.
• temporary jobs rose by 41,300. Since February, there have still been -852,800 jobs lost, or over 1/4 of all temporary help jobs.
• the number of people unemployed for 5 weeks or less declined to 3.875 million, compared with April’s total of 14.283 million. This is similar to the “less awful” readings of the weekly initial jobless claims.
• Professional and business employment rose by 127,000, which is still 2.156 million, or about 10% below its February peak.
• Average Hourly Earnings for Production and Nonsupervisory Personnel: declined $0.14 from $25.14 to $25.00, which is still a gain of over 3% in 2 months. This reflects that job losses were primarily among lower wage earners.
• the index of aggregate hours worked for non-managerial workers rose by 4.9%. In the past 3 months combined this has nevertheless fallen by about 10%.
• the index of aggregate payrolls for non-managerial workers rose by 4.4%. In the past 3 months combined this has nevertheless fallen by about 11%.
• Full time jobs were responsible for 2.2 million of the gains.
• Part time jobs were responsible for 1.6 million of the gains.
• The number of job holders who were part time for economic reasons declined by 254,000 million to 10.633 million. This is still an increase since February of 6.315 million.

SUMMARY: This report was a positive shock. Rehiring in May outweighed the continuing and spreading layoffs. At first blush it appears this was primarily among the retail and leisure and hospitality sectors which were more than decimated in March and April. A few sectors have recovered more than half of the jobs that were lost, but most have only regained 10% or 20% of their losses. Further, because average hourly wages have maintained over 80% of the increase in April – because lower wage jobs were primarily lost – this strongly suggests that the job recalls were relatively speaking tilted towards higher paying jobs as well. Most importantly, aggregate payrolls are still down more than 10% from their recent peak. Unless a miracle happens and a huge majority of the job losses are reversed in the next 45 days, when the enhanced unemployment insurance passed by Congress runs out in July, there is going to be a major knock-on shock to the economy.

Comments on May Employment Report – The May employment report was surprising. Every key indicator – ISM surveys, ADP employment report, unemployment claims and more – suggested further job losses in May. Instead the BLS reported job gains of 2.5 million (about 10 million better than consensus forecasts), and the unemployment rate decreased to 13.3%. The reference week in May (includes the 12th) was too soon to be impacted by most areas “reopening”. One possibility is that many companies brought back employees to qualify for the PPP (Payroll Protection Plan). Earlier: May Employment Report: 2,500,000 Jobs Added, 13.3% Unemployment RateIn April, the year-over-year employment change was minus 17.7 million jobs. One of the keys to follow will be the number of workers on temporary layoff. This increased from 801 thousand in February, to 1.848 million in March, and to 18.063 million in April. This decreased by 2.7 million in May to 15.343 million. It could be that companies let too many workers go in April and brought some back – or this might be related to PPP adjustments. Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. The prime working age will be key in the eventual recovery. The 25 to 54 participation rate increased in May to 80.7%, and the 25 to 54 employment population ratio increased to 71.4%. From the BLS report: “The number of persons employed part time for economic reasons, at 10.6 million, changed little in May, but is up by 6.3 million since February. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. This group includes persons who usually work full time and persons who usually work part time.” The number of persons working part time for economic reasons decreased in May to 10.633 million from 10.887 million in April. These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 21.2% in May. This is down slightly from the record high last month for this measure (since 1994). The previous peak was 17.2% during the Great Recession. This graph shows the number of workers unemployed for 27 weeks or more. According to the BLS, there are 1.164 million workers who have been unemployed for more than 26 weeks and still want a job. This will increase sharply in 4 or 5 months, and will be a key measure to follow during the eventual recovery. Summary: The headline monthly jobs number was surprising, and well above expectations. However, the previous two months were revised down significantly. The headline unemployment rate decreased to 13.3% (probably closer to 16% according to the BLS). Since the reference week included the 12th of May, this was too soon to be impacted by “reopenings” in most areas. That will be more of a June story. Instead this increase in employment was likely due to companies rehiring because they let too many people go in April, and because some companies needed to rehire to qualify for PPP forgiveness. As a reminder, the course of the economy will be determined by the course of the pandemic.

Where Employment Improved – and Where It Didn’t – WSJ — Employment rebounded broadly in May as companies reopened following coronavirus shutdowns. Among goods-producing industries, manufacturing showed strong gains. In the services category, jobs in food services and drinking places rose by 1.4 million, accounting for about half of the gain in total nonfarm employment. On the other hand, government payrolls continued to shrink as steep declines in revenue forced cities and states to lay off workers.Construction registered the strongest improvement among goods-producing industries with an increase of 464,000 jobs, or almost half the number lost in April. Despite the coronavirus shutdowns, house prices continued to rise, and some real-estate brokers and economists say they see signs that demand for new homes has started to rise in recent weeks.Employment in services such as education, health care and hospitality dropped sharply when the U.S. went into lockdown, but those sectors saw the strongest revivals last month. Employment in two categories – leisure and hospitality, and retail trade – accounted for more than half of the rebound in payrolls across the economy.The unemployment rate ticked down for both sexes, with the rate still higher for women, who are overrepresented sectors such as education, leisure and hospitality. Those jobs were hard hit by social-distancing measures because they involve close personal contact.The coronavirus pandemic took the greatest toll on the least-educated workers, who are concentrated in hard-hit industries like retail and hospitality. One in five workers who didn’t complete high school remained out of work in May. Unemployment declined among white and Hispanic workers but rose for blacks and Asian Americans. The rate for black Americans was 16.8% in May, the highest since March 2010, in the aftermath of the last recession.

