Coronavirus Economic Weekly News 27June 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. We cover the latest economic data, especially GDP and employment plus some other Main Street economic impacts. I conclude with a handful of reports from other countries 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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Fed’s George: Unclear What Fed Policy Will Need to Do Next – WSJ –Kansas City Fed leader Esther George said Thursday with the future path of the economy linked to how well health threats from the coronavirus pandemic can be managed, it is unclear what lies ahead for central-bank policy efforts. “Extraordinary uncertainty about the path of the pandemic over the second half of the year and the economic outlook will require a fair amount of patience and wisdom as we navigate the likely long-lasting implications of the coronavirus shock,” Ms. George said in the text of a speech. In this environment, “determining the correct path for policy is likely to be even more difficult than usual given what I expect to be the continued volatility of the incoming data,” the official said. “Indicators are expected to improve in the third quarter even as the level of activity remains depressed,” but “it might be awhile before the dust settles and we gain insight on whether further accommodation is necessary or not,” she said. Ms. George isn’t currently a voting member of the rate-setting Federal Open Market Committee. The speech Thursday was her first in some time. She spoke amid the central bank’s massive response to help the economy navigate the pandemic. Even with unprecedented action on the part of the Fed, a number of officials have hinted they’ll have to do more, even as they expect economic activity to rebound over the latter half of the year. Ms. George said Fed efforts to help restore market functionality have been successful. She also pointed to signs of life in the economy. “More recently, as stay-at-home orders and other restrictions on activity have been lifted we have started to see signs of recovery, both in the Tenth District and nationally.” Ms. George added, “the pick-up that we have seen has been importantly supported by some of the swiftest and most aggressive fiscal policy actions on record.” Improved financial conditions “should further support a rebound in economic activity backed by fiscal support and a further relaxation of virus-related restrictions.” But whatever happens is tied to health risks, she said, noting “a renewed upsurge in infections and resumed social distancing, either mandatory or voluntary, is likely to be a persistent risk, at least until a vaccine has been developed or treatment options sufficiently improve.

Chicago Fed National Activity “Suggests Economic Growth Increased Substantially in May” — From the Chicago Fed: Index Suggests Economic Growth Increased Substantially in May: Led by improvements in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +2.61 in May from – 17.89 in April. All four broad categories of indicators used to construct the index made positive contributions in May, and all four categories increased from April. The index’s three-month moving average, CFNAI-MA3, moved up to – 6.65 in May from – 7.50 in April. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. This suggests economic activity was in a recession starting in March (using the three-month average). According to the Chicago Fed: The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories. … A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.

Q1 GDP Third Estimate: Real GDP Remains at -5.0% – The Third Estimate for Q1 GDP, to one decimal, came in at -5.0% (-4.99% to two decimal places), a major drop from 2.1% (2.13% to two decimal places) for the Q4 Third Estimate. Investing.com had a consensus of -5.0%.Here is the slightly abbreviated opening text from the Bureau of Economic Analysis news release:Real gross domestic product (GDP) decreased at an annual rate of 5.0 percent in the first quarter of 2020 (table 1), according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1 percent.[Full Release] Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was an annual calculation. To be more precise, the chart shows is the annualized percentage change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We’ve also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.18% average (arithmetic mean) and the 10-year moving average, currently at 2.12. Here is a log-scale chart of real GDP with an exponential regression, which helps us understand growth cycles since the 1947 inception of quarterly GDP. The latest number puts us 15.2% below trend. A particularly telling representation of slowing growth in the US economy is the year-over-year rate of change. The average rate at the start of recessions is 3.35%. Four of the eleven recessions over this timeframe have begun at a lower level of current real YoY GDP.

U.S. 1Q Final GDP Down 5.0% | Morningstar -The U.S. economy’s first quarter contraction was unchanged in the government’s latest reading, as the coronavirus pandemic’s spread triggered a recession. Gross domestic product, a broad measure of the goods and services produced across the U.S., contracted at a 5.0% seasonally and inflation-adjusted annual rate January through March, the Commerce Department said Thursday. The department has previously released estimates of first quarter GDP, most recently saying last quarter’s contraction was 5.0%. Economists surveyed by The Wall Street Journal had expected that figure to be unrevised in the latest report. The economy grew 2.3% in 2019, its 10th straight year of growth, but slid into a recession in February as the pandemic slammed the brakes on spending by consumers and businesses. Earlier this month, the National Bureau of Economic Research, the nonprofit that is the official scorekeeper of recessions, said the U.S. was in a recession. It determined the unprecedented magnitude of the pandemic-related decline in employment and production, and its broad reach across the entire economy, warranted the designation even if the downturn ends up being briefer than earlier contractions. Economists project that the second quarter, which ends next week, will see the biggest quarterly economic contraction in records dating back to 1947. Forecasting firm Macroeconomic Advisers on Tuesday forecast GDP will decline at a 37.3% annual rate. The annualized rate, however, overstates the severity of any drop in output because it assumes that one quarter’s pace continues for a year. The revised data released Thursday showed business investment declined in the first quarter at a slower pace than earlier estimated, while inventory investment and exports fell more sharply. Here are highlights of the revisions:

• –Consumer spending, which accounts for more than two-thirds of U.S. economic output, decreased at a 6.8% annual rate in the first quarter, unchanged from the prior estimate of a 6.8% decline. That was a sharp deterioration from the fourth quarter, when spending increased at a 1.8% rate.
• –A measure of business investment, fixed nonresidential investment, declined at a 6.4% rate, compared with a prior reading of a 7.9% decline.
• –U.S. exports declined at a 9.0% rate, versus a prior estimate of a 8.7% decline. Imports fell by a greater amount, 15.7%. As a result, trade added 1.31 percentage points to the first quarter’s 5% overall GDP decline. Inventories were a drag on growth, subtracting 1.66 percentage point, compared with the previous estimate of a 1.52 point drag.
• –Spending on home building and improvements remained a bright spot, residential investment increased at a 18.2% rate in the first quarter, versus a prior reading of a 18.5% increase.
• –Spending at all levels of government rose at a 1.1% rate, above the prior estimate of 0.8%.
• After-tax corporate profits without adjustments for inventory valuation and capital consumption, a measure of profits that quarter, declined at a 14.1% rate in the first quarter from the prior quarter. The initial estimate was for a 15.9% decrease.
• Compared with a year earlier, profits without inventory valuation and capital consumption adjustments fell 9.1%.

Economic Outlook: The Gathering Storm – McBride – On March 31st, I wrote: This is a healthcare crisis, and the economic outlook is based on presumptions about the course of the pandemic.I’ve been updating my outlook monthly, and turning more and more pessimistic due to the poor US government response to the pandemic. The Federal government’s response has not been helpful, and in many ways, it has been counterproductive. The Vice President of the US, Mike Pence, wrote just last week in the WSJ: There Isn’t a Coronavirus ‘Second Wave’. The data has already proven Pence wrong. Fortunately, some state and local governments have stepped up to fill the void, but in other localities, the response has been terrible. And it is possible the pandemic will get worse in the Fall. Some countries have been able to open their economies without an increase in infections. For example, in Japan, the economy is mostly open, however 1) everyone wears a mask, 2) there is robust contact tracing, and 3) everyone is urged to follow the 3 C’s (avoid Closed spaces, Crowded places, and Close-Contact settings). However, in the US, contact tracing is still ramping up, many people aren’t wearing a mask or face covering, and many people are not following the 3Cs. However, there is no leadership in the US to significantly change people’s behavior. It doesn’t take an official lockdown to push local economies back into recession – many people will pull back as the number of cases and hospitalizations rise. Based on recent hospitalization data, I expect further layoffs in some states like Arizona, Texas, and Florida. I do expect another round of disaster relief in July – extending the extra unemployment benefits (perhaps at a lower level), extending the PPP, and providing relief to the States. Without this disaster relief, the entire US economy might slide back into recession in August. But even with another round of disaster relief, it seems likely the recovery will stall unless progress is made in slowing the spread of the virus. The longer the widespread pandemic continues, the more structural damage to the economy. And the more severe the economic damage, the longer it will take to recover from the pandemic.

All 4 coincident indicators of recession improved in May vs. April — With this morning’s release of personal income and spending, we now have all 4 coincident indicators for May that the NBER uses to determine whether the economy is in a recession or recovery/expansion. And all 4 improved from their “most horrible” readings in April. A recession is a generalized downturn in production, employment, sales, and income. The “income” metric that the NBER uses is “real personal income excluding current transfer receipts,” (basically, government program payments to individuals) and as shown in the graph below, it improved from April: Still a horrible decline from February, but “less horrible” compared to April. Since industrial production, nonfarm payrolls, and real retail sales also all improved in May from April, that makes it 4 for 4 among the coincident indicators: Real disposable personal income (red in the graph below) declined in May from April but was well ahead of previous months. This probably represents the delayed receipt and cashing of some of the one-time $1200 stimulus checks distributed by Congressional Act. Real consumption expenditures (blue), however, increased significantly, probably reflecting in part spending of that stimulus money by consumers, and partly spending by those called back to work: In short, in May the situation was still horrible, but “less horrible” than April. That would qualify for the beginning of a recovery by economists’ definitions, *provided* there is no renewed downturn. And as the coronavirus continues to wreak more havoc in the States that have recklessly reopened – or simply let their guards down – a renewed downturn is very much a possibility, and almost a certainty if Congress does not extend the enhanced unemployment program by the end of July.

China’s Big Surprise (Years In The Making): An EMP Attack? – The coronavirus pandemic has exposed dangerous weaknesses in U.S. planning and preparation for civil defense protection and recovery, and those weaknesses surely have been noticed by our potential enemies: China, Russia, North Korea, Iran and international terrorists.The U.S. spent decades, and billions of dollars, supposedly preparing for biological warfare. The Centers for Disease Control and Prevention, the National Institutes of Health, and the departments of Defense and Homeland Security are supposed to have contingency plans to protect the American people from lethal biological weapons such as anthrax and genetically engineered smallpox, which could have mortality rates of over 90 percent.But our defenders have not even been able to competently cope with COVID-19, which has a mortality rate under 1 percent. The White House took over management of the pandemic, apparently to compensate for the failure of the U.S. government to have adequately stockpiled such basics as ventilators, masks and pharmaceuticals.Hostile foreign powers surely have noticed the panicked, incompetent U.S. response to the virus that shut down a prosperous U.S. economy, self-inflicting the worst economic crisis since the Great Depression. The nationwide lockdowns brought shortages of all kinds, exposing societal and critical infrastructure fragility – and causing widespread fear.Adversaries also have noticed the ongoing U.S. “cold civil war.” According to federal authorities, radicalized young people on both sides of the political divide and criminals have been infiltrating recent protests – rioting, toppling statues and setting fires. The swelling counter-culture anarchy and self-condemnation is reminiscent of 1968, a year of riots and anti-war protests in America that is recognized by most historians as the psychological turning point toward U.S. defeat in the Vietnam War.North Korea applauds America’s domestic chaos as proof that democracy does not work and the future belongs to totalitarian states such as China. America looks fragile to dictators who would replace the U.S.-led world order with a new one dominated by themselves. China, for example, has been planning to defeat the U.S. with an electromagnetic pulse (EMP) and cyber “Pearl Harbor” attack for a quarter-century. As I warned the Senate Subcommittee on Terrorism, Technology and Homeland Security in 2005, Chinese military writings – such as the following excerpt – make reference to U.S. vulnerability to EMP attacks:

House readies $1.5T ‘infrastructure’ plan including education, broadband, housing – The House is preparing to merge several typically unrelated bills into one massive “infrastructure” package, doling out more than $1.5 trillion for everything from roads to education, housing, clean water, broadband and more. Speaking with reporters Thursday, Speaker Nancy Pelosi gathered the heads of some of the largest House committees to discuss their pieces of the legislation, which she called “Moving America Forward.” She said she intends for the legislation, which contains a significant focus on green initiatives and climate resiliency, to pass the House before the July 4th recess. It’s unclear, however, how – if at all – the bill will be paid for. House Ways and Means Chair Richard Neal (D-Mass.) implied that it would lean on bonding and deficit spending, at one point calling out President Donald Trump’s own call for a $2 trillion infrastructure investment. .” Beyond the spending issue, Republicans have already been highly critical of the surface transportation piece of the bill and its heavy emphasis on green infrastructure and climate resiliency, deriding it as just another fanciful iteration of a Green New Deal and complaining of being shut out of the process. Pelosi acknowledged some of the partisan atmosphere, especially the challenge of bringing Senate Republicans on board. “As you know, the Grim Reaper has said nothing is ever going through in the Senate,” said Pelosi, referring to Senate Majority Leader Mitch McConnell. But she said improving infrastructure is of “tremendous interest” across the political spectrum. “When people see the legislation, and people see how it does affect their areas – this is not just a matter of transportation, it’s a matter of clean air, clean water,” said Pelosi. “So, we think that this will be nonpartisan, very bipartisan, and we look forward to working together – House and Senate, Democrats and Republicans, and the White House.” She also suggested that, although previous coronavirus relief measures have focused on “mitigation,” this package will help the country with “recovery,” including by generating good-paying jobs and facilitating commerce. A surface transportation bill, currently working its way through the House, appears to be the base of the legislation. It would authorize $494 billion over five years for roads, bridges and transit programs. That bill had been expected on the House floor around June 30. The new legislative package also will contain what House Energy and Commerce Chair Frank Pallone (D-N.J.) characterized as $70 billion for “clean energy.” Pallone specifically mentioned upgrading the electric grid and making it more resilient, among other items. He also said the legislation will contain $25 billion for drinking water programs, $35 billion for health care infrastructure and $100 billion for broadband, “which will get us to 100 percent coverage.” The legislation is also expected to contain funding to upgrade schools, as well as for public housing – including $70 billion to address a capital backlog for public housing, $1 billion for climate resiliency upgrades to public housing and $5 billion for a housing trust fund that would support the creation of 60,000 new affordable housing units.

Treasury, SBA to disclose identities of large PPP borrowers – The Treasury Department and Small Business Administration have reversed course and will release the names of many borrowers that received Paycheck Protection Program loans. The agencies, which are overseeing the $659 billion program, said late Friday that they will provide information on businesses that received loans of $150,000 or more. They said those loans account for about three-fourths of all PPP funds approved. The SBA and Treasury will share other details for the businesses, including their addresses, demographic data and the number of jobs supported by the loans. Specific loan amounts will not be disclosed, though each loan will be placed in one of five size categories. SBA Administrator Jovita Carranza said in a tweet that the agencies “agreed with bipartisan leaders” of the Senate Committee on Small Business & Entrepreneurship to make the data public. The Treasury Department had initially pushed back against demands that the data be shared. The agencies will disclose summary information for loans of less than $150,000, including ZIP code, industry, business type and certain demographic categories. No timeline was shared for producing the in-depth data.

Small Businesses Raced to Spend PPP Funds but Covid-19 Pandemic Drags On – WSJ – Restaurants and retailers have applauded recent changes in the government’s $670 billion small business rescue program that make it easier for companies battling the Covid-19 pandemic to qualify for loan forgiveness. But the increased flexibility has come late for scores of small businesses that followed the Paycheck Protection Program’s original rules – and quickly used up most or all of their money. Rising numbers of Covid-19 cases in Florida, Texas and other Sunbelt states have disrupted many reopening plans. The governor of Texas paused reopening plans and ordered some hospitals to pause elective surgeries. New York is delaying the reopening of malls and gyms. Maine put on hold plans to let patrons inside bars. ECi Stores, a chain of consignment shops in Leominster, Mass., received a roughly $80,000 PPP loan in mid-April. By the time Congress relaxed the program’s rules on June 3, the 22-employee business had already spent the bulk of its PPP loan. It was still days away from being able to open its doors to customers. “It doesn’t really do us much good,” said ECi finance chief Neil Abramson. ECi would have delayed bringing its employees back to work had it known earlier that Congress would extend the timeline for using PPP funds. Instead, the company paid for a few weeks of health-insurance premiums and funded retirement plans for its staff to ensure the money would be spent quickly enough to qualify for loan forgiveness. The PPP has provided a lifeline for many small companies struggling to stay afloat during the pandemic. It also encouraged businesses to make spending decisions that sometimes weren’t in their best interests, some owners say. To qualify for forgiveness, many prioritized speed over efficacy. Now, with much of the money spent and the economy still hobbled, some are finding they would have been better off had they not followed the program’s original requirements in an effort to make sure their loans would be forgiven and instead gambled that the rules would change.

More Mind Reading as Washington Post Pushes Another Round of Pandemic Checks as Stimulus – Dean Baker – For some reason reporters feel it is part of their job to read politicians minds. We got another taste of this in a Washington Post news story * pushing the idea of sending out another big check as a stimulus. The piece begins by telling readers:”President Trump has told aides he is largely supportive of sending Americans another round of stimulus checks, believing the payments will boost the economy and help his chances at reelection in November, according to three people aware of internal administration deliberations.”Of course the Post has no idea what Trump believes about the economic impact of stimulus checks. It knows what he says about the economic impact. If Trump “believes” that the checks will boost his re-election chances then he is likely to say that he thinks they will boost the economy, regardless of what he really believes.As a practical matter, these checks are likely a very poor form of stimulus. The point of another round of spending is first and foremost to help the people who have lost their jobs or in other ways have been hurt by the pandemic. The vast majority of people getting another round of pandemic checks will not be in this category.The other motive for a stimulus is to increase demand in the economy. Sending checks to people who have not lost their jobs or seen a large decline in their income is likely to have little impact on spending, as shown by the record saving rate seen in April. The saving rate will be lower in May, but likely still extraordinarily high. Many potential check recipients are hesitant to spend money because they are worried about the pandemic, not because they don’t have it. Incredibly, the Post does not give the view of any economists who have this perspective, even though they would not be hard to find. The only reservations about another round of stimulus mentioned in the piece come from Republicans concerned about the size of the budget deficit.

IRS Paid $1.4 Billion in Stimulus Payments to Dead People, GAO Report Says – WSJ – The Internal Revenue Service paid nearly $1.4 billion in stimulus checks to dead people, according to a Government Accountability Office report that provides the first tally of such payments. Citing data from the tax agency’s inspector general through April 30, GAO said Thursday that the IRS made almost 1.1 million such payments before Treasury Department officials determined that deceased people were ineligible and began asking recipients to return the money. Those checks amounted to less than 1% of the total stimulus payments. The GAO report says IRS lawyers initially determined that the agency couldn’t deny payments to people who filed a 2019 return but have since died. The report says IRS officials raised the issue to Treasury officials while Congress was drafting the legislation. The law authorizing the stimulus payments based the amounts – up to $1,200 per adult – on past tax returns. People who died in 2018 or 2019 may have filed returns before they died or had heirs file final income tax returns for them afterward. The IRS, which was trying to get the money out quickly, didn’t use death records from the Social Security Administration as a computerized filter in the first three rounds of payments, according to GAO. The tax agency then reversed that decision after Treasury Department officials read media reports about payments to dead people. Now, the IRS says people who have died by the payment date are ineligible to get the money and recipients – such as the family members of the deceased – should return it.

Democrats: Trump has yet to spend nearly $14B for COVID tests, contact tracing – The Trump administration has yet to distribute nearly $14 billion intended to help state and local governments improve coronavirus testing and contact tracing, according to two top Democrats. In a letter to Health and Human Services Secretary Alex Azar, Senate Minority Leader Charles Schumer (D-N.Y.) and Senate Health Committee ranking member Patty Murray (D-Wash.) said the administration needs to “immediately” distribute the funding. Congress in April provided more than $25 billion to increase testing and contact tracing capacity, as well as $2 billion to provide free COVID-19 testing for the uninsured by paying providers’ claims for tests and other services associated with getting a test, like an office or emergency room visit. But according to Schumer and Murray, the administration has no plans for how to distribute more than $8 billion out of the $25 billion, leaving communities without needed resources. “The United States is at a critical juncture in its fight against COVID-19, and now is the time for an aggressive and fast response. This administration will put our country at grave risk if it tries to declare an early victory, leave lifesaving work undone, and leave resources our communities desperately need sitting untouched,” the lawmakers wrote. They said the administration should disburse the $8 billion “immediately,” with an emphasis on addressing contact tracing and collecting data on COVID-19 racial and ethnic disparities. Leading public health groups say state and local governments need $7.6 billion to quickly scale up contact tracing, including $4.8 billion to hire at least 100,000 contact tracers. Still other experts believe the country needs closer to 300,000 contact tracers. Like much of the federal response to the pandemic, states have been left to establish their own contact tracing metrics, and many are even lagging behind the metrics they set for themselves. The Centers for Disease Control and Prevention hasn’t released a national contact tracing strategy to help localities evaluate their efforts and hasn’t awarded nearly $4 billion for surveillance and contact tracing at the state and local levels and tribal territories, the Democrats said. The administration has also distributed very little of the $2 billion meant to pay for the costs of testing.

Trump refuses to say if he slowed down coronavirus testing – President Trump on Monday refused to say whether he told staff to slow down COVID-19 testing to make it look like the U.S. had fewer cases, while White House officials denied he had ever given such an order. Trump has been blaming rising case numbers of coronavirus in the U.S. on increased testing, arguing the country has been doing “too good a job.” “If we did slow it down, we wouldn’t show nearly as many cases,” Trump said in an interview with Scripps News. Asked again if he had asked to slow testing down, he replied: “Frankly I think we’re way ahead of ourselves if you want to know the truth. We’ve done too good a job, because every time we go out with 25 million tests, you’re going to find more people so then they say ‘oh, we have more cases in the United States.’ The reason we have more cases [is] because we do more testing than any other country by far.” Trump generated outrage this weekend when he said at his first campaign rally in months that he told staff to “slow the testing down, please.” Trump aides later said his comments were a joke. “It was a comment that he made in jest,” White House press secretary Kayleigh McEnany told reporters Monday. “It was a comment that he made in passing, specifically with regard to the media coverage and pointing out the fact that the media acknowledges that we have more cases because where you test more people you find more cases.” The president has consistently said he believes widespread testing to be overrated and problematic because it leads to higher case counts. COVID-19 testing was scarce in the early days of the pandemic but availability improved significantly as commercial labs became involved in the effort. The U.S. has now completed more than 25 million tests, including 2.3 million positive results. Trump has called for speedy reopening efforts to try to revive the U.S. economy, which has been devastated by the pandemic. On Monday, the White House moved to scale back its own temperature screenings for those entering the complex as Washington, D.C., proceeds to phase two of its reopening.

Dr. Birx privately tells states to increase testing – Dr. Deborah Birx, the coordinator of President Donald Trump’s coronavirus task force, told the nation’s governors in a call Monday that it was vital that they ramp up testing to find asymptomatic individuals to prevent further community spread. Her remarks stood in stark contrast to those by the president at his rally in Tulsa, Oklahoma over the weekend – and the days since – in which he said he had asked his team to slow-walk testing initiatives so as not to inflate the country’s official case count. “Hopefully I have left you with the impression that increased testing is good,” Birx said on the call, a recording of which was obtained by The Daily Beast. “We would like to even see it even more. Identifying cases early including your asymptomatic [ones] will really help us protect the eldery and the additional people with comorbidities.” In her weekly call with governors, Birx said her team had collected data that suggests an uptick in cases in people between the ages of 18 and 35, and that state officials should continue to test that population to better contain the virus and to ensure hospitalizations and deaths do not spike. For good measure, she asked governors to enhance testing of workers in nursing homes and of individuals in Hispanic communities, saying it would be helpful to enlist bilingual testers for the latter. The call with governors comes just two days after President Trump told rally-goers that he asked his team to “slow the testing down” to keep the U.S. case count artificially lower. Trump’s advisors told reporters that he was merely joking. But on Tuesday morning, before departing for Arizona, Trump told reporters he was not. “I don’t kid,” he told CBS News’s Wija Jiang. Birx’s remarks on Monday’s call underscore the extent to which the president and members of his own coronavirus task force are increasingly operating off of different playbooks. Appearing before a House committee on Tuesday, Dr. Anthony Fauci, the top infectious disease expert in the government, said he’d never been told to slow down testing and expected it to ramp up. The internal administration debate over the efficacy of testing comes at a time when cases of coronavirus are rising fast in several states and ticking up nationally. Both Birx and Pence acknowledged on the call that there was still plenty of reason for state officials to worry about the trajectory of the virus’s spread, particularly in the south and southwestern part of the county. “We have about 110 ten counties … that are in that alert status,” Birx said. The call featured remarks from several of the governors in the hardest hit states. Those goververs stressed, as did Birx, that much of the rise in cases was due to younger individuals, often asymptomatic, testing positive for the disease. And in explaining those spikes, the governors offered an implicit admission that the relaxing of social distance policies that they’d undertaken had given way to complacency about health standards writ large.

Sources: Trump admin weighs ending virus emergency -The Trump administration, eager to claim victory over coronavirus, has been considering scaling back the national emergency declared earlier this year to control the pandemic, according to healthcare industry officials who have spoken with the administration. The prospect has stoked alarm among public health leaders, physicians, hospital officials and others who are trying to control the outbreak and fear that such a move would make it more difficult for state and local governments and health systems to keep the coronavirus in check. Pressed on the issue Tuesday, White House press secretary Kayleigh McEnany told the Los Angeles Times that no such move was imminent. “I just spoke with the president,” she said, “and he said we are not looking at lifting the national emergency declarations.” But White House officials have a history of contradicting themselves, most recently on Monday when McEnany claimed President Trump was joking over the weekend when he said he’d directed aides to slow coronavirus testing. Trump said Tuesday it wasn’t a joke. Several industry officials interviewed by The Times said they’d received indications over the last week from the Trump administration that lifting emergency declarations was being considered. “It was very much under discussion,” said one industry official, who asked not to be identified to avoid jeopardizing relationships with the administration. The discussions have taken place as hospitalizations and caseloads have begun to climb rapidly in several large states that moved early to lift restrictions on businesses, an increase that could make it more difficult for the administration to end the emergency declarations. Healthcare leaders said they’d been mystified by the administration’s unwillingness to publicly commit to an extension of the emergency declarations, one of which is scheduled to expire next month. “It’s the silence that worries us,”

America Sits on Its Hands as Covid-19 Cases Rise — Yves Smith – How was America able to send a man to the moon, yet now only able to dork around in the face of a disease that most other developed economies and even quite a few emerging ones have done reasonable jobs of containing? While its bungled Covid-19 response confirms the thesis that the US is a failed state, the cause isn’t simply enfeebled government bureaucracies and MBA-style magical thinking by too many people in charge. It’s the way citizens are setting out to propagate infection via refusing to change their habits. It’s as if the American religion has become “Don’t tell me what to do.” And that’s even more peculiar given how conformist Americans are.In case you managed to miss the lead story in network news yesterday, US Covid-19 cases continue to rise, and at alarming rates in Texas, Florida, and California.And yes, sports fans, these increases are taking place in areas with some economic heft. A chart from Deutsche Bank via Econobrowser: And let us not forget that plenty of people aren’t being tested, so Lord only know what is really going on. Lambert yesterday featured a Kafkaesque tweetstorm from an Arizona resident who went to extreme lengths to find someplace, anyplace that would test him, no avail. The anti-mask types are getting reinforcement when even the Sainted Fauci himself wears no face covering during testimony, as if it’s fine to be maskless when speaking, when much of the general public knows speaking is droplet-generating activity. Can’t he at least put on a plastic shield for public performances? And what about newscasters? And to remind you of the obvious, Bangkok was the most visited city in the world, and the Thai economy is heavily dependent on tourists. Thailand shut down tourism, including still its largest source, China, and imposed a curfew that shut down its night-life, and even its malls. Only now is Thailand beginning to re-open. The country is not wealthy not does it have a surveillance state tech apparatus. Oh, and everyone from the prime minister to TV presenters wears masks in public. Now so far, this is all pretty familiar stuff. Covid-19 nfections were rising in the South and California, so it wasn’t much of a stretch to think the growth rate would accelerate as the “reopenings” progressed. An important element, which hasn’t gotten the attention it warrants, is confirmation of our thesis that the collapse in economic activity was due primarily to disease avoidance measures, as opposed to the lockdowns per se. We’ve pointed out that office workers in Manhattan are not coming back in anywhere close to the level allowed. An important study last week lead authored by Harvard’s Raj Chetty concluded the big spending drop came from the well off, because they could. From a write-up at NPR: So the affluent won’t go back to their personal old normal until they feel safer. They might loosen up a bit as restrictions ease, but they have and will continue to engage in adaptations, like having their hair coiffed at home rather than in a salon.

As the pandemic spirals out of control, Trump attacks testing, holds indoor rally in Phoenix – On Tuesday, as the COVID-19 crisis continued to spiral out of control, President Donald Trump derided coronavirus testing and held yet another mass indoor event, this time in the hotspot of Phoenix, Arizona, in defiance of city officials and new warnings from health experts. Over the past week, the average reported number of new cases across the country has risen by 28.1 percent, reaching 28,387, according to Stat News. This has brought the total number of infections to more than 2,300,000 and the reported death toll to more than 121,000 – figures that are widely acknowledged to significantly underestimate the actual scale of the public health disaster. New infections are rising in 25 states, with a marked increase in cases among young people. Those states in the South and Southwest that lifted social distancing measures and shutdowns the earliest and the most precipitously, in line with Trump’s back-to-work campaign, are seeing astronomical surges in infections. Over the past week, average daily new cases in Texas (3,932) have increased by 92.2 percent over the previous level, with Houston becoming a new international center of the pandemic. Florida has seen an 84.2 percent rise to 3,270 daily new cases. Oklahoma, where Trump held a campaign rally on Saturday, has recorded an average increase in new cases of 91.2 percent, hitting 331 infections. Arizona, where Trump spoke Tuesday night before some 3,000 people at a “Students for Trump” convention, has seen a rise in average daily infections (2,554) of 97.8 percent. Maricopa County, which includes the state capital Phoenix, where the rally was held, has suffered a 120.3 percent rise in average daily infections. Hospitals in the city are being flooded with a record number of patients. The state of Arizona, meanwhile, has one of the lowest coronavirus testing rates in the US. The deadly back-to-work drive is bipartisan, with Democratic governors and mayors taking the lead in reopening businesses and forcing workers to return to the job without any real protection from COVID-19 infection. In California, headed by Democratic Governor Gavin Newsom, daily infections have risen by 37.5 percent over the past week. The complete subordination of public health to the drive for profit and the interests of Wall Street investors is the policy of both parties of the financial oligarchy in the US, and of capitalist governments all over the world.

‘Downright Dangerous’: Trump Moves to End Federal Support for Testing Sites as US Sees Record Daily Spike in Covid-19 Infections — As Covid-19 cases continue to spike across the U.S. – the nation on Wednesday saw its largest daily increase in confirmed new infections since the pandemic began – the Trump administration is reportedly planning to cut off federal funding for 13 coronavirus testing sites in five states at the end of the month, a move that is in keeping with president’s vow to slow screenings for the virus.Politico reported Wednesday that “the federal government is ending its support for 13 drive-thru coronavirus testing sites on June 30, urging states to take over their operations – even as cases spike in several parts of the country.”Seven of the sites set to lose federal funding and support are located in Texas, which has seen new Covid-19 cases and hospitalizations skyrocket during the reopening process – a spike that Texas Gov. Greg Abbott predicted last month in a private call that leaked to reporters. Texas was one of six states that saw a record increase in new infections on Wednesday.The other testing sites that will lose federal support next week are located in Colorado, Pennsylvania, Illinois, and New Jersey. This is downright dangerous, as tens of thousands of Americans are testing positive for COVID-19 each day. We should be working to expand testing, not reduce it!https://t.co/mhT2ONRw81 – Rep. Diana DeGette (@RepDianaDeGette) June 24, 2020 Texas lawmakers reacted with alarm to the administration’s plan, which was reported days after President Donald Trump said during a weekend rally in Oklahoma that he ordered a slowdown in coronavirus testing. White House officials claimed Trump’s comments were made “in jest,” but the president on Tuesday doubled down and told reporters that he was not joking. “Texas continues to set records for the number of new cases and hospitalizations and Harris County leads the state in number of confirmed cases,” Texas Democratic Reps. Sylvia Garcia, Al Green, Lizzie Pannill Fletcher, and Sheila Jackson Lee wrote in letters this week to U.S. Surgeon General Jerome Adams and to Federal Emergency Management Agency (FEMA) administrator Pete Gaynor. “Without FEMA’s supplies, fiscal aid, and personnel, these sites may no longer be able to serve our communities,” the lawmakers warned. “FEMA’s removal in this moment would be harmful and irresponsible. We urgently ask you to extend FEMA’s presence at these testing sites through August 30, 2020.” Rocky Vaz, the director of emergency management for Dallas, told Talking Points Memo that the city asked for an extension of federal support for two testing sites in Dallas County but was denied by the Trump administration. “They told us very clearly that they are not going to extend it,” Vaz said. “We are not expecting it to continue beyond June 30, but things change.”

White House ordered NIH to cancel coronavirus research funding, Fauci says – The National Institutes of Health abruptly cut off funding to a long-standing, well-regarded research project on bat coronaviruses only after the White House specifically told it to do so, according to Dr. Anthony Fauci, director of the NIH’s National Institute of Allergy and Infectious Diseases.Fauci made the revelation Tuesday at a Congressional hearing on the federal response to the COVID-19 pandemic, which is caused by a coronavirus that is genetically linked to those found in bats. Rep. Marc Veasey (D-Texas) asked Fauci why the NIH abruptly canceled funding for the project, which specifically worked to understand the risk of bat coronaviruses jumping to humans and causing devastating disease.Fauci responded to Veasey saying: “It was cancelled because the NIH was told to cancel it.””And why were they told to cancel it?” Veasey pressed.”I don’t know the reason, but we were told to cancel it,” Fauci said.After the hearing, Fauci clarified to Politico that it was the White House that told the NIH to cancel the funding. An unnamed White House official told Politico that the White House did encourage the funding cut, but ultimately it was the Department of Health and Human Services – of which the NIH is a part – that made the final decision. An HHS spokesperson said only that the funding was cut because “the grantee was not in compliance with NIH’s grant policy.” In an emailed statement to Ars Wednesday, the NIH did not respond to questions about the cancellation, saying only that “NIH does not discuss internal deliberations on grant terminations.” The involvement of the White House is a new wrinkle in a story that has appalled and angered scientists. Since the grant was nixed in late April, scientists had speculated that politics and a conspiracy theory played a role in canceling funding for the research, which was in good scientific standing and seen as critical work.

Approval of Trump’s coronavirus response sinks to lowest on record amid surge in cases: Reuters/Ipsos poll – (Reuters) – American approval of President Donald Trump’s handling of the coronavirus pandemic has dropped to the lowest level on record, the latest Reuters/Ipsos opinion poll shows, as new COVID-19 cases surged and Trump was widely criticized for suggesting he wanted to slow down testing. The June 22-23 poll also found that a majority of Americans want Trump’s former national security adviser, John Bolton, to testify to Congress under oath, after he accused Trump in a new book of misdeeds, including seeking Chinese President Xi Jinping’s help to win re-election. The poll shows that 37% of Americans approved of the way Trump has responded to the pandemic, the lowest on record since Reuters/Ipsos started asking the question at the beginning of March. Fifty-eight percent said they disapproved.Trump has been slow to publicly acknowledge the severity of the coronavirus outbreak, which has killed more than 120,000 Americans so far, and he has pushed states to reopen before experts said it was safe to do so. In his first post-pandemic rally, held in Oklahoma on Saturday, the president told thousands of supporters that testing was a “double-edged sword” and that he asked health officials to slow down testing in response to the public’s concern for the growing number of cases. Administration officials said Tuesday that Trump did not, in fact, ask them to slow down testing, which is one way to track and eventually control the spread of the disease.