BLS Admits “Survey Error” May Have Reduced Unemployment Rate By Up To 3% –Earlier we pointed out some statistical aberrations that helped explain some of the shocking surprise in today’s jobs report. But none other than the BLS itself admitted that a “misclassification error” led to the unemployment rate being as much as 3% higher than reported.Here is what the BLS said about adjustments to the household survey as a result of the Coronavirus shutdowns:… there was also a large number of workers who were classified as employed but absent from work. As was the case in March and April, household survey interviewers were instructed to classify employed persons absent from work due to coronavirus-related business closures as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified. If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis).So the BLS knows there is an error and is hoping to fix it…”BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue.”… but not yet:“However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses.” One can only imagine what other “survey errors” were made but not fixed for the sake of “data integrity.”

One-Third of America’s Record Unemployment Payout Hasn’t Arrived Almost one-third of unemployment benefits estimated to be owed to the millions of Americans who lost their jobs as a result of the coronavirus slump haven’t been paid yet, as flagship policies struggle to cope with the unprecedented wave of layoffs. The Treasury disbursed $146 billion in unemployment benefits in the three months through May, according to data published Monday — more than in the whole of 2009, when jobless rates peaked after the financial crisis. But even that historic figure falls short of a total bill that should have reached about $214 billion for the period, according to Bloomberg calculations based on weekly unemployment filings and the average size of those claims. Estimated total claims cost calculated by Bloomberg based on unadjusted continuing claims plus Pandemic Unemployment Assistance claims. Claims data for the last two weeks of May are averages of the prior four weeks, PUA data for the last two weeks are averages of the prior two weeks. The estimated gap of some $67 billion shows how emergency efforts to boost payments, and deliver them via creaking state-level systems, are lagging the needs of a jobs crisis that’s seen more than 40 million people file for unemployment as the economy shut down. The gaps in America’s social safety net are becoming apparent at the same time as protests erupt over longstanding racial inequities. The debate over how and when to reopen businesses even as the pandemic continues is also turning acrimonious, in a nation that increasingly feels like a tinderbox. There’s “a huge hole,” said Jay Shambaugh, an economist at Brookings Institution who has been tracking the unemployment payments. “There’s a lot more money that should have gone out that has not gone out.” The bill is still mounting. Economists estimate that another 1.8 million people filed for unemployment last week. That data is due out on Thursday, while Friday’s monthly numbers are forecast to show a jobless rate of 19.5% in May, the highest since the Great Depression.

Census: Household Pulse Survey shows 48.1% of Households lost Income –From the Census Bureau: Measuring Household Experiences during the Coronavirus (COVID-19) Pandemic The U.S. Census Bureau, in collaboration with five federal agencies, is in a unique position to produce data on the social and economic effects of COVID-19 on American households. The Household Pulse Survey is designed to deploy quickly and efficiently, collecting data to measure household experiences during the Coronavirus (COVID-19) pandemic. Data will be disseminated in near real-time to inform federal and state response and recovery planning.…Data collection for the Household Pulse Survey began on April 23, 2020. The Census Bureau will collect data for 90 days, and release data on a weekly basis. This will be updated weekly, and the Census Bureau released the fourth week of survey results today. This survey asks about Loss in Employment Income, Expected Loss in Employment Income, Food Scarcity, Delayed Medical Care, Housing Insecurity and K-12 Educational Changes.

AMC Theaters warns of ‘substantial doubt’ about future as pandemic fallout continues — AMC Theaters is warning investors about its incredibly uncertain future as financial fallout from the pandemic continues, blatantly stating that “substantial doubt exists about our ability to continue as a going concern for a reasonable period of time.” A new 8-K filing arrived ahead of AMC Theaters’ upcoming earnings call next week, and it wasted no time going over the disastrous situation the company has found itself in. The filing comes with a long list of ways that AMC Theaters, the largest theater chain in the United States, is trying to stay afloat, but it acknowledged that the pandemic makes the future more uncertain than ever before. The theater chain already carried a massive debt load of approximately $5 billion by the end of 2019 and is continuing to borrow more as the company tries to make it through an unprecedented tumultuous period. AMC Theaters expects a loss of somewhere between $2.1 and $2.4 billion in the first quarter, and it maintained a cash balance of $718.3 million as recently as April.Over the last few months, AMC Theaters has effectively generated no revenue, as government-imposed restrictions and theatrical delays have stopped the company’s primary revenue generator: movie tickets and concessions. AMC Theaters, alongside competitors, is hopeful that theaters can begin to reopen en masse in July, just in time for Warner Bros.’ highly anticipated Christopher Nolan feature, Tenet.If AMC Theaters isn’t able to begin operations by then, “substantial doubt exists about our ability to continue as a going concern for a reasonable period of time.” The filing adds that because AMC has never “previously experienced a complete cessation of our operations,” the company is unable to make any predictions because everything is up in the air and changing all the time.

Major League Baseball plans to open season in midst of pandemic – On March 12, Major League Baseball (MLB), in response to the COVID-19 pandemic, suspended spring training and postponed the start of the 2020 regular season.Initially, the opening of the season was to be delayed for just two weeks, but this was pushed back in response to updated recommendations issued by the Centers for Disease Control and Prevention (CDC), which urged restrictions on events of more than 50 people for eight weeks.On March 27, MLB and the Major League Baseball Players Association (MLBPA) finalized an agreement that established a potential framework for the 2020 season. Players would receive pro-rated salaries for the number of games played. Players and owners were willing to stretch the postseason well into November in order to maximize the number of games played.In the ensuing weeks, various scenarios were proposed as to when and where to start the season. In early May, based on the expectation that the COVID-19 spread would be contained, MLB announced an 82-game season that would begin by the first week of July, with spring training resuming by June 10. Teams believe most pitchers need about four weeks to get ready, and position players need about three.MLB’s plan, which calls for “frequent” but not daily testing, quarantines only individuals who test positive and contravenes federal guidelines that advise individuals who come in contact with a confirmed infection to quarantine for at least two weeks.The Harvard Global Health Institute recommends states conduct at least 152 tests per day for every 100,000 people. But only four out of the 17 states with MLB teams currently meet that standard. How MLB avoids competing for desperately needed resources has gone unanswered. With MLB losing roughly $75 million a day, according to estimates by Patrick Rishe, director of the sports business program at Washington University in St. Louis, officials are contemplating a half-season plus expanded playoffs – well over 1,200 games across the nation. Baseball contends it can counteract the virus by disinfecting baseballs, deep-cleaning clubhouses, and, at least initially, banning paying customers from the ballpark.