McKinsey helps oversee recovery payouts to former clients The global consulting firm McKinsey, which has been tapped by the Department of Health and Human Services to help manage and audit billions of dollars in coronavirus relief for hospitals, has worked for at least 10 hospitals and chains that have received federal recovery funds, according to tax records and other public disclosures. McKinsey was hired to help manage the program and establish audit procedures for the funds, according to the contract award, which was granted in late April and is worth $4.9 million. The majority of the $175 billion in funds had yet to be paid out to hospitals when McKinsey was hired, though McKinsey denied playing any role in deciding which hospitals received funds. Among those that have already received payments are at least 10 hospitals and chains that have in recent years retained McKinsey & Co.’s extensive health care business, which employs more than 1,700 consultants. The hospitals have paid as much as $20 million for McKinsey’s services in a single year as they seek to streamline costs and boost revenue, according to public disclosures. A spokesman for McKinsey said the firm “does not determine which organizations receive money under the CARES Act. No McKinsey personnel working with HHS on this project concurrently serve health care providers or other potential fund recipients.” An HHS spokesperson said: “McKinsey does not determine payment methodology or priority of how payment should be made. The purpose of this contract is to develop and implement a framework for project management and project planning, which will be applied across the Provider Relief Fund portfolio of projects.” The spokesperson added that HHS is aware “McKinsey affiliates provide consulting services to health care provider clients which could potentially give rise to an organizational conflict of interest,” and added the firm’s contract includes guidance about conflicts and nondisclosure policies. Nonetheless, neither the firm nor HHS specified whether consultants who previously worked for chains in the past were now helping audit their grants under the federal recovery act. But a McKinsey spokesperson said the firm’s partners overseeing its work with HHS have not served health care providers in the past four years, and most McKinsey employees on the project have never worked with health care providers.

House Dems Introduce Bill to Prevent Big Pharma Price Gouging During COVID-19 Pandemic – On the heels of polling that showed 88% of Americans worry Big Pharma will exploit the ongoing pandemic to hike drug prices, House Democrats on Monday introduced two bipartisan bills to prevent price gouging for Covid-19 treatments and vaccines and to strengthen oversight of federal spending on coronavirus research and development.Public Citizen president Robert Weissman welcomed the legislation in a statement. “This is about way more than ensuring taxpayers aren’t ripped off, as important as that objective is,” he declared. “Promoting transparency and reasonable pricing of Covid-19 treatments and vaccines is a life-and-death matter.””President Donald Trump’s sycophancy to drug corporations is endangering the nation’s pandemic response,” Weissman warned. “Although public investments are driving drug and vaccine development, the Trump administration is permitting drug companies to retain monopoly control over the drugs and vaccines, including those still under development.””The administration is refusing to use its existing authorities to enable knowledge sharing and generic competition. Nor is the administration seeking enhanced powers from Congress,” he added. “The certain result will be profiteering, rationing, and inadequate supplies of the medicines and vaccines desperately needed to treat and eliminate the virus.”The Make Medications Affordable by Preventing Pandemic Price-gouging (MMAPPP) Act introduced Monday is sponsored by Rep. Jan Schakowsky (D-Ill.), a senior chief deputy whip and chair of the House Energy and Commerce Consumer Protection and Commerce Subcommittee. Schakowsky said that “we have good reason to be skeptical about the role of the pharmaceutical industry.” “Well before this pandemic, we saw price gouging that cost lives. Now, during a global health crisis, many pharmaceutical companies will see another opportunity to benefit themselves by ‘pandemic profiteering.’ That cannot stand,” she said. “Congress must guarantee affordable Covid-19 drugs, eliminate monopolies on these drugs, and ensure transparency for taxpayers who developed them.”

Trump’s ban on temporary work visas is an attempt to scapegoat immigrants during an economic collapse: Real reform would improve wages and working conditions – EPI –President Trump has issued a new proclamation “Suspending Entry of Aliens Who Present a Risk to the U.S. Labor Market Following the Coronavirus Outbreak,” that will halt the issuance of certain major categories of nonimmigrant (i.e. temporary) work visas until the end of 2020, and calls for a number of rule changes with respect to work visas and work authorization. (A presidential proclamation is essentially the same as an executive order.) This follows his April proclamation that would suspend a third of immigrant visas from being issued (immigrant visas are also known as “green cards,” which confer foreign residents with lawful permanent resident status that can eventually lead to citizenship). The language in the April proclamation, which was initially valid for 60 days, also directed federal agencies to examine nonimmigrant work visas; this new proclamation appears to be the result of that effort. Trump’s new proclamation extends the duration of the April proclamation banning certain green cards until the end of 2020. Trump’s June 2020 proclamation will suspend the issuance of new temporary work visas to migrants and their family members if they are applying from abroad, between now and December 31, 2020, but does not appear to suspend the issuance of visa statuses for those applying from within the United States. The impacted visa classifications are the H-1B for occupations requiring a college degree, H-2B for low-wage jobs outside of agriculture, L-1 for intracompany transferees and personnel with specialized knowledge, and some of the major programs that authorize employment in the J-1 Exchange Visitor Program, specifically the J-1 Intern, Trainee, Teacher, Camp Counselor, Au Pair, and Summer Work Travel programs. While most of these visa classifications are issued to applicants at consulates abroad and are therefore suspended, the H-1B is an exception. In 2019, 60% of new H-1Bs were issued to migrants who were already present in the United States, often on a student visa. Therefore, the H-1B program will be less impacted in terms of a reduction in visas. (It may even result in a higher share of foreign graduates of U.S. universities being granted H-1B status, since they’ll be applying from within the country.)

Judge orders US to free migrant children from family detention, citing virus spread – A federal judge in the United States has ordered the release of children held with their parents in US immigration jails and denounced the Trump administration’s prolonged detention of families during the coronavirus pandemic. US district judge Dolly Gee’s order on Friday applies to children held for more than 20 days at three family detention centre’s in Texas and Pennsylvania operated by US Immigration and Customs Enforcement. Some have been detained since last year. Citing the recent spread of the virus in two of the three facilities, Gee set a deadline of 17 July for children to either be released with their parents or sent to family sponsors. “The family detention centre’s are on fire and there is no more time for half measures,” she wrote. Gee’s order said Immigration and Customs Enforcement (ICE) was detaining 124 children in its centres, which are separate from US Department of Health and Human Services facilities for unaccompanied children that were holding around 1,000 children in early June. The numbers in both systems have fallen significantly since earlier in the Trump administration because the US is expelling most people trying to cross the border or requiring them to wait for their immigration cases in Mexico. Gee oversees a long-running court settlement governing the US government’s treatment of immigrant children known as the Flores agreement. Her order does not directly apply to the parents detained with their children. Gees’s order said ICE can decline to release a child if there is not a suitable sponsor, the child’s parent waives rights under the Flores agreement, or if there is a prior unexplained failure to appear at a scheduled hearing.

The financialization of the end of the world — For those who are fans of cartoons from The New Yorker magazine and consistent readers of this blog, you might be able to guess my two favorite cartoons. In the first one, a man in a coat and tie stands at a podium and tells his unseen audience the following: “And so, while the end-of-the-world scenario will be rife with unimaginable horrors, we believe that the pre-end period will be filled with unprecedented opportunities for profit.” In the second, a man in a tattered suit sits cross-legged near a campfire with three children listening to him intently as he says this: “Yes, the planet got destroyed. But for a beautiful moment in time we created a lot of value for shareholders.” Now, in the you-can’t-make-this-stuff-up category, financial writer Paul Farrell used the caption from the first cartoon in a 2015 piece for MarketWatch entitled: “Your No. 1 end-of-the-world investing strategy.” The subheading is: “How to pick stocks for the near term when long-term trends say collapse is near.” The subhead actually seems like it might be another caption from a New Yorker cartoon (or possibly one from The Onion). Why exactly would you invest in stocks – as opposed to seeds of food crops and sturdy garden implements – “when long-term trends say collapse is near”? But I’ll put that down to bad headline writing. In Farrell’s defense, he frequently used his column in MarketWatch to warn his readers of the coming collapse of modern civilization if we don’t change our ways. He was obliged to give investment advice, of course, because that’s what the column was for. One would think that the coronavirus pandemic would allow for some sober reflection among those in the financial community as the pandemic-induced crash of the economy and the markets has called into question the stability of practically all the arrangements of modern civilization. Instead, the focus is on how stock markets could be back at or near all-times highs at the beginning of what is arguably the next Great Depression.

Rabobank: We Live In A World Where Dave Portnoy Picks Random Stocks Using Scrabble And Outperforms Hedge Funds – US President Trump held a rally in a half-empty stadium over the weekend in which, as expected, he pledged to be the face of Law & Order. He’d already tweeted “LAW & ORDER!” previously – to which someone replied “MORK & MINDY!” … which sums everything up. Indeed, the half-empty stadium might reflect flagging Trump voters and an imminent defeat of America First US economic populism. Or, as Democrat AOC tweeted, it might have been teenagers ordering hundreds of tickets each in order to leave seats empty – and by using Chinese-owned apps like Tiktok and Zoom, the latter of which was recently in the headlines for literally shutting down discussion *in the US* that China does not approve of. Once again what used to be a key signalling device to markets –that said, only after they didn’t listen to it in 2016– is perhaps distorted by some form of suppression. How to work out if the US will swing one way or the other in November and take economic policy with it? Might we see US-China detente under Biden, or a broader anti-China coalition? Would be see even more generous fiscal policy, or an attempt to try to reduce the deficit? The fact that his campaign is holding no kind of campaign at all, it seems, leaves us all wondering. But if markets are starting to wonder which way to go, think of the poor politicians outside the US. Orwell might have feared a Soviet Union where there were no markets. We have a world where we can all watch Barstool Dave Portnoy pick US stocks randomly using Scrabble letters live online – and then watch him outperform hedge funds. “Trivial is essential”. And the essential is now trivial. Bloomberg, which combines Orwell with Huxley and Douglas Adams, sums it up thus: “A ‘Buy Everything’ Rally Beckons in World of Yield Curve Control” That as the Fed’s number two, Clarida, recently stated there are no signs of asset bubbles forming due to Fed policy! The RBA’s Lowe is also open to re-assessing the bank’s property inflation targeting framework in a few years … when interest rates eventually rise again: in the meantime, “Borrow now!” is the message. The PBOC left its supposed new base 1-year loan prime rate on hold at 3.85% just days after promising USD4.2 trillion new broad credit growth this year, which is just as inconsistent in its own way.

OCC to lower assessment fees despite surge in bank assets – The Office of the Comptroller of the Currency says it will give national banks a break by using pre-pandemic asset levels to calculate assessment fees this upcoming September.The OCC cited the sharp growth in bank assets during the early weeks of the novel coronavirus outbreak as the basis for what the regulator described in a press release Monday as a “one-time change.” Proposed as an interim final rule, the tweak is slated to stay in effect only until October – or one assessment.”Banks have played an important role in the national response to COVID-19,” acting Comptroller of the Currency Brian Brooks said in the release. “As a result, many banks took on significant volumes of additional assets while providing relief to their customers as part of these federal programs. Banks should not be penalized by these efforts to support our national recovery.” The OCC’s regulatory assessment fees, used to fund supervisory activity, are partly based on a bank’s size and charged twice a year, once in March and again in September. The decision to use call report data from Dec. 31, 2019, rather than June 30, 2020, will “result in lower assessments for most banks under the jurisdiction of the OCC,” according to the text of the interim rule. However, in the event a bank’s reported assets are lower at the end of June than they were back in December, the OCC said it would use the most recent data. Monday’s announcement is the latest instance of the national bank regulator trimming assessment costs: In both 2018 and 2019, the OCC permanently reduced its assessment fees for national banks by 10%, citing improvements in the agency’s operational efficiency.

Warren and Brown urge regulators to undo recent capital change – Two Democratic senators are calling on regulators to reverse their recent decision to ease a key capital requirement for banks. Sens. Sherrod Brown of Ohio, the Senate Banking Committee’s top Democrat, and Elizabeth Warren of Massachusetts said in a letter Friday that a change to the supplementary leverage ratio that was announced in May “is dangerous and puts the economy and hardworking families at risk.” “There is no justifiable reason to relax a key safety and soundness restraint by arguing that it is necessary for banks to support lending while simultaneously allowing banks to distribute capital to enrich their shareholders,” the senators wrote to Federal Reserve Vice Chairman of Supervision Randal Quarles, Federal Deposit Insurance Corp. Chairman Jelena McWilliams and acting Comptroller of the Currency Brian Brooks. “We are baffled that the federal financial regulators granted a long-desired piece of deregulation to the nation’s largest banks without sufficient justification to do so, and despite the risks to economic growth and financial stability,” Brown and Warren wrote. The SLR requires banks with more than $250 billion of assets to maintain an extra cushion of high-quality capital against their total assets. Banks must maintain a minimum 3% ratio against their total leverage exposure, with even tougher requirements for the most complex firms. In May, the regulators announced an interim rule change to allow banks to exclude U.S. Treasury securities and deposits held at Federal Reserve banks from the SLR calculation until March 2021. Brown and Warren said the change to the SLR goes “far beyond providing institutions relief to accommodate the inflow of deposits and increases in reserve balances as a result of the economic response to the coronavirus crisis.” The senators criticized the SLR change because it allows banks to continue to pay billions of dollars in dividends to shareholders and executives. And they said the change makes the U.S. financial system weaker and could harm the recovery from the COVID-19 pandemic.

Banks can ill afford to get complacent about coronavirus – Christopher D. Armstrong, Executive Vice President, New York Fed – For some, a business continuity plan is something that gets dusted off the shelf every few years, only to be returned to the stack with a few modifications. In the wake of the global coronavirus pandemic, many institutions have discovered that’s just not enough. As head of financial services at the New York Fed, I’m responsible for managing payments and receipts of currency for depository institutions across the globe, meeting demand for U.S. currency wherever it is. I also oversee the Fed’s Wholesale Product Office, which acts as the plumbing for the U.S. financial system. Given the volume and value going through our pipes, any sort of disruption to our infrastructure would have immediate and significant impact on the financial system. So we spend many days and nights thinking about what could go wrong and how to make the system more resilient. Needless to say, these past few months have shown the importance of thinking about how to adapt to existing business continuity procedures to keep up with new challenges. Back in March, a cyberattack on a commercial service provider – which many small and midsize banks use to manage their connectivity to the Fed – impacted their ability to complete daily settlements worth billions of dollars. It became clear that a number of the institutions utilized by this service provider did not have an effective business continuity plan, and had not practiced their contingency channels.This incident, among others, revealed gaps in business continuity plans that must be filled. The current context makes this even more urgent With so many employees working remotely, and operating using business continuity models that have not been thoroughly exercised, there will likely be more disruptions that could have an enormous impact on the financial system. Point-blank: Don’t be complacent. On the most basic level, institutions must prioritize strengthening their contingency models and make sure their business continuity plans are being reviewed, practiced and understood. Then, focus on key-person risk. What if a second or third wave of the coronavirus pandemic were to hit? What if those waves are even more severe? Even if team members are positioned to work remotely, institutions should be prepared for potential bottlenecks and pinch points that may emerge if individuals cannot work for long periods of time. Have you considered training not just backup teams, but a tertiary team and beyond? Leaders should also ask whether they have the proper equipment, access and credentials to be able to quickly step in if necessary. At the end of the day, a plan is not enough. Executives must ask themselves: “Can we actually execute this?” Finally, cyber resiliency in a business continuity model is going to be crucial to ensuring a safe and secure financial system. Cyber resiliency is broader than the traditional business continuity focus on data backup and recovery. It’s about data integrity and the ability to trust the data to know with confidence that backed-up data has not been corrupted or altered by a cyberattack. Resilience is the ability to operate, even in a degraded state, and recover from deliberate attacks.

Rosengren’s Main Street pitch to banks: Get in it for long haul – Federal Reserve Bank of Boston President Eric Rosengren says the coronavirus pandemic offers banks a unique opportunity to help steer their communities through the rocky months likely ahead and forge lasting bonds with commercial and nonprofit customers. The Boston Fed has been tasked with administering one of the central bank’s most anticipated lending vehicles, the Main Street Lending Program, which seeks in conjuction with banks to provide a lifeline to small and midsize businesses that have suffered during the coronavirus pandemic. The $600 billion program is offering loans of at least $250,000 to eligible businesses that were in sound financial condition before the pandemic, and have at least 15,000 employees or $5 billion in annual revenue. Banks will originate loans through the program, and the Fed will then purchase a 95% stake in each loan made under the program’s terms. “This is the time where that banking relationship really becomes valuable, and it’s not only valuable to the borrower, it’s valuable to the community and the country at large,” Rosengren said in an interview. Although the program has been met with some criticism from some who feel that banks might not participate in it and others who worry that the loan terms are too onerous for smaller businesses, Rosengren said that the program – which opened for lender registration last week – has already attracted substantial attention from banks looking to serve their customers. “These are still early days in the program, and we are seeing a steady stream of interest,” Rosengren said Friday in a speech to the Greater Providence Chamber of Commerce. He added, “I anticipate that many more institutions will register for the program, given its benefits to them, their customers and the areas where they operate.” The Fed is also still expanding the Main Street program: Last week it asked for feedback on a proposal to extend the program to nonprofit organizations, which Rosengren thinks could allow banks to establish relationships with new customers. American Banker spoke with Rosengren about his expectations for the program, the economy and additional actions Congress or the Fed may need to take to aid the recovery. This interview has been condensed and edited for clarity.

Question looming over bank earnings: Will deferred loans be paid back? – Whether the economy remains weak, hampered by continued rapid spread of the coronavirus, or slowly comes back to life as Americans learn to safely venture out again, community and regional banks are likely staring at several quarters of elevated loan-loss provisions, according to investment analysts. The pandemic-imposed recession is battering the retail, hospitality and energy sectors – and broadly sales for a range of other businesses – leaving banks to conservatively assume that more borrowers will struggle to make loan payments, even if the economy gradually recovers in the second half of 2020. “Bottom line,” D.A. Davidson analysts said in a June report, “we expect to see continued reserve build over the balance of the year, with a hand-off to more elevated” charge-offs later in 2020 and into next year. When second-quarter earnings calls get underway in July, executives at community and regional banks are likely to field an abundance of questions about credit quality. The hope is that, by mid-July, bank executives will be able to shed meaningful light on what lies ahead based on the performance of their loan books and their assessments of customer sentiment and expectations. One telling sign could be the direction of loan deferrals. Late in the first quarter and early in the second, banks agreed to defer scores of commercial loan payments, often for 90 days. Will those borrowers be able to resume payments on those loans? Will they seek to extend deferrals? Or will they throw in the towel on their businesses, forcing banks to charge off more loans? “Almost everyone believes the amounts are as high as they’ve ever been, and so the most important question in the industry right now is at what rate those deferrals translate to losses,” said Joseph Bonner, founder of the consultancy Community Bank Advocates and a former bank CEO. Even with some clarity on the deferral front, Bonner said, most banks would be wise to brace for continued economic weakness and a choppy recovery. Provisions soared in the first quarter. He anticipates further increase for many banks in second-quarter results. He noted that Federal Reserve officials recently predicted that unemployment, currently above 13%, could still hover nearly 10% by the close of 2020. “I believe that the more conservative view is the prudent one,” Bonner said.

Fed should make banks stop paying dividends, Senate Democrats say – – Ahead of the Federal Reserve’s anticipated announcement of banks’ stress test results, three Democratic senators are urging the regulator to require banks it oversees to suspend dividend payments in order to build their capital cushions while continuing to lend during coronavirus pandemic. In a letter to Federal Reserve Chairman Jerome Powell and Vice Chairman of Supervision Randal Quarles, Sens. Sherrod Brown of Ohio, Elizabeth Warren of Massachusetts and Brian Schatz of Hawaii said the regulator should implement a broad dividend suspension in light of uncertainty about how much stress COVID-19 will continue to create for the sector. “An across-the-board suspension now, before heavy losses pile up, is the prudent course of action,” the senators wrote Tuesday. “Our economy needs a safe and sound banking system to serve as a source of strength through these difficult times. An undercapitalized banking system could seriously hinder the economic recovery if this crisis causes a wave of bank failures. You should be taking every step possible to avoid that scenario.” Banks have faced growing pressure from congressional Democrats to suspend capital distributions in the midst of the coronavirus pandemic. Quarles recently indicated that the Fed will use the outcome of coronavirus-related tests to determine whether banks can make dividend payments. Banks have remained largely bullish about their ability to continue paying dividends while holding adequate levels of capital. The senators in their letter note that a number of former regulators, including former Fed Chair Janet Yellen and Federal Deposit Insurance Corp. Chairman Sheila Bair, have called on regulators to require banks to suspend capital distributions to shareholders and executives. “It is not clear why the Fed has not taken this action yet,” the senators wrote. The senators also criticized a decision by the Fed not to release bank-by-bank results of coronavirus-related sensitivity analyses and instead report potential losses across the tested banks. “This decision could undermine confidence in the banking system,” the senators wrote. “If a bank fails any of the coronavirus-related severely adverse scenarios, it should be required to immediately raise capital to ensure it can handle potential future losses. Hiding the individual results and presenting only aggregate data will not make the possible capital shortfall go away.”

If the Fed puts its stress test results in the shadows, it will backfire – The Federal Reserve said last week that it plans to limit the disclosure of this year’slarge bank stress tests. An announcement of the results is due later today. If it goes ahead with the plans, they are likely to prove self-defeating. Failure to disclose the individual banks’ outcomes of this year’s Covid-19 “sensitivity analysis” tests will weaken the credibility and effectiveness of the Fed’s stress testing regime. To put it bluntly, the main point of a supervisory stress test is disclosure. Anything short of full transparency risks financial instability. There are three key elements of an effective stress testing regime that have characterised the Fed’s tests since the extraordinary 2009 Supervisory Capital Assessment Program (SCAP). These are severity, flexibility, and transparency.First, if stress test scenarios are not dire enough, there is little use in doing them. Second, effective tests must include scenarios that adapt – sometimes rapidly – to changing economic and financial conditions. Third, scenarios should be transparent after the fact, not before. To promote confidence and effective market function in the presence of a large shock, supervisors must disclose the results of individual institutions. Failure to disaggregate fosters concerns about the presence of weak banks and can lead to runs. Experience with the May 2009 SCAP, with its bank-by-bank detail, highlights the favourable impact of full disclosure. Following publication, the largest US banks were again able to tap the equity market to help them lend to healthy borrowers. Because the SCAP played such a critical role in ending the Great Financial Crisis (GFC), many observers (including ourselves) view it as the most successful stress test in history. Against this background, we found the Fed’s May announcement of its intention to supplement the scenarios announced in February with a Covid-related sensitivity analysis quite heartening. Based on current economic indicators, the impact of Covid is significantly worse than the severely adverse scenario provided in February. While market developments are generally better than in those in the severely adverse scenario, ensuring confidence in the banks requires that we have some sense of both their post-Covid state and of their ability to withstand further deterioration in economic conditions. The clear lesson from history is that episodes of sizeable shocks to bank capital are precisely the times when the disclosure of individual bank stress test results can foster confidence. The scale of the current shock is very large: as of June 19, the NYU Stern Volatility Lab’s measure of SRISK – a market-based estimate of banks’ capital shortfalls – puts the aggregate capital shortfall of US intermediaries near the peaks observed in 2008-09. Moreover, the Federal Reserve in recent years unwisely permitted the largest US banks to make shareholder payouts (summing dividends and share buybacks) in excess of their earnings. As a result, in the final years of the decade-long cyclical expansion, when banks should have been building their capital buffers to improve resilience, supervisors tolerated a persistent decline in the regulatory leverage ratios of the largest US banks. Finally, we face an uncertain recovery that is liable to include rising defaults. This, together with the likelihood of a flat yield curve for some time to come, means that there is little hope of using bank profits to replenish capital anytime soon. If US large banks remain healthy under these simulations, then the Fed has a powerful incentive to release the full results. Conversely, providing only an aggregate result would invite doubt about the wellbeing of one or more banks, and could unintentionally increase stress in the system.

Bloomberg Drops a Bombshell on the Fed’s Big Bank Stress Tests Set for Release Today – Pam Martens -The Federal Reserve will release the results of its stress tests on the biggest and most dangerous banks at 4:30 p.m. today. But the potential results of those tests played a negative role in the stock market’s performance yesterday.The Dow’s drop of 710 points yesterday can be ascribed to two things: the alarming news reports that COVID-19 cases are skyrocketing in the second and third most populous states in the U.S. – Texas and Florida; and a bombshell report from Bloomberg News released at 7:00 a.m. yesterday morning.The Bloomberg article, by Lisa Lee and Shahien Nasiripour, cast the Federal Reserve in an unfavorable light over its failure to halt dividend payments at the biggest Wall Street banks, something that European bank regulators have done during the pandemic crisis. Eight of the largest U.S. banks announced in unison on Sunday, March 15, that they would halt share buybacks through the first and second quarter, but they’ve continued to pay cash dividends to shareholders, whittling away critical capital that could serve the struggling U.S. economy far better as loans to consumers and businesses. (Two-thirds of U.S. GDP consists of consumer spending.)The Bloomberg article dropped this bombshell nugget on what Bank of America, Citigroup, JPMorgan Chase and Wells Fargo had spent on share buybacks and dividends since 2017:”From the start of 2017 through March, the four banks cumulatively returned about $1.26 to shareholders for every $1 they reported in net income, according to data compiled by Bloomberg. Citigroup returned almost twice as much money to its stockholders as it earned, according to the data, which includes dividends on preferred shares. The banks declined to comment.”We need to pause right there for a moment because both Fed Chairman Jerome Powell and the Fed’s Vice Chairman for Supervision Randal Quarles have been telling Congress and the public for months now that these mega banks, which it is in charge of supervising, have “adequate capital” and are a “source of strength” in this crisis. There is no accounting alchemy in the world that can make Citigroup a source of strength if it’s been paying out twice as much money as it’s been earning for 3-1/4 years.In addition, the Fed appears to have been ignoring the looming risks hiding off these bank balance sheets. See our report: Three of the Biggest Banks on Wall Street Have $7.4 Trillion In Off-Balance Sheet Exposures. It appears that the Fed has been doing the exact same thing it did during the financial crisis of 2007 to 2010 – hiding the truth from the American people while it makestrillions of dollars in secret loans to the largest Wall Street financial institutions.

Fed Stress Test Finds U.S. Banks Healthy Enough to Withstand the Coronavirus Crisis – WSJ – The Federal Reserve on Thursday said a prolonged economic downturn could saddle the nation’s biggest banks with up to $700 billion in losses on soured loans and ordered them to cap dividends and suspend share buybacks to conserve funds. In a worst-case scenario, where unemployment remains high and the economy doesn’t bounce back for a few quarters, the 33 largest U.S. banks would suffer heavy loan losses that would erode the capital buffers meant to keep them on stable financial footing, the Fed said when it announced the results of its annual stress tests. Designed to gauge the health of the nation’s banking system, the stress tests were expanded this year to study the effect of the downturn brought on by the coronavirus pandemic. The Fed said U.S. banks are strong enough to withstand the crisis and restricted dividend payouts and buybacks to make sure they stay that way. Banks, which will announce their dividend plans for next quarter as soon as Monday, won’t be able to make payouts that are greater than their average quarterly profit from the four most recent quarters. The Fed also barred them from buying back shares in the third quarter. Most of the largest banks had previously agreed to halt buybacks during the second quarter. Buybacks are the main way U.S. banks return capital to shareholders. In a sign of the uncertainty facing the industry, the Fed required banks to resubmit updated capital plans later this year to reflect current stresses. The central bank didn’t break out the results of the coronavirus analyses for individual banks. However, among the six largest, only Wells Fargo & Co. had a dividend payout that would breach the new threshold set by the Fed, according to Wolfe Research forecasts. The bank’s dividend in the third quarter would be 150% of its average expected profits over the past four quarters. A Wells Fargo spokesman declined to comment on the stress test results. The Fed said limiting shareholder payouts would help keep banks healthy during the recession. Its analysis of the current pandemic found that if the economy takes a long time to recover, banks could experience losses similar to the financial crisis of 2008.

Fed freezes stock buybacks, caps dividends after stress test results – The Federal Reserve said Thursday it will limit shareholder payouts by big banks and will also require them to reassess their long-term capital plans. The actions are necessary in anticipation of more economic fallout from the coronavirus pandemic, the Fed said after it released the results of its annual stress tests. The central bank will require big banks to suspend share repurchases during the third quarter of this year and limit dividend distributions to the levels banks paid out in the second quarter. Those dividend distributions could also be limited further, the Fed said, depending on each individual bank’s earnings results. “For the first time in the ten years we have been doing stress testing, we are exercising the option that has always been in our capital framework of requiring all large banks to reassess their capital needs and resubmit their capital plans to the Federal Reserve later this year,” Fed Vice Chairman for Supervision Randal Quarles said in a statement. “If the circumstances warrant, we will not hesitate to take additional policy actions to support the U.S. economy and banking system.” Many big banks had already halted share buybacks this spring. A handful of small and midsize banks reduced their dividends after COVID-19 was declared a global pandemic by the World Health Organization on March 11, but none of the larger banks have cut their payments. The investment firm Keefe, Bruyette & Woods issued a forecast in May that dividend payouts as a percentage of earnings among the largest banks would peak in the second quarter and then settle back in the latter half of the year. The Fed took action after conducting “sensitivity analyses” of the 34 banks – each with more than $100 billion of assets – that it reviewed for capital adequacy as part of its annual stress tests. In a departure from previous years, the Fed did not publish how individual firms fared under the Comprehensive Capital Analysis and Review, or CCAR, examinations, but instead disclosed how the biggest banks would perform under the typical “severely adverse” scenario as a whole, as well as how banks would react to the additional COVID-19-related analyses. Those analyses tested banks against three hypothetical economic models of recovery from the pandemic: a “V-shaped” economic recovery, a “U-shaped” recovery and a “W-shaped” recovery. Each of those scenarios made different assumptions in unemployment rates, gross domestic product output and Treasury rates. Those were the only economic indicators, although they stressed some other elements of the bank data. In aggregate, all 34 banks tested maintained the minimum capital requirements under each of the scenarios tested – although “several would approach minimum capital levels,” the Fed said in the statement.

Fed puts restrictions on bank dividends after test finds some banks could be stressed in pandemic The Federal Reserve put new restrictions on the U.S. banking industry Thursday after its annual stress test found that several banks could get uncomfortably close to minimum capital levels in scenarios tied to the coronavirus pandemic. The Fed said in a release that big banks will be required to suspend share buybacks and cap dividend payments at their current level for the third quarter of this year. The regulator also said that it would only allow dividends to be paid based on a formula tied to a bank’s recent earnings. Furthermore, the industry will be subject to ongoing scrutiny: For the first time in the decade-long history of the stress test, banks will have to resubmit their payout plans again later this year, and restrictions on payouts could remain in effect. They may have to repeat this cycle every quarter, the regulator said. Bank stocks slumped after the close of regular trading in New York. Shares of Wells Fargo, which had climbed during the day, gave back some of those gains, falling 3.3%. Goldman Sachs slumped 3.9%. JPMorgan Chase dropped 1.9%. “While I expect banks will continue to manage their capital actions and liquidity risk prudently, and in support of the real economy, there is material uncertainty about the trajectory for the economic recovery,” Fed Vice Chair Randall Quarles said in a statement. “As a result, the Board is taking action to assess banks’ conditions more intensively and to require the largest banks to adopt prudent measures to preserve capital in the coming months.” The move signals that the unprecedented nature of the coronavirus pandemic, and the difficulty in forecasting what the future holds for banks, is making the Fed cautious. Regulators and the industry are keen to avoid the mistakes of the previous crisis, where firms made billions of dollars in payouts only to have to raise capital later. The biggest U.S. banks already said in March that they would voluntarily suspend share repurchases, which make up roughly 70% of capital payouts for the industry. What remained were the dividends, which bank analysts have mostly assumed would remain at their current levels – with the exception of Wells Fargo, which is struggling to restore profits after its fake accounts scandal. Still, options market traders have bet that banks would be forced to cut dividends, even at JPMorgan, the biggest and most profitable of the megabanks.

Fed’s Stress Tests Results Based on GDP Decline of 8.5 Percent; Atlanta Fed’s GDPNow Forecast Says GDP Will Decline by 46.6 Percent – Pam Martens -Yesterday the Federal Reserve released its highly awaited stress tests on the biggest and most dangerous banks in America. The stress test results fill an 83-page document with dozens of charts showing what would happen to the banks under a hypothetical “severely adverse scenario.”This scenario, unfortunately, was previously prepared and pales in comparison to the actual economic damage rendered by the COVID-19 pandemic. For example, the severely adverse scenario for this year’s stress tests imagined the U.S. unemployment rate climbing to a peak of 10 percent in the third quarter of 2021. The unemployment rate is currently 13.3 percent. But far more frightening, the Fed’s severely adverse scenario for GDP imagined a decline of “81/2 percent from its pre-recession peak, reaching a trough in the third quarter of 2021.”As of yesterday, June 25, the Atlanta Fed’s GDPNow estimate was for U.S. GDP to decline by a staggering 46.6 percent in the second quarter. In a feeble attempt to compensate for the fact that its “severely adverse scenario” now looks like a cake walk compared to the reality on the ground in the U.S., the Fed added what it calls a “sensitivity analysis.” That analysis assessed how the big banks would perform under three downside scenarios resulting from the coronavirus pandemic: a V-shaped recession; a slower, U-shaped recession; and a more severe W-shaped, double-dip recession.The Fed summarized those three scenarios as follows: “Under the U- and W-shaped scenarios, most firms remain well capitalized but several would approach minimum capital levels.”The Fed, however, did not provide individual bank results for those scenarios. It provided individual bank results only for its previously announced criteria for the “severely adverse scenario” that imagined unemployment at 10 percent and a GDP decline of 8.5 percent. Under that scenario, the Fed projected $552 billion in losses in the aggregate for the 33 banks it reviewed, over nine quarters.We looked at where those projected losses were concentrated and, sure enough, they were concentrated at the biggest Wall Street banks. The breakdown was as follows: JPMorgan Chase, hypothetical losses of $64.4 billion; Citigroup, $47.7 billion; Wells Fargo, $47.4 billion; and Bank of America, $47.2 billion. In other words, the tally for just those four banks comes to $206.7 billion or 37 percent of the losses for all 33 banks. The Fed really lost credibility, however, with these loss estimates for Goldman Sachs and Morgan Stanley, showing hypothetical losses of $9.8 billion and $5.3 billion, respectively, in the hypothetical “severely adverse scenario.” During the last financial crisis, one trader alone at Morgan Stanley, Howie Hubler, racked up $9 billion in losses.