Nebraskans Ask For Protections For Meatpacking Workers: “Essential Workers Are Essential Lives” -Hundreds of Nebraskans gathered at the Capitol Sunday to demand more action to protect essential workers, especially those at meatpacking plants. The Capitol steps filled up long before the rally. Hundreds of people were there for a Black Lives Matter protest later in the afternoon, but eagerly joined the crowd advocating for meatpacking workers. Maira Mendez says both of her parents work at the Smithfield Foods packing plant in Crete. “We won’t allow employers and government officials to classify plant workers as essential workers without treating them as essential lives,” Mendez said.” Maira Mendez is the daughter of two workers at the Smithfield Foods packing plant in Crete. (Becca Costello, NET News) She says Gov. Pete Ricketts has not done enough to ensure packing plants are following guidelines recommended by the CDC and OSHA. And state Sen. Tony Vargas agrees, after listening to the stories of workers. “Workers are still working too closely on assembly lines,” Vargas said. “Their employers are threatening them, saying that if they go to the media or to the public with these experiences they will lose their jobs. And if they are sick, they’re encouraged to go to work anyway.” At least 3,000 meatpacking workers in Nebraska have tested positive for COVID-19 and 11 have died. Advocates say plants didn’t act quickly enough to protect workers and are still prioritizing profit over safety.

‘Why Do We Always Get Hit First?’ Proposed Budget Cuts Target Vulnerable Californians – Shirley Madden, 83, relies on a caregiver and her two grown daughters to remain living at home – and not in a nursing home. Her daughters, 55-year-old Carrie and 60-year-old Kristy Madden, both use wheelchairs and need a second caregiver to help them navigate their own daily lives. But that critical caregiving support, along with other health care benefits for millions of Californians, could be scaled back to help plug a massive budget deficit triggered by the coronavirus. California Gov. Gavin Newsom has proposed sweeping budget cuts to safety-net health care programs ― including Medi-Cal, California’s Medicaid program for low-income people ― just as enrollment is projected to spike because of record job losses related to the pandemic. Health care experts also fear the cuts could jeopardize billions of dollars in emergency federal health funding allotted to California. Madden’s fears are compounded by the COVID-19 crisis, which has hit older people and those with chronic health conditions the hardest. She doesn’t want her mother, her sister or herself to end up in a nursing home or other long-term care facility – the settings with the most outbreaks of COVID-19. States across the country are eyeing Medicaid cuts to balance their budgets, in part because health care is usually the biggest portion of state spending, after education. They also project that more people will sign up for the public health care program, as the number of unemployed Americans hits astronomical heights. More than 20 million Americans filed for unemployment in April, raising the unemployment rate at least to 14.7%, the worst since the Great Depression of the 1930s. New York approved Medicaid cuts that will take effect after the federal emergency ends, while Georgia has instructed all its agencies to reduce spending by 14%. In California, where almost 2.9 million people have filed for unemployment in the past two months, Newsom described the proposed budget cuts as “prudent” and “strategic,” a huge pivot from the grand plans he unveiled earlier this year to expand health care to some of the neediest residents.

Denver Was Booming Before the Coronavirus Pandemic. Now It Hopes to Bounce Back – WSJ – Before the coronavirus pandemic, few American cities were creating jobs faster than Denver. Nor had many places aligned themselves so closely with sectors that have since been battered by shutdowns aimed at curbing the spread of the virus, such as tourism and energy. Now the Mile High City may also hold answers about the post-coronavirus economic outlook: whether cities that outperformed during the longest expansion in U.S. history are better cushioned to navigate a recovery. In Denver’s case, some of the same factors that propelled it – such as a younger, more educated and wealthier population – may outweigh disadvantages of high exposure to crisis-hit sectors, according to local business owners and economists. A few months back when the U.S. was enjoying joblessness at a half-century low, Denver area employment proved consistently healthier than the national average, according to the U.S. Labor Department. The city’s expanding population earned a median income of $63,793 – 6% above the national average – and underpinned surging property values. They patronized hundreds of new restaurants a year in places such as the trendy RiNo district. An important component of Denver’s vitality has included attracting outsiders: tourists and convention-goers, but also companies and job seekers. Chunks of that revenue have been erased by lockdowns and social distancing. Resort, hotel, restaurant and airport layoffs in Denver and across Colorado have propelled state jobless claims to nearly 500,000 in recent weeks – compared with jobs added as recently as February.Denver’s 4.6% jobless rate in March, the most recent month available, exceeded the national average for the first time since early 2012, according to the Labor Department. The fall in economic activity also caused a collapse in global oil prices, costing oil patch jobs in Denver.

NYC’s Metropolitan Opera artists face uncertain future due to coronavirus lockdown For the past two months of the coronavirus quarantine, Metropolitan Opera House singer Abigail Mitchell has used her small upper Manhattan apartment as a temporary studio space.On most days, the soprano enters the bedroom – the area of her home that’s farthest from the neighbors – sits down at her keyboard, and runs through the obligatory scales before trying her vocal chords on new arias, or long songs featuring soloist parts.Promote health. Save lives. Serve the vulnerable. Visit who.intMitchell, 35, a full-time Met chorus member, has embraced this new routine – but it’s a far cry from the electrifying frenzy of day-long rehearsals and nightly performances at the famed Metropolitan Opera House in Lincoln Center, which shuttered its doors in March due to the looming threat of COVID-19. Hundreds of part-time and full-time singers, directors, dancers, musicians, stagehands and supportive staff members have been out of work for over eight weeks due to the pandemic.While the chorus is scheduled to resume rehearsals July 27 to prepare for the fall season, many members wonder whether that too will be postponed.“I doubt that’s going to happen,” said Met chorus member Ned Hanlon, 36, of the Upper West Side. “To stand in a group of people and sing for a group of people is exactly the kind of thing we can’t do right now.”“Like with all (of those in) the performing arts, we were among the first to lose our jobs,” he added. “And we’re going to be some of the last people to get our jobs back.”