Banking Regulators Relax Volcker Rule, Cut Margin Requirements for Derivative Trades: Instant Reaction – Bank regulators are finishing a major rollback of the Volcker rule Thursday, making it easier for banks to invest in some riskier funds, including venture capital funds. Regulators are also finalizing changes to another, separate requirement, relaxing swap margin rules governing banks’ derivatives trades with their own affiliates, which is expected to release an estimated $40 billion in capital, according to banking agency staff in a conference call with reporters. The Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Federal Reserve voted to approve the changes on Thursday. It’s likely this is the Trump administration’s last big bank deregulatory push before the 2020 elections. Morning Consult asked financial policy experts and analysts for their thoughts on the newly released rule. Here’s what they said: “We are more than a little concerned about the apparent number and scope of unnecessary carve-outs from the covered funds restrictions. We also are concerned about the timing of these changes because these exclusions can only increase risks in the U.S. banking system and divert resources from the lending activities banks should be emphasizing as the U.S. economy attempts a recovery from the COVID-19-induced economic downturn. “The FDIC and CFTC have set the stage to turn the Volcker rule into the regulatory equivalent of a Potemkin village. The rule remains in theory. In practice, however, multiple new exclusions and expanded existing exclusions will place far too many of the speculative activities of U.S.-taxpayer-backed banks beyond the reach of the Volcker rule.” Kress said he is concerned the rules will “expose banks and the FDIC’s deposit insurance fund to greater risks.” “Both the Volcker rule and inter-affiliate swap margin requirements were designed to limit the deposit insurance fund’s exposure to holding company risk-taking that occurs outside of bank subsidiaries. By weakening these safeguards, the FDIC puts the deposit insurance fund on the hook for even more high-risk, speculative activities.”

Wells Fargo employees targeted with phishing attack using calendar invites – Wells Fargo employees are being targeted with a phishing attack that uses innocent-looking calendar invitations as the clickbait. Hackers have been sending Wells staffers emails that look like they’re coming from the company’s security department, according to Abnormal Security, a cybersecurity research firm that says it discovered the attack. The fraudsters try to get message recipients to click on calendar invitations that take them to a malicious website which resembles the Wells Fargo site. At that site, employees are asked for sensitive information like the username, login, card PIN or number for their personal accounts held at Wells. As of Friday the campaign had targeted about 20,000 employees, Abnormal Security said in a June 18 blog post. That equals more than 7% of Wells’ workforce based on the number of full-time equivalent employees the company reported at year-end. It is unclear how many employees may have been duped. Wells Fargo declined an interview request but offered this statement acknowledging the situation: “The security of our customers’ accounts and information is our priority at Wells Fargo, and we are aware of this campaign. We encourage our customers who receive suspicious emails to not respond, click on any links or open any attachments in any format.” The company also has set up a webpage with information and resources on phishing. Cybercriminals have been upping their game during the coronavirus pandemic, taking advantage of the disruption of normal activity to siphon off unemployment benefits, execute fraudulent wire transfers, get people to download fake bank mobile apps and more. According to the cybersecurity firm Mimecast’s 100 Days of Coronavirus Report, the use of impersonation emails rose 30.3% from January through mid-April. Financial services firms have been among the hardest hit, said Trace Fooshee, senior analyst at Aite Group. “Banks have reported increases in phishing attacks that are specifically engineered to exploit the many thousands of consumers who have migrated to digital banking in the wake of the pandemic,” Fooshee said. “These consumers are particularly vulnerable to these kinds of attacks as they are often completely unaware of these kinds of attacks and are more likely to fall for deceptions that are cleverly disguised.”

SEC Issues Devastating Risk Alert on Private Equity Abuses; Effectively Admits Failure of Last 5+ Years of Enforcement –Yves Smith -We’ve embedded an SEC Risk Alert on private equity abuses at the end of this post.1 What is remarkable about this document is that it contains a far longer and more detailed list of private abuses than the SEC flagged in its initial round of examinations of private equity firms in 2014 and 2015. Those examinations occurred in parallel with groundbreaking exposes by Gretchen Morgenson at the New York Times and Mark Maremont in the Wall Street Journal. At least some of the SEC enforcement actions in that era look to have been triggered by the press effectively getting ahead of the SEC. And the SEC even admitted the misconduct was more common at the most prominent firms.Yet despite front-page articles on private equity abuses, the SEC engaged in wet noodle lashings. Its pattern was to file only one major enforcement action over a particular abuse. Even then, the SEC went to some lengths to spread the filings out among the biggest firms. That meant it was pointedly engaging in selective enforcement, punishing only “poster child” examples and letting other firms who’d engaged in precisely the same abuses get off scot free.The very fact of this Risk Alert is an admission of failure by the SEC. It indicates that the misconduct it highlighted five years ago continues and if anything is even more pervasive than in the 2014-2015 era. It also confirms that its oft-stated premise then, that the abuses it found then had somehow been made by firms with integrity that would of course clean up their acts, and that now-better-informed investors would also be more vigilant and would crack down on misconduct, was laughably false.In particular, the second section of the Risk Alert, on Fees and Expenses (starting on page 4) describes how fund managers are charging inflated or unwarranted fees and expenses. In any other line of work, this would be called theft. Yet all the SEC is willing to do is publish a Risk Alert, rather than impose fines as well as require disgorgements?

Societal upheaval strengthens case to expand CRA to nonbanks- Ludwig – – Just two years after finalizing the first significant regulatory overhaul of the Community Reinvestment Act in the 1990s, then-Comptroller of the Currency Eugene Ludwig had another pitch for policymakers: It was time to expand the law’s anti-redlining obligations beyond banks. “At the end of 1996, for the first time, the dollar volume of mutual funds exceeded the dollar volume of bank deposits,” Ludwig said in a speech to the National Urban League in August 1997. “In these circumstances, I think you will agree that it makes sense to start thinking about how these financial powerhouses can shoulder some of the public responsibilities that banks today must assume.” Those trends have only accelerated in more recent years: Between 2010 and 2017, the global assets of nonbank lenders alone grew to $52 trillion from $30 trillion, according to an analysis of Financial Stability Board data from the bond ratings agency firm DBRS. The most recent CRA reforms by former Comptroller of the Currency Joseph Otting, who stepped down in May, made a lot of changes that involved banks, including a reworked scoring system that puts greater emphasis on the dollar value of CRA activity and less emphasis on where banks do it. But many observers say only an act of Congress could expand the types of institutions the law covers. Ludwig, chairman and CEO of Promontory Financial Group, told American Banker in a recent interview that now is the time for lawmakers to extend CRA to include nonbank financial institutions such as online lenders, student loan servicers, credit unions, hedge funds and more. Doing so could make a big difference in this tumultuous period of widespread protests against racial inequality amid the coronavirus pandemic and a recession, he says. “This is a time and will be increasingly a time of great need for us to come together and address, holistically, our social and economic problems for low- and moderate-income people,” Ludwig said. “We have an opportunity now to take the difficult, challenging period we’ve been living through and use it to the benefit of the nation going forward.” The following conversation has been condensed and edited for clarity.

CFPB issues proposals to revise QM rule, extend GSE patch – The Consumer Financial Protection Bureau on Monday proposed two rulemakings concerning competitive advantages that Fannie Mae and Freddie Mac enjoy in connection with underwriting requirements. The bureau said it would revise the definition of “qualified mortgage” and extend an exemption given to the government-sponsored enterprises known as the GSE patch. The temporary exemption was granted to Fannie and Freddie in 2014 with the goal of helping the housing market recover from the financial crisis. For the past eight years, loans approved by the GSEs’ underwriting engines have been considered qualified mortgages that automatically meet ability-to-repay underwriting requirements, including having a debt-to-income ratio of 43% or less – even if the DTI ratio actually exceeds that amount. The CFPB estimates that 957,000 loans would be affected by the January 2021 expiration of the GSE patch. “Many of these loans would either not be made or would be made but at a higher price” after it expires, it said. The consumer bureau has proposed revising the QM definition and potentially replacing the 43% debt-to-income limit with a price-based threshold. It also is requesting comment on whether to increase the DTI threshold within a range of 45% to 48% or to adopt a hybrid approach that includes “more flexible definitions of debt and income.” CFPB Director Kathy Kraninger has promised a smooth transition for the mortgage market after the expiration of the patch. “The Bureau is proposing to replace the Patch with a price-based approach to QM loans to preserve consumer access to mortgage loans while also making sure consumers have the ability to repay them,” Kraninger said in a press release. “The GSE Patch’s expiration will facilitate a more transparent, level playing field that ultimately benefits consumers through promoting more vigorous competition in mortgage markets.” Sen. Sherrod Brown, D-Ohio, the ranking member of the Senate Banking Committee, criticized Kraninger for proposing such a major revamp during the coronavirus outbreak. “Putting out a proposal to reshape access to affordable mortgages in the middle of a pandemic guarantees that this rule will not have the thoughtful look that it deserves,” Brown said in a press release. “At a time when the CFPB is receiving the largest volume of complaints in its history, the CFPB should be focused on protecting consumers who are struggling, not this rule.” Kraninger caught many in the mortgage industry off guard last year when she proposed ending the special treatment given to Fannie and Freddie by letting the GSE patch expire. The CFPB’s proposal would revise the general definition of constitutes a QM loan, replacing the hard 43% DTI limit with a price-based threshold measured by comparing a loan’s annual percentage rate against the average prime offer rate for a comparable transaction. A loan would meet the qualified-mortgage definition only if the APR exceeds average prime offer rate by less than two percentage points for as of the date the interest rate is set. The proposal would provide higher price thresholds for smaller loans. Though the plan would remove the 43% DTI limit from the QM definition, it would still require that lenders consider a borrower’s income or assets, debt obligations and DTI ratio or residual income when making a loan. Lenders would still have to verify the borrower’s current income or assets and debt obligations. Notably, the plan would completely remove Appendix Q, a set of guidelines for documenting a borrower’s income and liabilities that has long been vilified by mortgage lenders as unworkable, particularly for self-employed borrowers.

CFPB gives mortgage servicers relief to help struggling homeowners – The Consumer Financial Protection Bureau will give mortgage servicers limited regulatory cover to offer forbearance and loss-mitigation options to their customers suffering financial hardship due to the coronavirus pandemic. In an interim final rule published Tuesday and taking effect July 1, the bureau will waive its requirement that loss-mitigation options only be extended to customers who have submitted a complete loss-mitigation application. Borrowers facing temporary hardships would benefit from a quicker and more efficient application process, the CFPB said. The rule “makes it clear that servicers do not violate Regulation X by offering certain COVID-19-related loss-mitigation options based on an evaluation of limited application information collected from the borrower,” the CFPB said in a press release.Regulation X of the Real Estate Settlement Procedures Act requires that loss-mitigation and forbearance options only be extended to borrowers who complete an application for such relief. Tuesday’s interim final rule would allow mortgage servicers to extend that relief sooner if they meet certain criteria that benefit struggling borrowers. “There are circumstances where Regulation X may require a servicer to collect a complete application from a borrower before offering this type of program,” the rule says. “However, that result may not serve the particular needs of borrowers and servicers during the COVID-19 emergency.”To qualify for the exemption during the pandemic, servicers must meet three criteria. Servicers must allow a borrower who became delinquent to delay all principal and interest payments; refrain from charging any fees or accrued interest while the relief is in place; and ensure that acceptance of a loss-mitigation offer resolves the borrower’s delinquency status. The exception from Regulation X is not limited to borrowers who received forbearance plans under the coronavirus rescue package enacted earlier this year, and thus extends beyond those mortgages held by Fannie Mae, Freddie Mac, the Federal Housing Administration or any other federal agency. The CFPB will accept comments on the interim final rule for 45 days after its publication in the Federal Register.

MBA Survey: “Share of Mortgage Loans in Forbearance Decreases for First Time in Series to 8.48%” 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 Decreases for First Time in Series to 8.48% The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased – for the first time since the survey’s inception in March – from 8.55% of servicers’ portfolio volume in the prior week to 8.48% as of June 14, 2020. According to MBA’s estimate, 4.2 million homeowners are now in forbearance plans – down from almost 4.3 million homeowners the prior week….”The lower share of loans in forbearance was led by declines in GSE and portfolio and PLS loans, as more of those borrowers exited than entered a new forbearance plan,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Fewer homeowners in forbearance underscores the continued improvements in the job market, and provides another sign of the fundamental health of the housing market, which has rebounded considerably over the past several weeks.”Added Fratantoni, “The big unknown with respect to this positive development is the extent to which it relies upon policy measures put in place to help families through this crisis, particularly the stimulus payments and enhanced unemployment insurance benefits that were key parts of the CARES Act. We expect to see further improvements in the weeks ahead given the drop in forbearance requests this week.”

Black Knight: Number of Homeowners in COVID-19-Related Forbearance Plans Increased Slightly — Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance. From Black Knight: Forbearances Rise After Three Weeks of Declines The latest data from the McDash Flash Forbearance Tracker shows that the number of homeowners in active forbearance rose this week after three consecutive weeks of declines. Overall, the number of active forbearance plans is up 79K from last week – erasing roughly half of the improvement seen since the peak of May 22 – with rises seen over each of the past five business days. As of June 23, 4.68 million homeowners are in forbearance plans, representing 8.8% of all active mortgages, up from 8.7% last week. Together, they represent just over $1 trillion in unpaid principal ($1,025B).

Black Knight: National Mortgage Delinquency Rate Increased Sharply in May, Highest Rate since 2011 – Note: Loans in forbearance are counted as delinquent in this survey, but these loans are not reported as delinquent to the credit bureaus. From Black Knight: Black Knight: Mortgage Delinquencies Increase Another 20% in May to Hit Highest Level Since 2011, But June Payment Data Suggests Rise May Be Cresting

Another 723,000 homeowners became past due on their mortgages in May, pushing the national delinquency rate to its highest level in 8.5 years

There are now 4.3 million homeowners past due on their mortgages or in active foreclosure – including those in forbearance who have missed scheduled payments as part of their plans – up from 2 million at the end of March

Serious delinquencies are on the rise as well, increasing by more than 50% over the past two months

However, Black Knight’s McDash Flash Payment Tracker shows a higher share of payments have been made thus far in June than at the same time in May, suggesting the rise in delinquencies may be leveling off

Both foreclosure starts and sales (completions), halted by COVID-19 moratoriums, remain at record lows

The share of homeowners in active foreclosure has fallen to its lowest level on record since Black Knight began reporting the figure in January 2000 emphasis added

According to Black Knight’s First Look report for March, the percent of loans delinquent increased 20.4% in May compared to April, and increased 131% year-over-year. The percent of loans in the foreclosure process decreased 5.8% in May and were down 22.7% over the last year. Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 7.76% in May, up from 6.45% in April. The percent of loans in the foreclosure process decreased in May to 0.38% from 0.40% in April. The number of delinquent properties, but not in foreclosure, is up 2,363,000 properties year-over-year, and the number of properties in the foreclosure process is down 55,000 properties year-over-year.

Freddie Mac: Mortgage Serious Delinquency Rate increased in May, Highest in 2 Years – Freddie Mac reported that the Single-Family serious delinquency rate in May was 0.81%, up from 0.64% in April. Freddie’s rate is down from 0.63% in May 2019. This is the highest serious delinquency rate since June 2018. Freddie’s serious delinquency rate peaked in February 2010 at 4.20%. These are mortgage loans that are “three monthly payments or more past due or in foreclosure”. With COVID-19, this rate will increase significantly in June and July (it takes time since these are mortgages three months or more past due). I believe mortgages in forbearance will be counted as delinquent in this monthly report, but they will not be reported to the credit bureaus. This is very different from the increase in delinquencies following the housing bubble. Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes – and they will be able to restructure their loans once they are employed.

30% Of Americans Didn’t Make Their Housing Payment In June – A stunning 30% of Americans didn’t make their housing payment for June – a figure that is likely going to ripple through the housing industry in coming months. According to a new survey by Apartment List, the rate is similar to May and shows that even though other industries are rebounding, the situation has not yet improved meaningfully in housing.These figures stood at 24% in April and 31% in May, before falling slightly to 30% in June. One third of the 30% in June made a partial payment, while two thirds made no payment at all. “Missed payment rates are highest for renters (32 percent), households earning less than $25,000 per year (40 percent), adults under the age of 30 (40 percent), and those living in high-density urban areas (35 percent). While the missed payment rate for mortgaged homeowners is just 3 percentage points lower than renters,” the survey showed. Despite the trend of missing payments at the beginning of the month, households have been able to play catch-up later in the month and “narrow the gap” by making payments in the middle of the month. This was the case in May, where the missed payment rate “dropped from 31 percent at the beginning of the month to 11 percent at the end.”We’ll see how long people can play catch up. Meanwhile, as the survey notes, delayed payments in one month are a strong indicator for coming months. 83% of those who paid on time in May did so in June. Meanwhile, only 30% of those who were late in May have made their payment in full for June.This means the data for the beginning of July is likely to be just as ugly as June.

Eviction bans ending – massive eviction crisis looms – Eviction moratoria in states across the U.S. are coming to an end. Many state and local leaders are working to extend these measures to protect renters, but eventually, the rent will be due. Unfortunately, the end of these eviction moratoria doesn’t mean the end of when renters need help. The number of renters who can’t pay their rent is expected to climb in the coming months as the COVID-19 crisis continues to leave millions of people without jobs and the CARES Act’s supplemental boost to unemployment insurance ends on July 31. The country could face a massive eviction crisis when these moratoria and supplemental benefits end, which could lead to a surge in renters losing their homes, an increase in homelessness and a strain on public services. One analysis predicts that homelessness could increase 40 to 45 percent by the end of the year. A rise in homelessness could mean a rise in the use of shelters and emergency rooms, all of which likely cost more than helping a family stay in their home. A federal funding infusion in rental assistance can prevent a wide-scale surge in evictions and homelessness. Before the pandemic, the U.S. was already facing affordable housing, eviction and homelessness crises. In 2015, just over 8 million renters had worst case housing needs, meaning they had extremely low incomes, lacked housing assistance, had severe rent burdens or lived in severely inadequate housing. Landlords file approximately over 3 million eviction notices every year. Moreover, on any given night in 2019, over 560,000 people were experiencing homelessness, with over 200,000 enduring sleeping outside. The pandemic could send all these numbers skyrocketing, causing long-term ramifications for families. When families are evicted and forced to move, they often lose their possessions, parents may lose their jobs and kids may have to switch schools. For some families, an eviction on their record could prevent landlords from renting to them, making it difficult to find a new home and potentially leading to them becoming homeless. This is more likely to happen for Black and Native American households, people with extremely low incomes and people with histories of involvement in systems such as child welfare and criminal or juvenile justice. These groups face discrimination in many facets of their lives, including in the rental housing market, making it less likely that they will be able to find housing again. If tenants are evicted and forced into homelessness, they would encounter an already overburdened homeless assistance system and many more could have to endure sleeping outside. People who currently are forced to live outside have higher rates of serious health conditions, are more likely to experience an attack or physical trauma and are less likely to have access to services and hygiene materials to keep them healthy. These risks are especially dangerous during a pandemic.

NAR: Existing-Home Sales Decreased to 3.91 million in May, Rebound Expected in Coming Months – From the NAR: Existing-Home Sales Fall 9.7% in May While NAR Expects Strong Rebound in Coming Months: Existing-home sales fell in May, marking a three-month decline in sales as a result of the coronavirus outbreak, according to the National Association of Realtors. Each of the four major regions witnessed dips in month-over-month and year-over-year sales, with the Northeast experiencing the greatest month-over-month drop. Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, slumped 9.7% from April to a seasonally-adjusted annual rate of 3.91 million in May. Overall, sales fell year-over-year, down 26.6% from a year ago (5.33 million in May 2019)….Total housing inventory at the end of May totaled 1.55 million units, up 6.2% from April, and down 18.8% from one year ago (1.91 million). Unsold inventory sits at a 4.8-month supply at the current sales pace, up from 4.0 months in April and up from the 4.3-month figure recorded in May 2019.This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in May (3.91 million SAAR) were down 9.7% from last month, and were 26.6% below the May 2019 sales rate. The second graph shows nationwide inventory for existing homes. Existing Home InventoryAccording to the NAR, inventory increased to 1.55 million in May from 1.46 million in April. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory. Year-over-year Inventory Inventory was down 18.8% year-over-year in May compared to May 2019. Months of supply increased to 4.8 months in May. This was below the consensus forecast.

US Existing Home Sales Plunge To 10 Year Low As Exodus From Cities Accelerates – Despite record low mortgage rates, soaring mortgage applications, and a modest rebound in new home sales, existing home sales were expected to tumble further in May. April’s collapse was the largest since July 2010’s expiration of the first-time homebuyers credit, and May saw the plunge continue, falling 9.7% MoM (against expectations of a 5.6% MoM decline) The median existing-home price for all housing types in May was $284,600, up 2.3% from May 2019 ($278,200), as prices increased in every region. May’s national price increase marks 99 straight months of year-over-year gains. But sales of $1mm-plus home crashed… But the notable trend of migration from cities to suburbs is clear:“Relatively better performance of single-family homes in relation to multifamily condominium properties clearly suggest migration from the city centers to the suburbs,” Yun said.“After witnessing several consecutive years of urban revival, the new trend looks to be in the suburbs as more companies allow greater flexibility to work from home.”And second-home buyers surged…Individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in May, up from 10% in April 2020 and from 13% in May 2019. All-cash sales accounted for 17% of transactions in May, up from 15% in April 2020 and down from 19% in May 2019. May’s decline pushed the existing home sales SAAR to its lowest level since 2010… Regional Breakdown: Sales for May decreased in every region from the previous month’s levels. Median home prices grew in three of the four major regions from one year ago, falling marginally in the West.

• May 2020 existing-home sales in the Northeast fell 13.0%, recording an annual rate of 470,000, a 29.9% decrease from a year ago. The median price in the Northeast was $327,900, up 7.8% from May 2019.
• Existing-home sales decreased 10.0% in the Midwest to an annual rate of 990,000 in May, down 20.2% from a year ago. The median price in the Midwest was $227,400, a 3.0% increase from May 2019.
• Existing-home sales in the South dropped 8.0% to an annual rate of 1.73 million in May, down 25.1% from the same time one year ago. The median price in the South was $247,400, a 2.1% increase from a year ago.
• Existing-home sales in the West fell 11.1% to an annual rate of 720,000 in May, a 35.1% decline from a year ago. The median price in the West was $408,400, down 0.2% from May 2019.

Comments on May Existing Home Sales – McBride- Earlier: NAR: Existing-Home Sales Decreased to 3.91 million in May, Rebound Expected in Coming Months. A few key points:

1) Existing home sales are counted at the close of escrow, so this report is mostly for contracts signed in March and April – when the economy was mostly shutdown.

Sales NSA for May were below the housing bust low for May. However, there has been a rebound in mortgage purchase applications and regional pending home sales, so we can expect a rebound in existing home sales in June or July.

2) Inventory is very low, and was down 18.8% year-over-year (YoY) in May. This is the lowest level of inventory for May since at least the early 1990s.

3) As usual, housing economist Tom Lawler was much closer to the actual NAR report than the consensus forecast.

This graph shows existing home sales by month for 2019 and 2020. Note that existing home sales picked up somewhat in the second half of 2019 as interest rates declined. Even with weak sales in April and May, sales to date are only down about 9.1% compared to the same period in 2019. Existing Home Sales NSAThe second graph shows existing home sales Not Seasonally Adjusted (NSA) by month (Red dashes are 2020), and the minimum and maximum for 2005 through 2019. Sales NSA in May (372,000) were well below sales last year in April (452,000). Sales NSA in May were just BELOW the housing bust minimum for May in 2009 (376,000).

New Home Sales increased to 676,000 Annual Rate in May – The Census Bureau reports New Home Sales in May were at a seasonally adjusted annual rate (SAAR) of 676 thousand. The previous three months were revised down. Sales of new single-family houses in May 2020 were at a seasonally adjusted annual rate of 676,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 16.6 percent above the revised April rate of 580,000 and is 12.7 percent above the May 2019 estimate of 600,000. The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. The second graph shows New Home Months of Supply. The months of supply decreased in May to 5.6 months from 6.7 months in April. The all time record was 12.1 months of supply in January 2009. This is in the normal range (less than 6 months supply is normal). “The seasonally-adjusted estimate of new houses for sale at the end of May was 318,000. This represents a supply of 5.6 months at the current sales rate. ” Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973. The inventory of completed homes for sale is still somewhat low, and the combined total of completed and under construction is close to normal.The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate). In May 2020 (red column), 64 thousand new homes were sold (NSA). Last year, 56 thousand homes were sold in May. The all time high for May was 120 thousand in 2005, and the all time low for May was 30 thousand in 2011. This was above expectations of 640 thousand sales SAAR, however sales in the three previous months were revised down.

A few Comments on May New Home Sales – McBride -New home sales for May were reported at 676,000 on a seasonally adjusted annual rate basis (SAAR). However sales for the previous three months were revised down. This was above consensus expectations. New home sales are counted when the contract is signed, whereas existing home sales are counted when the transaction closes. So new home sales performed better than existing home sales in May. Based on mortgage applications and regional pending home sales reports, there will be a pickup in existing home sales in June (or July), and builder reports suggest there will probably be a further pickup in new home sales too. No one should get too excited. I’ve long argued that new home sales and housing starts (especially single family starts) were some of the best leading indicators for the economy. However, I’ve noted that there are times when this isn’t true. NOW is one of those times. The course of the economy will be determined by the course of the virus, and New Home Sales tell us nothing about the future of the pandemic. The longer the pandemic lasts, the more long term damage to the economy – and, if the pandemic worsens and persists – that will eventually negatively impact housing. The outlook for housing depends on the outlook for the pandemic.This graph shows new home sales for 2019 and 2020 by month (Seasonally Adjusted Annual Rate). New home sales were up 12.7% year-over-year (YoY) in May. Year-to-date (YTD) sales are still up 1.9%. (the comparison to May of last year was pretty easy). And here is another update to the “distressing gap” graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales. Distressing GapThe “distressing gap” graph shows existing home sales (left axis) and new home sales (right axis) through May 2020. This graph starts in 1994, but the relationship had been fairly steady back to the ’60s. Following the housing bubble and bust, the “distressing gap” appeared mostly because of distressed sales. Now the gap is mostly closed (with help from the sharp decline in existing home sales due to the pandemic). Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

AIA: “Architecture billings downward trajectory moderates” This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture billings downward trajectory moderates: Demand for design services in May saw few signs of rebounding following a record drop in billings the month prior, according to a new report today from The American Institute of Architects (AIA).AIA’s Architecture Billings Index (ABI) score for May was 32.0 compared to 29.5 in April, but still represents a significant decrease in services provided by U.S. architecture firms(any number below 50 indicates a decrease in billings). In May, the decline in new project inquiries and design contract scores moderated from April, posting scores of 38.0 and 33.1 respectively.”A large portion of the design and construction industry remains mired in steep cutbacks as many businesses and organizations are still trying to figure out what actions make sense in this uncertain economic environment,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “There are growing signs of activity beginning to pick up in some areas, but others are seeing a pause as pandemic concerns continue to grow.”…

Regional averages: West (36.0); South (30.6); Midwest (29.7); Northeast (25.1)

Sector index breakdown: institutional (35.7); multi-family residential (34.8); mixed practice (28.5); commercial/industrial (24.8) This graph shows the Architecture Billings Index since 1996. The index was at 32.0 in May, up from 29.5 in April. Anything below 50 indicates contraction in demand for architects’ services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions. This represents a significant decrease in design services, and suggests a decline in CRE investment in early 2021 (This usually leads CRE investment by 9 to 12 months).

Hotels: Occupancy Rate Declined 41.8% Year-over-year From HotelNewsNow.com: STR: US hotel results for week ending 20 June : U.S. hotel performance data for the week ending 20 June showed another small rise from previous weeks and less severe year-over-year declines, according to STR. 14-20 June 2020 (percentage change from comparable week in 2019):

Occupancy: 43.9% (-41.8%)

Average daily rate (ADR): US$92.20 (-31.7%)

Revenue per available room (RevPAR): US$40.48 (-60.3%)

“Occupancy was up another couple percentage points from last week, marking the 10th consecutive week of such an increase,” said Jan Freitag, STR’s senior VP of lodging insights. “Demand continues to be pushed upward by drive-to spots and the destinations with outdoor offerings such as beaches. For the week, 10 submarkets showed occupancy above 70%, led by Panama City (88.7%), where occupancy was just 0.7% lower than the comparable week in 2019.” The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. Usually hotel occupancy starts to pick up seasonally in early June. So even though the occupancy rate was up slightly compared to last week, the year-over-year decline was only slightly improved this week compared to the previous three weeks (41.8% decline vs 43.4% last week, 45.3% two weeks ago, and 43.2% decline three weeks ago). The improvement appears related mostly to leisure travel as opposed to business travel.

Personal Income decreased 4.2% in May, Spending increased 8.2% — The BEA released the Personal Income and Outlays report for May:Personal income decreased $874.2 billion (4.2 percent) in May according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased $911.1 billion (4.9 percent) and personal consumption expenditures (PCE) increased $994.5 billion (8.2 percent). Real DPI decreased 5.0 percent in May and Real PCE increased 8.1 percent (tables 5 and 7). The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.The May PCE price index increased 0.5 percent year-over-year and the May PCE price index, excluding food and energy, increased 1.0 percent year-over-year. The following graph shows real Personal Consumption Expenditures (PCE) through May 2020 (2012 dollars). Note that the y-axis doesn’t start at zero to better show the change. The dashed red lines are the quarterly levels for real PCE. The decrease in personal income was less than expected, and the increase in PCE was below expectations. Note that core PCE inflation was below expectations.

Real Personal Income less Transfer Payments —NOTE: All of these numbers are on a seasonally adjusted annual rate basis (SAAR).In the Personal Income & Outlays report for May, the BEA noted that “Personal income decreased $874.2 billion (4.2 percent) in May”. This decrease in Personal Income was due to a large decrease in transfer payments.Transfer payments decreased by $1.1 trillion in May (SAAR), after increasing $3 trillion in April (SAAR). Unemployment insurance increased from $70 billion in March (SAAR), to $430 billion in April (SAAR), to $1.28 trillion in May (SAAR).And “Other” (mostly the CARES Act one time payments) decreased by $2 trillion in May (SAAR).Without the decrease in transfer payments, Personal Income in April would have increased about 1.5%.A key measure of the health of the economy (Used by NBER in recession dating) is Real Personal Income less Transfer payments.This graph shows real personal income less transfer payments since 1990.This measure of economic activity decreased 2.9% in March, compared to February, and another 6.1% in April (compared to March). This measure increased 1.5% in May compared to April, but is still down 7.5% compared to February (pre-recession).

US Spending Surges At Record Pace In May As Government Wages Crash – Following the somewhat surprising surge (stimulus checks) in personal incomes in April (after March’s collapse), May’s income data was expected to fade as spending rebounded strongly (on the pent-up-demand after re-opening). On a month-over-month basis, personal income did drop, but less than expected (-4.2% MoM vs -6/0% exp) but spending rose less than expected (+8.2% MoM vs +9.3% exp) – this was still the biggest surge in spending on record (since 1958). Year-over-year, income growth slowed (as stimulus checks slowed) but spending’s slump rebounded only modestly (remaining down a shocking 9.3% YoY)… Note that personal income (ex-transfer receipts – i.e. stimulus checks) rebounded very modestly… …as government handouts plunged by $1.1 trillion to $5.3 trillion… In fact, on the income side of the equation, May saw the biggest drop in government wages on record… All this chaotic noise has sparked massive volatility in the implied savings rate, which plunged back towards old normal (from 32.2% to 23.2%) but still remains extremely high… 4 Graphs Source: Bloomberg Finally, we note that The Fed’s favorite inflation indicator – Core PCE Deflator – slowed even firther to +1.0% YoY (slightly hotter than the +0.9% YoY expected)…

U.S. Consumer Spending Rebounded in May, but Virus Surge Poses Economic Threat – WSJ – Americans cautiously returned to the marketplace last month, helping the economy slowly dig out from a severe recession. But a new rise in coronavirus infections threatens the nascent recovery. Household spending on goods and services rose a record 8.2% in May, the government said Friday. That was more than double the prior all-time high on records dating from 1959. Americans spent big on long-lasting items like cars, refrigerators and sofas. May spending rose but remained below pre-coronavirus pandemic levels. Incomeremained high after surging thanks togovernment stimulus. The report boosted hopes that a good portion of consumers are eager and able to spend despite historically high unemployment. But it also showed just how far the economy has to go to recover from what economists have already labeled a deep recession caused by the pandemic. Consumer spending remained down 12% from February, when state and city officials ordered businesses to shut to prevent the virus’s spread. “It’s only a partial recovery from where we were. I’m not sure that it can be sustained,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. Consumer spending and economic growth won’t return to normal levels “unless there’s a vaccine, a health response that makes people feel safe.” Consumer sentiment remains depressed from near all-time highs reached during the last expansion, and slipped in the latter half of June. And Americans overall pocketed more than a fifth of their disposable incomes last month, an exceptionally high savings rate that signals caution. But the federal stimulus package, coupled with the urge among many Americans to get out and spend after months of being cooped up, is likely helping the economy grow again. Married couple Chip Hoagland and Sarah Wiley have been saving money by not going out to eat or taking trips. That has freed up income to add a studio behind their 1955 ranch house in Falls Church, Va., and buy a used Dodge Caravan. Mr. Hoagland, a 59-year-old bioenergy company executive, also bought cars during the 2008 and 2001 recessions. “I usually buy when it’s low,” he said. He visited three dealerships last month. “Clearly they weren’t moving their cars. I was able to negotiate what I thought was a fairly good deal.”

Trump Wants You to Tip Restaurant Owners, Not Servers – If the Trump administration has its way, the tip you leave your waiter or waitress could end up in the pocket of the restaurant owner instead of the person who served you.This week, Trump’s Labor Department proposed rescinding an Obama-era rule that made the logical point that tips are the property of the servers and cannot be taken by the restaurant owner. The administration’s proposal would allow restaurant owners who pay their wait staff as little as $7.25 per hour to collect all the tips left by patrons and do whatever they want with them – regardless of what diners intended. Coming on the heels of the massive tax bills recently passed by the House and Senate, this “reverse Robin Hood” scheme – which will take money out of the pockets of low-wage workers and give it to business owners – is just one more example of “trickle-down” economic policy masquerading as pro-worker reform.Like the tax bills, the DOL proposal sets the table to transfer income and wealth from those least able to afford it to corporations and the very wealthy.Servers in restaurants are among the lowest-paid workers in our economy. The median hourly wage for waiters and waitresses was less than $10 per hour in 2015, according to the Bureau of Labor Statistics. They are hardly the kind of workers who should be subsidizing the profits of their bosses.But the National Restaurant Association – the “other NRA” – lobbied for this result. The only question now is whether Labor Secretary Alex Acosta will go along with this swindle, or whether he will give the public enough information to have a fair chance to weigh in.This is a bad policy that the administration is trying to hide behind a very bad process. Despite the fact that the law requires it, the Labor Department’s proposal includes no estimate of how much money in tips will be transferred from servers to restaurant owners – many of which are big corporations, not mom and pop – as a result of the rule. Instead of providing an estimate, the proposal provides numerous excuses for hiding the rule’s real impact from the public.

GNC Files Chapter 11 Bankruptcy With Plan To Sell Itself – On Tuesday, we noted that weekly bankruptcies are soaring, the most in over a decade, and there is a striking correlation between the unemployment rate and chapter 11 filings. Not too long ago, we said that a “biblical” wave of bankruptcies is about to flood the U.S. economy. With that being said, and at no surprise, GNC Holdings, Inc. filed for bankruptcy protection on Tuesday night, intending to sell its business and shutter over 1,000 stores. The health and wellness brand, based in Pittsburgh and founded in 1935, “expects the Chapter 11 process will benefit its stakeholders and best position the Company for long-term success.” The Chapter 11 petition was filed in U.S. Bankruptcy Court in Delaware will allow the company “to restructure its balance sheet and accelerate its business strategy.” GNC said it reached a deal with its secured lenders for approximately $130 million in additional liquidity to continue operations through the bankruptcy process and work toward a prearranged reorganization plan with creditors. “GNC has secured approximately $130 million in additional liquidity through (i) a commitment from certain of its term lenders to provide $100 million in “new money” debtor-in-possession (DIP) financing and (ii) approximately $30 million to come from certain modifications to the existing ABL credit agreement,” GNC said. The company said it “reached an agreement in principle for the sale of the Company’s business” – with the starting bid price of $760 million, subject to court approval.“With the support of its lenders and key stakeholders, the company expects to confirm a standalone plan of reorganization or consummate a sale that will enable the business to exit from this process in the fall of this year,” GNC said.GNC estimated its total debts at $895 million and total assets of $1.4 billion. The company plans to close 800 to 1,200 of its 5,200 retail locations throughout the U.S.