Public education job losses in April are already greater than in all of the Great Recession – EPI Blog — It has been well documented that fiscal austerity was a catastrophe for the recovery from the Great Recession. New estimates show that without sufficient aid to state and local governments, the COVID-19 shock could lead to a revenue shortfall of nearly $1 trillion by 2021 for state and local governments. In lieu of substantial federal investments, budget cuts are certain. But I, for one, did not expect to see the losses as soon as April. As of the latest jobs report from the Bureau of Labor Statistics (BLS), state and local government employment fell by 981,000, with the vast majority of losses found in local government. And the majority of those local government losses are in the education sector, with a loss of 468,800 jobs in local public school employment alone.State and local government austerity in the aftermath of the great recession contributed to a significant shortfall in employment in public K – 12 school systems, a shortfall that continued through 2019. The figure below shows that, as of early 2020, public employment in elementary and secondary schools had yet to recover the level it had reached prior to the losses of the Great Recession. Furthermore, employment levels in the public education system have failed to keep up with growth in public school enrollment since 2008. As of September 2019, the start of the most recent pre-pandemic school year, local public education jobs were still 60,000 short of their September 2008 level, and they were over 300,000 lower than they would have needed to be to keep up with public school enrollment.Then, the pandemic hit and local education jobs dropped sharply. More K – 12 public education jobs were lost in April than in all of the Great Recession. And that’s before any austerity measures from lost state and local revenue have been put in place. While some teachers were spared, namely elementary and middle school teachers, others were not. Half of the job losses in K – 12 public education between March and April were among special education teachers, tutors, and teaching assistants. Not only are these job losses devastating to those no longer getting a paycheck, but they negatively impact the education students receive.

Nearly half of all teachers in Brookline, Massachusetts receive pink slips – The Public Schools of Brookline, a district located in Greater Boston, Massachusetts, handed out just over 300 pink slips last Friday, nearly half of the district’s 645 teachers. These drastic cuts follow the similar elimination of all art, PE and music classes in the nearby working class town of Randolph. The fact that such devastating cuts can take place in a middle class town like Brookline, where the median income stands at $111,289, demonstrates that only the wealthiest layers of society are safe from the pandemic’s fallout and many similar stories will soon emerge with horrifying frequency across the US. Although the full list of staff that received pink slips is not public, based on discussions between teachers it appears that the departments most affected by the layoffs are physical education, art, early education and special education, with entire departments being laid off, along with many paraprofessionals and librarians. Perhaps most disturbingly, all school nurses were laid off, whose work will be more essential than ever if schools reopen in the fall. The Brookline School Committee (BSC) announced in a letter sent to the school community that they had “no choice but to provide layoff notices to some of our valued teachers and staff,” citing “the COVID-19 induced budget crisis in the Town of Brookline and the contractual obligation with the Brookline Educators Union (BEU) to provide notices of layoff by May 30.” The letter also falsely states that no departments are being cut, even though many could be staffed by zero teachers come September. The night before the pink slips were distributed, a community member broke the news in a local Facebook group, writing, “the school committee plans to lay off hundreds of Brookline teachers,” and adding that they had “just learned about this tonight.” The group was immediately alight with hundreds of comments, largely consisting of parents in distress. “This is beyond horrible. I am sick,” wrote one Brookline parent, quickly capturing the sentiment of many.

Will State and Local Governments Hire 1 Million Teachers in June and July? No, but … There will be some weird seasonal adjustments this year! Every year, state and local governments let about 2 million teachers go in late Spring, and then hire them back at the end of Summer. Since this happens every year, the BLS adjusts for this seasonal pattern in the monthly employment report. However, in 2020, state and local governments let almost 1.2 million teachers go in March, April and May, Not Seasonally Adjusted (NSA). On a seasonally adjusted basis, this was just over 1 million teaching jobs lost (State governments usually start letting teachers go in May, so some of the NSA job losses were expected).

What this means is that instead of letting close to 2 million teachers go in late Spring (NSA), state and local governments will only let go less than 1 million teachers. This creates a weird seasonal adjustment problem. By the end of July, the normal number of teachers (around 2 million) will probably have been let go. Since the BLS has already reported over 1 million teaching jobs lost seasonally adjusted (SA), the seasonally adjusted number from the BLS will have to show something like an increase of 1 million teacher jobs in June and July! State and local governments will not hire 1 million teachers in June and July, but the BLS seasonally adjusted report will show those hires to make the numbers balance out. Just something to remember over the next two months.

US universities and colleges appeal for legal immunity from coronavirus lawsuits as campuses plan to reopen in fall – In a letter to Congress, the American Council on Education, a policy group for universities and colleges in the US, pleaded on Thursday for legal liability protections ahead of potential lawsuits brought by students, faculty and staff as campuses plan to reopen in the fall in the midst of the coronavirus pandemic. The letter was co-signed by 70 other higher education associations.The move comes as over a dozen campuses currently face class action lawsuits from students demanding a partial reimbursement in tuition costs as schools moved instruction online due to campus closures in response to the pandemic.The onset of the coronavirus pandemic has had a major financial impact on higher education institutions. Some schools estimate losses in the millions for the portion of the spring semester under lockdown, with predicted losses of up to $1 billion this coming year. According to Inside Higher Ed, schools anticipate at least a 15 percent drop in enrollment nationwide for the 2020 – 21 school year, amounting to a $23 billion revenue loss.Likewise, state funding for education has been slashed substantially in several states as tax revenues have fallen as a result of mass unemployment, decreased consumer spending and a lack of federal aid during the pandemic. The largest budget shortfalls have been reported in California and New York, where cuts in education have been reported at $18 billion and $15 billion, respectively.Universities and colleges depend on state funds for a portion of their revenue, but have become increasingly reliant on revenue streams coming from student enrollment in tuition costs, residence fees, sports revenue and dining. As a result of years of budget cuts in education, the business model of the university requires the in-person attendance of students, faculty and staff. The Chronicle of Higher Education recently outlined a number of measures being planned by schools for in-person instruction in the fall, ostensibly meant to ensure social distancing protocols at campuses. Plans for instruction vary but revolve around measures such as the mandatory use of masks on campus and a 6ft distance from other students and faculty. Cartoon images in The Chronicle article illustrate the measures, for example showing students spaced out in classrooms and one-way entrances and exits to buildings. Other measures include a reduction in class sizes and a reorganization of class schedules to accommodate for longer times between classes and deep cleaning of classrooms.

US colleges prepare full opening of campuses in the name of football — American colleges and universities have begun announcing plans for how they will reopen campuses for the fall 2020 semester amid the ongoing COVID-19 pandemic, with many schools indicating that they will operate on a modified schedule or implement more online learning options for the fall. However, many prominent schools including the University of Louisville, Syracuse University, the University of Texas at Austin and Ohio State University, among others, have unveiled plans to reopen with in-person classes and other school activities for the fall semester. The schools that are particularly committed to having full or partial reopening of campus activity all have one thing in common: large multimillion-dollar football or basketball programs, with playing seasons that start in the fall. Over the past several decades, college sports has become a multibillion-dollar industry and has made athletics the center of revenue and funding plans in most major US universities. In early May, the National College Athletics Association (NCAA) released a statement outlining their plan for resuming college sports, titled, “Core Principles of Resocialization of Collegiate Sport.” The principles include a number of conditions that must be met in order for sports to begin: COVID-19 testing for the athletes, adherence to federal guidelines, and a three-phase plan where social distancing measures are gradually lifted over time. These “principles” differ little from the phony PR statements of other industries which have already begun sending workers back to factories and workplaces. In these instances, the workers are being forced to return to work with little to no protections that they had been promised. Unsurprisingly, COVID-19 cases have surged in many of these major industrial sectors. Students returning to campuses, living in crowded residence halls and attending large classrooms, will be confronted with similar circumstances. They will have no guarantee that they will not catch the virus and spread it to others once they return to school. Eager to restart the multibillion-dollar college sports industry, NCAA has also announced that it will permit student athletes to return to campus for summer workouts and training starting on June 8. Most schools with large sports programs will have their teams on campus in June to prepare for the upcoming season. Some schools like the University of Oklahoma will wait, but only until July 1, before sending their students back to training. Delaying training could set back the athletic performance of those teams. For college sports, winning games is critical for revenue streams.

Overdose Deaths Have Skyrocketed in Chicago, and the Coronavirus Pandemic May Be Making It Worse – Opioid-related deaths in Cook County have doubled since this time last year, and similar increases are happening across the country. “If you’re alone, there’s nobody to give you the Narcan,” said one coroner. As COVID-19 kills thousands in Chicago and across Illinois, the opioid epidemic has intensified its own deadly siege away from the spotlight, engulfing one public health crisis inside another.More than twice as many people have died or are suspected to have died of opioid overdoses in the first five months of the year in Cook County, when compared with the same period last year, according to a ProPublica Illinois analysis of medical examiner’s office death records. There have been at least 924 confirmed or suspected overdose deaths so far in 2020; there were 461 at this time last year. And much like the coronavirus outbreak, the opioid epidemic has disproportionately affected African Americans on Chicago’s West and South Sides.Statewide, opioid deaths also are outpacing 2019 numbers, largely due to the increase in Cook County. The deadly surge comes at what was supposed to be a turning point for Illinois. A 2017 state action plan from then-Gov. Bruce Rauner vowed to halt the “explosive growth” of opioid deaths and reduce the projected number of opioid-related deaths this year by a third. Based on the number of overdose deaths so far in Cook County alone, it’s highly unlikely the state can meet that goal.While the spike in deaths began several months before the first known case of the coronavirus appeared in Illinois, COVID-19 appears to be exacerbating the crisis.“This is going to make it so much worse,” said Kathleen Kane-Willis, a researcher with the Chicago Urban League who has studied the opioid epidemic for more than a decade, adding that the true impact of the pandemic on drug overdoses likely won’t be known for some time. “It’s going to wear on people. It’s going to make them more anxious and depressed,” she said. “Being thrust into poverty is such a stressor, and people do turn to substances to get through that stress.”

Grief, lockdown and coronavirus: a looming mental health crisis – In almost 29 years of marriage to a rabbi, attending many of her Jewish community’s significant life events, Susannah Kraft had never attended a virtual funeral. Then in March, she went to her husband’s.The service for Rabbi Neil Kraft, the 69-year-old father of their two sons and wrestling superfan who she describes as wise, mischievous and kind, was extremely personal. Nonetheless, she says, it felt “one removed – we weren’t there”. But overall, the disruption to the traditional funeral, burial and mourning rites has been disorientating. “It’s very difficult,” says Ms Kraft, who was allowed to visit her husband’s grave this weekend. “The grieving and mourning when you haven’t actually been to the grave, it enhances the air of surrealness. Everything’s magnified; when are we going to go to the cemetery, who knows? When are we going to see family, who knows? Time is stretchy.” Just as the global pandemic is forcing a reappraisal of the way we work, socialise and travel, so too for death. From Bergamo to Brooklyn, Lille to London, the events of recent months have been so fast-moving that it can sometimes be difficult to take in the immensity of the personal trauma so many people have gone through – losses that could leave scars that last for years.With the jobs that have disappeared, the careers upended and the businesses closed, the economic impact of the crisis will take a toll on the wellbeing of millions of people. Domestic violence charities have warned about a sharp increase in cases during lockdown. But one of the hardest wounds to heal will be the sheer volume of death and the way that the natural order of saying goodbye to loved ones has been upended by the special conditions imposed by an infectious disease pandemic. The death toll in the US has now passed 102,000 while in the UK it is more than 38,000.For individuals, this will leave a private anguish that some – although not all – might find hard to come to terms with: for societies, it means a potential mental health crisis that could start to emerge as the lockdown is eased. Grief is chaotic and uncertain, says Julia Samuel, a bereavement psychotherapist in London who warns about the mental health impact from mourning under the isolation of lockdown. “What helps is that ritual. Touch, hugging, people coming round.”