DOT: Vehicle Miles Driven decreased 40% year-over-year in April –The Department of Transportation (DOT) reported: Travel on all roads and streets changed by -39.8% (-112.0 billion vehicle miles) for April 2020 as compared with April 2019. Travel for the month is estimated to be 169.6 billion vehicle miles.The seasonally adjusted vehicle miles traveled for April 2020 is 160.9 billion miles, a -41.2% (-112.9 billion vehicle miles) decline from April 2019. It also represents -27.2% decline (-60 billion vehicle miles) compared with March 2020. Cumulative Travel for 2020 changed by -14.8% (-152.3 billion vehicle miles). The cumulative estimate for the year is 875.9 billion vehicle miles of travel. This graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors. Miles driven declined during the great recession, and the rolling 12 months stayed below the previous peak for a record 85 months. Miles driven declined sharply in March, and really collapsed in April. This will be an interesting measure to watch when the economy eventually starts to recover. Vehicle Miles YoYThis graph shows the YoY change in vehicle miles driven. Miles driven were down 39.8% year-over-year in April.

June Vehicle Sales Forecast: 29% Year-over-year Decline -From Edmunds.com: New Vehicle Sales Expected to Drop in June, Closing a Second Down Quarter in 2020, Edmunds Forecasts The car shopping experts at Edmunds say that June will be another down month for auto sales as the industry continues to combat market challenges posed by the coronavirus (COVID-19) pandemic, forecasting that 1,080,656 new cars and trucks will be sold in the U.S. in June for an estimated seasonally adjusted annual rate (SAAR) of 12.8 million. This reflects a 28.7% decrease in sales from June 2019 and a 3.6% decrease from May 2020. … “It comes as no surprise that the second quarter was a disappointing one for the automotive industry, but the good news is that auto sales didn’t come to a complete standstill either,” said Jessica Caldwell, Edmunds’ executive director of insights. “The fact that retail sales – not fleet – are what kept the market propped up speaks volumes to the resilience of the American consumer. And the way that dealers were quick to pivot to online sales also underscores the incredibly responsive and resourceful nature of the industry in the face of adversity.”Although Edmunds data shows a steady growth in sales since the end of March, analysts caution that some of the strains of the pandemic are starting to show as more shoppers return to the market.”The marketplace is growing less inviting as automakers pull back on incentives and inventory dwindles due to factory shutdowns, particularly when it comes to trucks, which have been the one bright spot for sales during the pandemic,” said Caldwell. “Current sales paint an optimistic picture given the circumstances, but between COVID-19 and today’s politically charged climate, the industry needs to prepare for uncertainties ahead.” This graph shows actual sales from the BEA (Blue), and Edmunds forecast for June (Red).Note that the low in April of 8.73 million SAAR was lower than the lowest sales rate during the great recession of 9.02 million SAAR in February 2009.Sales have bounced back from the April low, but are still down sharply year-over-year.

Headline Durable Goods Orders Up 15.8% in May, Better Than Expected -The Advance Report on Manufacturers’ Shipments, Inventories, and Orders released today gives us a first look at the latest durable goods numbers. Here is the Bureau’s summary on new orders:New orders for manufactured durable goods in December increased $5.7 billion or 2.4 percent to $245.5 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 3.1 percent November decrease. Excluding transportation, new orders decreased 0.1 percent. Excluding defense, new orders decreased 2.5 percent. Transportation equipment, up following three consecutive monthly decreases, drove the increase, $5.9 billion or 7.6 percent to $82.9 billion. Download full PDFThe latest new orders number at 15.8% month-over-month (MoM) was better than the Investing.com 10.9% estimate. The series is down 17.9% year-over-year (YoY).If we exclude transportation, “core” durable goods was up 4% MoM, which was better than the Investing.com consensus of 2.5%. The core measure is down 6.3% YoY.If we exclude both transportation and defense for an even more fundamental “core”, the latest number is up 2.4% MoM and down 6.4% YoY.Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It is up 2.3% MoM and down 3.6% YoY. For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We’ve also included a dotted line to show the relative size of Core Capex.

Kansas City Fed: “Tenth District Manufacturing Activity Grew Slightly ” in June –From the Kansas City Fed: Tenth District Manufacturing Activity Grew Slightly: The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity grew slightly after sharply decreasing for three straight months. Activity still remained well below year-ago levels, while expectations for future activity rebounded moderately.”Regional factory activity expanded just slightly in June compared with a month ago, but was still well below year-ago levels,” said Wilkerson. “Of those surveyed, 76% of firms have taken advantage of emergency lending options, and expectations for future activity and employment levels have improved somewhat.” The month-over-month composite index was 1 in June, up considerably from -19 in May and a record low of 30 in April. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The improvement in activity was driven by nondurable goods plants, while durable goods factories, especially nonmetallic mineral products, primary metals, fabricated metals, and computer and electronics plants continued to decline. Month-over-month indexes were mixed. Production, shipments, new orders, and supplier delivery time indexes recovered to positive levels, while indexes for order backlog, employment, new orders for exports, and inventories remained negative. Year over-year factory indexes mostly remained highly negative in June, but the composite index moved up slightly from -35 to -29. The future composite index rose considerably in June, rebounding from -2 to 9.76% of factory contacts had applied for the Small Business Administration (SBA) Paycheck Protection Program since March 13, 2020 (up from 67% reported in April) This suggests activity has bottomed, but this is just a slight increase off the bottom. Three-fourth of the companies surveyed are using the PPP – and that suggests further layoffs coming if activity doesn’t rebound.

Richmond Fed Manufacturing: Steady in June – Fifth District manufacturing activity “held fairly steady in June”, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite index rose to 0 in June from -27 in May. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends is now at -26.7, which indicates contraction.The complete data series behind today’s Richmond Fed manufacturing report, which dates from November 1993, is available here. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series. Here is the latest Richmond Fed manufacturing overview. Fifth District manufacturing held fairly steady in June, according to the most recent survey from the Richmond Fed. The composite index rose from 27 in May to 0 in June, as shipments were relatively flat, more firms reported increases in new orders, and firms generally reported continued declines in employment. The index for local business conditions rose notably in June, indicating optimism among firms after three months of some of the most negative readings on record for that series. Manufacturers were also optimistic, overall, that conditions would improve in the next six months. Survey results suggested that some manufacturing firms saw decreased employment in June. Meanwhile, wages, the average workweek, and availability of skills appeared fairly flat, on the whole. Survey respondents expected employment, wages, and the average workweek to increase in the coming months. The average growth rates of both prices paid and prices received by survey participants increased in June, with growth of prices paid outpacing that of prices received. Firms expected price growth to continue to rise in the near future. Link to Report

MLB, players group agree to 60-game season starting in July – Major League Baseball (MLB) and the MLB Players Association agreed on Tuesday to Commissioner Rob Manfred’s proposed 60-game season, with games starting in late July.The league tweeted that players will report to a limited form of “spring” training on July 1 and that the shortest season in almost 150 years will begin either July 23 or 24. The player’s association agreed to the suggested health and safety protocols for the season to begin.”The health and safety of players and employees will remain MLB’s foremost priorities in its return to play,” the league’s statement said. “MLB is working with a variety of public health experts, infectious disease specialists and technology providers on a comprehensive approach that aims to facilitate a safe return.””Major League Baseball is thrilled to announce that the 2020 season is on the horizon,” Manfred said in the statement. “We have provided the Players Association with a schedule to play 60 games and are excited to provide our great fans with Baseball again soon.”Each team will play 10 games against each of its four division rivals and four games against the five clubs in the corresponding division in the other league to reduce travel, The Associated Press reported. Earlier Tuesday, the AP reported that MLB owners were planning to unilaterally issue a 60-game schedule for the series after the players association rejected a series of proposals. The league requested that the association answer by 5 p.m. Tuesday whether players could report to training by July 1. The games will be held without fans.

Weekly Initial Unemployment Claims decrease to 1,480,000 – The DOL reported: In the week ending June 20, the advance figure for seasonally adjusted initial claims was 1,480,000, a decrease of 60,000 from the previous week’s revised level. The previous week’s level was revised up by 32,000 from 1,508,000 to 1,540,000. The 4-week moving average was 1,620,750, a decrease of 160,750 from the previous week’s revised average. The previous week’s average was revised up by 8,000 from 1,773,500 to 1,781,500. The previous week was revised up. This does not include the 728,120 initial claims for Pandemic Unemployment Assistance (PUA). The following graph shows the 4-week moving average of weekly claims since 1971. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 1,620,750. This was higher than the consensus forecast of 1.3 million initial claims and the previous week was revised up. The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week). At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined. Continued claims decreased to 19,522,000 (SA) from 20,289,000 (SA) last week and will likely stay at a high level until the crisis abates.

U.S. Initial Unemployment Benefits Steady at 1.5 Million in June – WSJ – The number of workers seeking jobless benefits has held steady at about 1.5 million each week so far in June, signaling a slow recovery for the U.S. economy as states face new infections that could impede hiring and consumer spending.Applications for unemployment benefits were slightly below 1.5 million last week, at 1.48 million, the Labor Department reported Thursday. While weekly totals have gradually eased from a late March peak of nearly 7 million, they also remain well above the prepandemic record of 695,000 in 1982. Meanwhile, the number of people receiving benefits, an indicator for overall layoffs, totaled 19.5 million in the week ended June 13, down slightly from previous weeks.Economists say the sluggish improvements in claims tallies dim prospects for a quick recovery. Further, a recent increase in coronavirus casescould affect efforts to reopen the economy – and get people back to work and spending money. “We’re seeing a slowdown in layoffs, but hiring hasn’t picked up a tremendous amount,” said Nick Bunker, economist at the job site Indeed. “The recovery from this is going to potentially be a very long slog if we can’t get the virus under control quickly.”

Women’s Job Losses From Pandemic Aren’t Good for Economic Recovery – WSJ – Women have lost jobs at a steeper rate than men during the coronavirus pandemic, a factor that is likely to hold back the economic recovery. Female workers account for the majority of service-sector jobs, including food service and personal care, which are more vulnerable to social-distancing measures and have suffered the brunt of losses during the current economic crisis. Married women, who in past recessions took jobs to offset lost wages when their husband or male partner was laid off, also are less likely to seek work because their employment prospects are now limited, one researcher concluded. These dynamics present an impediment to broader economic growth: If participation among women remains weak, it means fewer workers in female-dominated fields such as nursing or hair care. Economists say the squeeze on jobs and continued child and elder-care responsibilities pose setbacks to female employment and labor-force participation as businesses start to reopen in the coming months. “There were lots of occupations that were offering women very decent earnings and flexible schedules…that may not be able to return 100% for a long time,” said Julia Pollak, labor economist at ZipRecruiter. The fragility of female-dominated jobs is different from past recessions, when goods-producing sectors such as construction and manufacturing – which are predominantly men – saw greater employment losses.

The Magnitude Of The 2nd Round Of Job Losses Won’t Be Apparent Until After The Election – Financial markets are entering a period with limited data or other scheduled developments from which to derive any meaningful trading direction. It’s the final full trading week of what promises to be a dismal second quarter and while the trajectory of economic activity has improved via the reopening process, the fact remains that it will most likely require years to claw back the ground lost during the pandemic. This isn’t new information however and as investors look forward, the focus remains on gauging the pace with which the labor market is reengaged and consumers’ propensity to spend is reestablished. While improvement in sentiment surveys and the surprisingly strong retail sales environment in May have added a positive skew to the near-term outlook, for the constructive momentum to accelerate the jobs landscape needs to continue improving. With a nod to all of the Fed’s accommodative efforts and Washington’s stimulus push, these measures are by definition temporary fixes designed to provide a bridge for firms to weather the pandemic with the objective of successfully reopening, reestablishing, and retooling in the new normal.These ambitions are consistent with reemploying as many workers displaced by the pandemic shutdown as possible, but the fact of the matter is a large number of the jobs lost during the second quarter simply are not going to return. This isn’t to suggest that an elevated unemployment rate will be a permanent feature in the US, rather that the snap-back scenario is unlikely given the dizzying array of uncertainties that persist. The October 31 expiration of the payroll protection program has undoubtedly kept the ranks of the unemployed lower than had the initiative not been deployed; even if a more cynical interpretation implies that another round of job-shedding has only been delayed to the final two months of 2020. The fact the magnitude of the second-round losses won’t be evident until after voters go to the polls on November 3 isn’t lost on us; but was it ever going to be any other way? We digress. With this context, this week’s economic data is unlikely to materially recast the macro narrative even if the domestic real estate sector continues to defy the downside implications from the pandemic. Durables and personal spending and income will incrementally add to investors understanding of the state of the economy, as well as the weekly jobless claims release. Nonetheless, the July 2 BLS report is the true litmus test of the V-shaped optimism. In this context, the consensus call for a gain of 3.6 million jobs during June on top of the 2.5 million seen in May will be in obvious focus. The unexpectedly strong May print (10 million stronger than the consensus) has raised the bar of how quickly investors expect the labor force to be redeployed and any significant downside miss will bring into question not only the trajectory of the recovery but also the reliability of the mid-pandemic data.

Reopenings in disarray as coronavirus surges— Newly diagnosed cases of Covid-19 and other indicators of the pandemic’s spread soared in hot spots across the U.S., driving city and state officials to consider slowing or reversing reopening plans. Cases are surging in Texas, Florida, Arizona and in California, which on Tuesday broke its record for new cases for the fourth day in the past week. Even in New Jersey, where numbers have been falling, Governor Phil Murphy warned that the transmission rate is “beginning to creep up.” a group of people standing in front of a crowd: People wearing protective masks wait to be seated at a restaurant on Pier 39 in San Francisco, California, U.S., on Monday, June 22, 2020. California’s new cases rose by a record and Florida infections jumped more than the weekly average, more signs of a possible resurgence of coronavirus in U.S. Sun Belt states. Bloomberg People wearing protective masks wait to be seated at a restaurant on Pier 39 in San Francisco, California, U.S., on Monday, June 22, 2020. California’s new cases rose by a record and Florida infections jumped more than the weekly average, more signs of a possible resurgence of coronavirus in U.S. Sun Belt states. California reported 5,019 new cases, its biggest daily jump, for a total of more than 183,000, according to state data. The state also hit a record 3,700 hospitalizations. Arizona also broke its daily case record, adding nearly 3,600, according to tallies released Tuesday, bringing the total to 58,179. The state also reported 42 deaths, raising the toll to 1,384. In Florida, local leaders hurried to react to daunting statistics. Palm Beach County — where President Donald Trump makes his official residence — became the latest jurisdiction to mandate masks to fend off the surge, with county commissioners voting unanimously to approve the measure Tuesday. The state’s 103,506 cases were up 3.3% from a day earlier, compared with an average 3.8% in the previous seven days. Seen on a rolling seven-day basis, Florida’s new cases reached 23,397, the highest ever. Deaths reached 3,237, an increase of 2%, the most on a percentage basis since June 5. Cumulative hospitalizations of Floridians rose by 199, or 1.5%, to 13,318. On a rolling seven day-basis, they reached 1,112, the highest level since May 25. The new rate of people testing positive for the first time climbed to 10.9% for Monday, from 7.7% on Sunday.

COVID-19 rages through food processing plants, warehouses and manufacturing facilities – The coronavirus continues to spread through factories, warehouses and other workplaces as the number of COVID-19 cases rises sharply in US states that have reopened businesses and abandoned social distancing guidelines. Twenty-nine states and US territories logged an increase in their seven-day average of new reported cases on Monday, with nine states – California, Texas, Arizona, Nevada, Oklahoma, Utah, Florida, South Carolina and Georgia – reporting record average highs. Disturbingly, many of the new cases are among younger people, with the median age for newly diagnosed coronavirus cases in Florida falling to 37. As the World Socialist Web Site reported yesterday, Florida’s agricultural regions – where migrant workers pick fruit and vegetables next to each other and are cramped into crowded busses, trailers and apartments – have been major vectors for the spread of the deadly disease. Immokalee, Florida, the country’s winter tomato capital, has 1,207 reported cases. With the harvest season over, thousands of migrant workers are now making their way up the East Coast and to the Midwest, with many of them taking the virus to Georgia, North Carolina, Michigan and other states. The meatpacking industry continues to be the largest spreader of COVID-19. It is esimated that more than 24,000 workers have been infected and at least 91, including more than 25 at facilities owned by Tyson Foods, have died. Both figures have increased five-fold since Trump used the Defense Production Act to reopen infected slaughterhouses and meat processing plants in late April. In North Carolina, where cases were found in at least 23 meat processing plants, the Raleigh News & Observer noted the comments of State Representative Jimmy Dixon, a staunch ally of the hog industry. During a recent committee meeting he said a policy of “herd immunity” would be better for the economy. “We’d better start addressing the economic health of this state,” he said. “In my opinion, we’re all going to get [COVID-19], and the sooner we get it the better off we are.” The wave of infections in the meatpacking industry is a global phenomenon, with major outbreaks last week in Wales in the UK, in Germany, where officials said 1,331 workers tested positive at a Tonnies Group slaughterhouse in North Rhine-Westphalia, and Brazil, where almost 24 percent of all COVID-19 cases in Brazil’s southern Rio Grande do Sul state are workers in the meat industry.