China’s Barely Begun Economic Recovery Shows Signs of Stalling – WSJ – China’s economic recovery hit a speed bump in May as the coronavirus pandemic began curbing the world’s demand for Chinese goods. More and more Chinese factories have reopened for work in the past three months as authorities have eased their once-aggressive coronavirus measures. But now they are facing the dire reality of falling orders from overseas customers. The conundrum can be seen in official and private gauges of China’s factory activity. China’s official manufacturing purchasing managers index and a closely watched private survey, the Caixin China manufacturing purchasing managers index, both showed factory activity expanding in May. For the official factory survey, the reading of 50.6 marked the third straight month of expansion, while the Caixin survey showed factory activity jumping to a four-month high of 50.7 in May, from 49.4 in April. For both indexes, the 50 mark separates expansion from contraction. Below the surface, however, there is evidence that China’s nascent economic recovery is already beginning to stall. While China’s official PMI, released by the National Bureau of Statistics on Sunday, showed continued expansion, the magnitude of the gains fell for a second straight month, and a subindex to measure production slipped to 53.2 from 53.7 in April – pointing to sluggish demand. Worryingly, the new-export-orders subindex, a gauge of external demand, continued to remain deep in contractionary territory, though it improved to 35.3 in May, from 33.5 in April. Meanwhile, the Caixin PMI survey, which is tilted toward smaller private manufacturers, showed new export orders contracting at a historically sharp rate, Caixin Media Co. and research firm IHS Markit reported Monday.

World’s Biggest Lockdown to Push 12 Million Into Extreme Poverty in India – Abdul Kareem was forced out of school and into a life of odd jobs like repairing bicycles before he finally managed to pull his family out of abject poverty transporting goods across the Indian capital in a mini truck. The job, and the slim financial security that came with it, was the first stepping stone to a better life. All that is now gone as India reels under the economic impact of its protracted coronavirus lockdown. Kareem’s out of a job and stranded in his village in the northern state of Uttar Pradesh with his wife and two children. Their minuscule savings from his 9,000 rupees ($119) a month job have been exhausted, and the money he saved for books and school uniforms is spent. “I don’t know what the job situation will be in Delhi once we go back,” Kareem said. “We can’t stay hungry so I will do whatever I find.” At least 49 million people across the world are expected to plunge into “extreme poverty” — those living on less than $1.90 per day — as a direct result of the pandemic’s economic destruction and India leads that projection, with the World Bank estimating some 12 million of its citizens will be pushed to the very margins this year. Some 122 million Indians were forced out of jobs last month alone, according to estimates from the Center for Monitoring Indian Economy, a private sector think tank. Daily wage workers and those employed by small businesses have taken the worst hit. These include hawkers, roadside vendors, workers employed in the construction industry and many who eke out a living by pushing handcarts and rickshaws. For Prime Minister Narendra Modi, who came to power in 2014 promising to lift India’s poorest citizens out of poverty, the fallout from the lockdown brings with it significant political risk. The breadth and depth of this renewed economic pain will only increase the pressure on his government as it works to steer the country’s economy back on track. “Much of the Indian government’s efforts to mitigate poverty over the years could be negated in a matter of just a few months,” “More people could die from hunger than the virus.”

India’s Electricity Generation Plunges As Worst Economic Downturn In Decades Unfolds – India has announced plans to ease a strict national lockdown even as the spread of COVID-19 shows no signs of abating. Restaurants, hotels, malls, and places of worship could reopen in the near term. Despite reopening plans, India’s economy is rapidly deteriorating, which has led to a significant decline in electricity generation. Even before the two-month lockdown, India’s economy was decelerating and now faces the worst recession in four decades. The country’s economy could contract by at least 5% this fiscal year. Economic paralysis has led to a collapse in electricity generation across the country, plunging 14.3% in May, compared with a 24% decline in April, a new Reuters analysis of government data showed. The report said electricity demand was higher among households, as consumption among industries and commercial places was still widely depressed. Factories account for 50% of India’s annual electricity demand, which suggests operating capacity is still low. India’s economic downturn will result in a decline in the country’s electricity demand for the next several years. Global rating and research agency CRISIL recently said it could take upwards of three years for the economy to get back to growth activity seen in 2019. This means India will not see a V-shaped economic recovery, but rather one that is more of a U or L-shaped. CRISIL believes India’s economy will suffer a 10% permanent loss to real GDP thanks to the pandemic-induced downturn. India will need fiscal support from the government this year to counter the recession. If policy support is limited, it means the downturn will increasingly get worse in the back half of 2020.

COVID-19 Impact on the Fashion Industry: Slow Down — Jerri-Lynn Scofield – Many of my contacts in the artisanal fashion world have been badly affected by the COVID-19 pandemic, They’ve had to shut down or suspend their businesses entirely. They’re not making anything and they are not providing any work for their artisans.Much of my focus at the moment is on studying textile production in India, where the national lockdown policy has been particularly severe. Some parts of the country – but not all – are just beginning to ease restrictions, but the pandemic has dealt serious blows – in some cases mortal ones – to many producers. I hope my friends and contacts find ways to survive. I also follow the broader story in some of the specialty publicationsJING Daily covers as its bailiwick the business of luxury in China – and until now, their approach seems to be if the editors click their heels, the fashion business can continue pursuing the same trends as before. Well, I don’t think so. But I continue to read their panglossian coverage for its cockeyed optimism. More thought-provoking is the approach of the Business of Fashion, which combines pieces on the continuing consolidation and collapse of the retail sector, sustainability, and the ephemera of fashion, among other topics. Last week, the Council of Fashion Designers of America (CFDA) and British Fashion Council (BFC) took a preliminary stab at broaching the future of fashion topic, which I stumbled upon via an article in Treehugger, It’s time for a fashion industry reset: It is a well-known fact that fashion is notoriously harmful to the environment. It’s said to be the second most polluting industry in the world after the oil and gas sector, emitting enormous amounts of carbon for all the shipping of textiles and finished products, the water-intensive production of cotton, and the toxic finishing processes for countless fabrics that get flushed into waterways with little to no treatment. Then there’s the rampant waste caused by fast fashion’s cheap, quasi-disposal styles. So it’s clear that something needs to change, but what and how exactly?The new recommendations call for a new way of doing business that’s a fairly radical departure from the norm, but at the same time logical and reasonable to implement. All of the suggestions revolve around the concept of slowing down, as the current “fast, unforgiving pace” makes life hectic and stressful for designers, brands, and retailers.(I have covered fashion’s environmentally destructive habits extensively; see here. here, here,here, here, and here for some background and context.) Specific recommendations for the future of fashion are spelled out in this press release, The Fashion Industry’s Reset: An Important Message from the BFC & CFDA. What the BFC and CFDA agree on is that the world has changed, and profoundly so, and fashion too must change:

The Price Of Half The World’s Staple Food Is Up 70% In 2020 – First the good news: after soaring to record highs one month ago due to widespread shutdowns of meat processing plants and supply chain impairments, wholesale beef prices have tumbled sharply and are just barely higher than where they were before the coronavirus pandemic struck. Now the not so good news: as Bank of America’s Michael Hartnett notes in his Flow Show today, while beef may be affordable again, rice – the staple food for half of world’s population – is becoming increasingly unaffordable, “surging 70% since Jan on COVID-19 labor supply chain hit & stockpiling.” Should rice prices not revert to normal and soon, how long before the protests, riots and looting that are currently sweeping the US and various European countries spread across the entire world, this time over a far more tangible cause: hunger. As a reminder, it was the surge in food prices in late 2010 and early 2011 that precipitated the Arab Spring protests that toppled numerous political regimes and eventually culminated with the mass exodus of migrants from northern Africa and the middle east toward Europe.

Sweeping attacks on migrant workers in Russia amid COVID-19 pandemic – A tidal wave of anti-immigrant measures is under preparation in Russia, as the Kremlin and its nominal political opponents in other parties attempt to divert mass discontent over the government’s handling of the coronavirus pandemic and skyrocketing poverty by promoting xenophobia and Russian chauvinism. There are currently 11 million foreign workers in Russia, of which nearly half are from the former Soviet republics in Central Asia. Official unemployment in the country has doubled since March and now stands at nearly 1.7 million. It is expected to reach 5 to 6 million by the end of the year. According to a recent poll by the Levada Center, 28 percent of the Russian population said they would join street protests over collapsing incomes and living standards. Under these conditions, the federal news agency RIA Novosti reported last Friday that the Ministry of Internal Affairs (MIA) is considering the creation of a vast database that contains foreign workers’ biometric information, health histories, details of their legal and “social” status, and criminal records. These laborers would be required to put the app “Migrant” onto their smartphones, which would track their movements and activities and link to the database. The entire system would assign each individual a “migrant social trust rating,” which would automatically decrease if the person refused to download the software. In order to facilitate the rollout of “Migrant,” the government is considering a mass amnesty for undocumented workers. The aim is to induce undocumented immigrants to register with the state. The government would simultaneously unveil a labor exchange for migrants, where workers would receive job placements in a narrow range of specific, low-wage industries. In short, the aim is to create a government-run caste system in the Russian labor force, with migrants funneled into the worst-paid jobs and subject to constant surveillance.

The European PMIs look troubling – Today marked the release of the final readings for manufacturing activity for May. And we have some concerns about how they’re being interpreted. The surveys ask purchasing managers whether activity over the current month has declined, improved, or stayed about the same compared with the previous month. Note, it does not ask them whether activity has declined, improved, or stayed about the same compared with average levels of activity. These responses are then tallied up to produce a net figure where 50 signals no change in activity from month to month. Therefore, anything below 50 is a contraction, and anything above 50 an expansion. For much of April advanced economies shut down due to the pandemic. Production lines across Europe that had ground to a halt in March – either because of local restrictions or disrupted supply chains – were still more or less closed.Towards the end of the month and into May, however, many factories began to reopen. In Germany, for instance, Volkswagen restarted production at its Wolfsburg plant on April 27. In harder-hit Italy, manufacturers began to return to work in early May. So it is rather surprising, then, that today’s PMIs suggest that manufacturing activity continued to decline between April and May. The Italian headline reading at 45.4 is still below the crucial 50 level that separates an expansion in activity from a contraction – which is remarkable given that it fell all the way to 31.1 in April. The German reading came in at 36.6, above the April figure of 34.5 but still deep below 50, suggesting month-on-month conditions worsened. Given how awful conditions were in April, one would expect any reading below 50 for May to be seized upon as an unmitigated disaster.Not so, judging from the market reaction. Many of the major European indices are closed today, but the FTSE 100 is up by just over 1 per cent at time of writing. (In the UK, the headline reading was 40.7 for May). Perhaps part of the problem is that people are forgetting that 50 marks the crucial boundary between expansion and contraction and are viewing a higher number as a good thing in and of itself – even though a figure below 50 following a month in which all-time lows were hit in many jurisdictions suggests conditions remain abysmal. Others might interpret the PMI as a gauge of where conditions are compared with more normal times. But that’s not what the survey records at all. So unless respondents are en masse answering the wrong question, this would appear unlikely factor for the May readings. So what is going on here? One feature of the current crisis that IHS Markit’s chief business economist Chris Williamson thinks might be distorting the headline readings is the degree to which global supply chains have been disrupted. Usually delivery times shorten when demand is weak, with this “positive” offering a boost to headline readings when output is falling. But that’s not happening in this instance, where we have both a supply and demand shock happening at the same time. Via Williamson:

Economic Scars for Decades to Come – Der Spiegel -Sometimes Yavuz Dașkin worries that everything was in vain: the six years of study at universities in Giessen and Hamburg, the semester abroad in Oslo, half a dozen internships. He finally wanted to start his career and write his master’s thesis while working in a company this fall. He has written application letters to a number of companies, but has received one rejection letter after the other, and the response is always the same: There are no more jobs for students because of the coronavirus pandemic. “I have to completely rethink things,” Dașkin says. Similar stories from students leaving high school or university are everywhere these days. Of the cancelled traineeship at the travel agency, the cancelled trainee post in event marketing, of the future hotel management trainee who nobody needs right now. Or of the engineer trainee who isn’t getting that dream job at German flag carrier Lufthansa. Of the non-university prep high school graduates who are in a state of panic because very few of them are landing training positions.This year, a half-million students will graduate from university in Germany. They are entering a labor market that is “essentially frozen,” says Detlef Scheele, the head of the Federal Employment Agency. At the end of the summer, more than a half-million vocation trainees were hoping to begin apprenticeships, but nobody knows how many spots will still be available. Scheele is urging companies to continue with their trainee programs at all costs. “We can’t have a lost corona graduating class of 2020,” he says. It’s a seemingly absurd turn of events for a generation that grew up in an era of what appeared to be a never-ending economic boom, a golden decade in which the German economy never stopped growing. An economy that had the lowest unemployment rate in history, a shortage of skilled workers and a surfeit of jobs. Prospects looked a lot better only a few months ago: You could head abroad after graduation and travel around the world and then, at some point, find a job, maybe even just a half-time one.

European Central Bank Ramps Up Stimulus Program Beyond $1.5 Trillion – WSJ – The European Central Bank scaled up its bond-buying program to €1.35 trillion ($1.52 trillion) Thursday in a bold move that puts the ECB’s stimulus effort in line with that of the Federal Reserve, while U.S. unemployment and trade data pointed to a rocky recovery from the pandemic shutdowns that crippled the global economy. Investors cheered the ECB’s decision, pushing the euro to its highest level against the dollar since March and fanning a recent rally in eurozone equity and bond markets. The move eases pressure on the region’s embattled governments and underscores a recent shift in Europe, where policy makers initially lagged behind the U.S. in the amount of firepower they threw at the crisis but have over the past week unveiled a series of bold stimulus moves. “The euro area economy is experiencing an unprecedented contraction,” ECB President Christine Lagarde said at a news conference. Economic output in the region is likely to shrink by 8.7% this year before rebounding by 5.2% next year, said Ms. Lagarde, who didn’t rule out an even deeper downturn. That contraction is larger than what is expected for the U.S., where the economy is forecast to shrink by 6.6% this year and grow by 5.0% in 2021, according to The Wall Street Journal’s May economist survey.

5am starts, poverty wages and no running water – the grim reality of “picking for Britain” – For decades, the UK’s agricultural industry has relied on migrant labour. Each year, an estimated 80,000 workers, primarily from Eastern Europe, come to harvest Britain’s fruit and veg. But this year, due to Covid-19 travel restrictions and ongoing uncertainties regarding Brexit, many would-be fruit pickers have been unable to make the trip. This has left a gaping hole in the agricultural workforce – one which British workers are expected to fill. On the 19th May, Environment Secretary George Eustice launched the official “Pick for Britain” campaign, encouraging the population to take up work on farms across the country. If it fails, the media’s bleak premonitions of “a disastrous situation” in which “mountains of food are left to rot” could find themselves realised. Signalling an intensification of the recruitment drive, last week the government wheeled out Prince Charles. Donning his humblest, most rumpled coat, in a video message he urged viewers to sign up. While acknowledging that the work would be “unglamorous and at times challenging,” Charles unashamedly evoked notions of national duty and that fabled “blitz spirit.” I’ve been working on a strawberry farm since mid-April. Like others, I wasn’t covered by the government’s furlough scheme and wanted to help the country in a time of crisis. But as I watched Charles’s broadcast from a blustery field, the gale pummelling at my caravan’s chipboard walls, I couldn’t help but feel that I knew something I shouldn’t. It was as if I’d taken a glance behind the curtain and, to my horror, found the machine.

More than half of parents defy UK school reopening: Education unions seek to demobilise popular opposition– More than a million children who Boris Johnson’s government wanted to force into classes yesterday were kept at home by worried parents, fearing an explosion in COVID-19 cases in schools that will spread throughout the population. More than 2 million pupils in nursery, reception, Year 1 and Year 6 were made eligible to return to school from Monday so their parents can be forced back to work. But the Association of School and College Leaders said that in the schools that were opened, only between 40 and 70 percent of pupils returned – possibly as few as 800,000. Fears among parents and teachers of the impact of reopening schools were heightened by warnings over the weekend by four leading members of the government’s Scientific Advisory Group (SAGE) and from the Association of Directors of Public Health (ADPH). Calum Semple, professor in Child Health and Outbreak Medicine, said, “I think a political decision has been made to tie in with when school was due to start, were everything normal, but it’s not normal … Essentially, we’re lifting the lid on a boiling pan and it’s just going to bubble over.” John Edmunds, professor of infectious disease modelling at the London School of Hygiene and Tropical Medicine, warned, “There are still 8,000 new infections every day in England without counting those in hospitals and care homes … If you look at it internationally, it’s a very high level of incidence.” Professor Peter Horby, chair of the Government’s New and Emerging Respiratory Virus Threats Advisory Group (NERVTAG), said that SAGE had been very clear that “test, trace, isolate must be fully running” before lockdown is relaxed. Jeremy Farrar, director of the Wellcome Institute, tweeted, “COVID-19 spreading too fast to lift lockdown in England.”

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