Covid-19 still is very real’: Major grocery union calls for mask requirements as cases spike – A major union that represents thousands of workers at grocery stores, meatpacking plants and nursing homes said government officials and companies must require masks in public places to control the spread of the coronavirus as Texas, Florida and other states become the new hotspots. Marc Perrone, president of the United Food and Commercial Workers International Union, said the pandemic hasn’t ended – and neither have health risks for workers. In fact, he said, in many states, their odds of getting sick are rising along with coronavirus cases. “Contrary to some of what employers – and I think even some of our government leaders – want us to believe, Covid-19 still is very real,” he said on a call with reporters. This week, the U.S. set a record for the number of new coronavirus cases in a single day, with 45,557 diagnoses reported Wednesday, according to a tally by NBC News. Throughout the pandemic, the union has pushed employers to expand workers’ access to testing and protective gear, saying that without them the public is at risk, too. It has also urged hazard pay for its members and for essential workers at non-unionized companies like Walmart and Amazon. Kroger, Walmart, Amazon and others have temporarily increased pay and offered bonuses during the pandemic, but that extra pay has ended or is winding down. Kroger ended its $2 an hourly temporary pay increase in mid-May, and facing backlash, paid a bonus of $400 to full-time employees and $200 to part-time employees. Walmart will end its $2 an hour pay increase for e-commerce fulfillment centers July 3. Amazon’s $2 an hour increase ended May 31. On Thursday, the union called on employers to pay essential workers at least $15 an hour and reinstate “hazard pay” in all states where cases are rising. Target announced last week that it will raise its minimum hourly wage from $13 to $15, starting July 5. It had planned to raise its wages to $15 by the end of this year, but accelerated its timetable because of the pandemic. A temporarily increase of $2 an hour put in place during the outbreak was set to expire July 4. The union also urged the creation of a national public registry where employers with more than 1,000 workers must disclose the number of people that have gotten sick or died from Covid-19 every month.

Census: Household Pulse Survey shows 31% of Households Expect Loss in Income over Next 4 Weeks — Note: The question on lost income is always since March 13, 2020 – so this percentage will not decline. 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 recent 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. The data was collected between June 11 and June 16, 2020.

Loss in employment income: “Percentage of adults in households where someone had a loss in employment income since March 13, 2020.” This number is since March 13, and hasn’t changed significantly.

Expected Loss in Employment Income: “Percentage of adults who expect someone in their household to have a loss in employment income in the next 4 weeks.” 31% of households expect a loss in income over the next 4 weeks. This is down from 38.8% in late April.

Food Scarcity: Percentage of adults in households where there was either sometimes or often not enough to eat in the last 7 days. About 10% of households report food scarcity.

Delayed Medical Care: “Percentage of adults who delayed getting medical care because of the COVID-19 pandemic in the last 4 weeks.” 41% of households report they delayed medical care over the last 4 weeks. This has not declined.

Housing Insecurity: “Percentage of adults who missed last month’s rent or mortgage payment, or who have slight or no confidence that their household can pay next month’s rent or mortgage on time.” 23.2% of households reported they missed last month’s rent or mortgage payment.

K-12 Educational Changes: “Percentage of adults in households with children in public or private school, where classes were taught in a distance learning format, or changed in some other way.” Essentially all households with children are reporting were not being taught in a normal format.

California Democrats collaborate with state employees union to cut workers’ wages by 11 percent – Last Friday, California Governor Gavin Newsom and Service Employees International Union (SEIU) Local 1000 agreed to a two-year wage cut of over 11 percent for 96,000 custodians, administrators and nurses employed by the state government.Workers are being forced to take two furlough days every month for two years, which equals to a 9.23 percent pay reduction. In addition, the 2.5 percent raise state employees were scheduled to receive on July 1 has been eliminated, and workers will not get a raise until 2022.In late May, the Democratic governor proposed a 10 percent pay reduction for all state employees to help address, he said, a projected budget deficit of $54 billion. Newsom indicated at the time that he wanted to rely on negotiating this pay cut with the unions, but if that failed, the governor said, he would seek authority from the state legislature to unilaterally impose the cuts.On the union’s Facebook page, workers denounced the sellout deal, the SEIU and Local 1000 President Yvonne Walker. One worker posted: “Yvonne Walker: No pay cuts, we really need for you to put aside your own personal agenda and focus on our needs. The governor blew the money, and he wants us to pay for it by reducing our pay. We fought to get a pay increase and you want to give it back. NO!!!” In an earlier posting another worker said, “This does not help my mother, a member, retire this year. She has worked so hard for her Department during covid19 and for this union, and all she wanted was her raise before she retires. She is worried about contracting the virus at work and this is why she feels she has to retire so my heart breaks for her now that she will have to retire for her health and she is deserving of her raise and will not get her raise.”

Revealed: millions of Americans can’t afford water as bills rise 80% in a decade – Millions of ordinary Americans are facing rising and unaffordable bills for running water, and risk being disconnected or losing their homes if they cannot pay, a landmark Guardian investigation has found. Exclusive analysis of 12 US cities shows the combined price of water and sewage increased by an average of 80% between 2010 and 2018, with more than two-fifths of residents in some cities living in neighbourhoods with unaffordable bills. In the first nationwide research of its kind, our findings reveal the painful impact of America’s expanding water poverty crisis as aging infrastructure, environmental clean-ups, changing demographics and the climate emergency fuel exponential price hikes in almost every corner of the US. America’s growing water affordability crisis comes as the Covid-19 pandemic underlines the importance of access to clean water. The research shows that rising bills are not just hurting the poorest but also, increasingly, working Americans. “More people are in trouble, and the poorest of the poor are in big trouble,” said Roger Colton, a leading utilities analyst, who was commissioned by the Guardian to analyse water poverty. “The data shows that we’ve got an affordability problem in an overwhelming number of cities nationwide that didn’t exist a decade ago, or even two or three years ago in some cities.” Water bills exceeding 4% of household income are considered unaffordable. Colton’s 88-page report is published today at the launch of a major project on America’s water emergency by the Guardian, Consumer Reports and other partners. Our research found that between 2010 and 2018 water bills rose by at least 27%, while the highest increase was a staggering 154% in Austin, Texas, where the average annual bill rose from $566 in 2010 to $1,435 in 2018 – despite drought mitigation efforts leading to reduced water usage. Meanwhile, federal aid to public water utilities, which serve around 87% of people, has plummeted while maintenance, environmental and health threats, climate shocks and other expenditures have skyrocketed. In New Orleans, Santa Fe and Cleveland, about three quarters of low income residents live in neighbourhoods where average water and sewage bills are unaffordable. “A water emergency threatens every corner of our country. The scale of this crisis demands nothing short of a fundamental transformation of our water systems. Water should never be treated as commodity or a luxury for the benefit of the wealthy,” said water justice advocate Mary Grant from Food and Water Watch, reacting to the Guardian’s research.

Grim Prospects for New York City as Few Office Workers Return Post Lockdown; How Hard Will Other US Cities Be Hit? — Yves Smith – We’d anticipated a difficult adjustment to life with Covid-19 for New York City and potentially other large American cities. A new Wall Street Journal story confirms our take and if anything, may be more grim. Restrictions of office workers returning to their posts end tomorrow, but the Journal’s sources estimate only 10% to 20% will return. And for the most part, this isn’t a short term “Get the bugs out of getting them back” phase, with many more expected to return soon. This low level looks likely to the new normal for at least the next few months, with increases from these levels expected to be measured. The fact that work from home has worked at all calls into question many heretofore unquestioned norms of office like, like the true utility of having workers on premises. How much of formal and informal information-sharing is actually productive, as opposed to gossip and political jockeying? Conversely, even though in-person collaboration is usually more efficient (think of programmers sitting next to each other looking at the same screen), how much will actually be possible with new distancing rules? Rethinking the utility of a day at the office isn’t just a New York City issue. From the Journal: But many firms say having employees work from home has been better than expected and are in no rush to get back to the office. In a recent global survey by trade group CoreNet Global, just 15% of companies said their office occupancy will be back to pre-pandemic levels within six months and 38% said it would take more than a year for everyone to be back. Of course, a potential negative is that if remote work continues to be common after Covid-19 has been tamed, it’s not hard to imagine that most employers engage in more intrusive worker monitoring. But you might also see some interesting side effects. Harvard Business School for decades analyzed what personal and demographic factors correlated best with starting and career pay. One factor was the biggest predictor: height. Hard to project that over Zoom. But back to Covid-19’s effects on New York City. The Journal article describes how traders are particularly eager to get back, and how real estate firms are keen to project that it’s safe to get in the pool by bringing their full contingents back. Particular CEOs also volunteered that they believed in the value of having employees present: [Citigroup] CEO Michael Corbat has said he is a believer in office culture. Citigroup pre-pandemic had knocked down walls in its offices to encourage collaboration and chance meetings, what Mr. Corbat calls “constructive collision.” Yet Citi expects to have only 5% on premises in New York as of July 1. Banks are more eager than other concerns to get staff back on deck. What is striking is that some industries that are perceived to be social, like ad agencies, have put themselves in the slow lane.From the Journal:

OPS outlines plan for fall school reopening with only half of students in buildings at a time -Omaha Public Schools officials unveiled a fall reopening plan Friday that would divide students into two groups who would each attend school in-person part of the week. Half of students districtwide would attend school Monday and Tuesday, the other half Thursday and Friday. They would rotate attending Wednesday. The result would be fewer students in a school building on a given day, creating the elbow room officials say would be needed for social distancing in classrooms and cafeterias and on buses. “The only way we can practice distancing is by limiting the population of kids in the classroom and in the schools,” school board president Marque Snow said Friday. Nebraska’s biggest school district has become the first in the metro area to roll out specific plans for coping with COVID-19 next school year. Under the plan, all staff, students and visitors would be expected to wear a mask at school. Exceptions would be made for children under age 2, those who cannot remove a mask without assistance and others with special needs. Exceptions also would be made for athletic activities, as long as social distancing is maintained, as well as while drinking and eating. Superintendent Cheryl Logan, in a letter to staff, said the plan is “our best path forward right now.” “We understand that no solution is ideal during this time, and we hope that conditions allow us to return at 100% in the future,” Logan said.

Denver Public Schools Plans To Reopen In Person In August – Good news, Denver parents. You have something to look forward to in August: Denver Public Schools will be back in session. Classrooms and expectations will look different for children. Parents can expect students and educators to undergo health screenings and wear masks inside the schools.Student schedules will also be adjusted to avoid large groups of students transitioning from class to class. Those schedules haven’t been released yet.DPS said there will be no assemblies, students will eat breakfast and lunch in their classrooms and will not be sharing supplies. Frequent hand washing and generous use of hand sanitizer will be encouraged if not mandatory. School facilities will be disinfected regularly.The Metro Denver Partnership for Health collaborated with several metro public health agencies to create reopening guidelines and strategies for schools. “Colorado children need to get back to school,” their report states and the partnership is “pleased to provide evidence-informed guidance to our regions’ school superintendents to support their efforts in reopening school safely.””We are both excited to welcome our students and educators back to our schools and committed to doing it safely,” Superintendent Susana Cordova wrote in her letter to parents. “We will strictly follow the health guidelines that were released.”DPS has been monitoring the disease, watching how other schools across the globe have coped with the coronavirus pandemic and weighed the effect school closings have had on parents and the community.Online schooling will still be available for those families who don’t feel comfortable sending their students back for in-person learning. While other states have continued to see spikes in COVID-19 infections, Colorado’s rate has remained steady. School and health officials will be closely watching what happens over the course of the summer and said plans and more details will be available in the coming weeks.

N.J. schools will reopen with masks, social distancing and sweeping new rules under just-released plan – New Jersey’s 2,500 public schools will open their doors for the 2020-2021 school year, but classes will be unlike anything students and teachers have ever experienced before, state officials announced Friday.Students will stay six feet apart in classrooms and on buses, lunch times will be staggered and teachers will be required to wear masks, according to sweeping new guidelines released by the state Department of Education.Students will also be “strongly encouraged” to wear face coverings all day and will be required to wear them when they can’t maintain social distancing at school. The new rules are part of a long-awaited “The Road Back: Restart and Recovery Plan for Education” report compiled by state education officials that willserve as a blueprint as schools prepare for the return of the state’s 1.4 million students while the coronavirus pandemic continues.State officials said they do not have a one-size-fits-all plan for reopening, so each of New Jersey’s 577 public school districts will have to weigh its options and come up with its own proposal that meets or exceeds the minimum guidelines. That could mean big changes to school schedules and start times.All districts will be required to have some form of in-person instruction, state officials said. So, keeping school buildings closed for district-wide remote learning is not an option. But schools can develop a “hybrid” model with both in-person and distance learning for students. Under the guidelines:

• –All teachers, school staff members and visitors will be required to wear masks unless they can’t for health reasons. Students must also wear masks when they can’t stay six feet apart and are encouraged, but not required, to keep their face coverings on throughout the school day.
• –Schools must “strive” for social distancing in the classroom and on school buses. If there is not enough room to keep students six feet apart, districts should consider physical barriers between desks and turning all desks all in the same direction. They should also consider installing barriers in buses.
• –Students can eat lunch in school cafeterias, but meal times must be staggered to allow for social distancing and disinfecting. Self-service and buffet-style food service will not be allowed.
• –Schools must set up a plan for screening students and staff for COVID-19 symptoms and work with the local health department and school nurses to use contact tracing to identify those who have come in contact with people who test positive. It will be up to districts if and how they want to test their entire staff for the coronavirus, state officials said.
• –Floors and sidewalks should have tape and signs to help guide how students should walk to maintain social distancing in common areas and hallways. Schools also need to step up their cleaning and disinfecting schedules. Bathrooms must be cleaned and sanitized “between use as much as possible.”

Some private schools getting more virus relief funding than public schools, under DeVos formula -The Trump administration on Thursday moved forward with a policy ordering public schools across the U.S. to share coronavirus relief funding with private schools at a higher rate than federal law typically requires. Under a new rule issued by Education Secretary Betsy DeVos, school districts are ordered to set aside a portion of their aid for private schools using a formula based on the total number of private school students in the district.The policy has been contested by public school officials who say the funding should be shared based on the number of low-income students at local private schools rather than their total enrollments. That’s how funding is shared with private schools under other federal rules that Congress referenced in the legislation creating the relief aid. But DeVos on Thursday said the funding is separate from other federal aid and was meant to support all students. The difference between the two formulas amounts to tens of millions of dollars. In Louisiana, for example, private schools are estimated to get at least 267% more under DeVos’ formula. In the state’s Orleans Parish, at least 77% of its relief allotment would end up going to private schools. DeVos previously vowed to pursue a federal rule on the issue after some states said they would ignore her guidance. Indiana’s education chief said the guidance was no more than a recommendation and decided to divide the funding “according to Congressional intent and a plain reading of the law.”

Oppose all public education budget cuts, layoffs and the unsafe reopening of schools! For a socialist program to fully fund and vastly expand public education! – By Joseph Kishore–Socialist Equality Party candidate for president – The assault on public education since the start of the COVID-19 pandemic has been unprecedented in scope and ferocity. As with every aspect of the pandemic, the full brunt of the crisis is being imposed on the working class, while trillions are squandered on Wall Street and the financial oligarchy. Massive austerity has already been implemented across the US, with an estimated 1.44 million educators laid off in March and April alone, including 779,000 K-12 public school educators. For the 2020-21 fiscal year, states face a public education funding shortfall of $230 billion. Cuts on this scale have never been seen before in the history of American education. The massive assault on public education is the direct corollary to the handout of trillions of dollars to Wall Street, supported by both the Democrats and the Republicans. Following the 2008-2009 financial collapse, the Obama administration bailed out the banks and escalated the attack on public education as part of an overall assault on the working class. Once again, on a far larger scale, the crisis sparked by the pandemic is being used to impose plans long in the making, including privatization, mass layoffs, and the destruction of arts and other programs. The Socialist Equality Party demands an immediate reversal of all budget cuts and layoffs of educators, and the redirection of the massive trillion-dollar bailout of Wall Street into public education, public health and the eradication of poverty. The resources exist to full fund public education and provide a safe learning environment, but they are monopolized by the financial oligarchy that controls the entire political system. Whether Biden or Trump is elected in November, the assault on public education will continue. The “choice” offered by the Democrats and Republicans in the election is between two reactionary representatives of the ruling elite. Indeed, both Democrats and Republicans are implementing historic cuts throughout the country. Ohio’s Republican Governor Mike DeWine demanded $465 million in education cuts for May and June. For the coming fiscal year, New York City’s Democratic Mayor Bill DeBlasio announced $827 million in cuts from the Department of Education. California’s Democratic governor Gavin Newsom has proposed a nearly unfathomable $8 billion in cuts to K-12 public education across the state.

Another COVID-19 victim: International education – Whether COVID-19 is the “last nail” in the coffin of globalization, as Carmen Reinhart, the incoming chief economist of the World Bank, recently remarked, remains to be seen. One thing is more certain: The United States’ prominence in international education is likely to be COVID-19’s latest fatality. That will be yet another heartbreaking loss we will all share if we don’t act quickly. For at least 50 years, the U.S. has been the leader in international education, welcoming first a trickle, then a stream, then a broad river of undergraduate and graduate students from all over the world. That river has dried up now. Visa offices in U.S. embassies abroad are closed, and entrance into the U.S. is barred for those entering from places as far-flung as Brazil and Belgium. Moreover, the parents and foreign governments who fund those foreign students may be reluctant to send them into the coronavirus-infested, “dangerous” United States. Meanwhile, students in Colombia, in India and in Ghana, to name only a few places, will look around and weigh their options. They will note that while they were working hard toward the goal of studying in the U.S., higher-level educational systems in their own country and neighboring countries were not standing still. New universities and new programs have sprung up like wildflowers and present viable alternatives for those aspiring students. And some of those “wildflowers” may turn out to be far more attractive than the more mature gardens of U.S. higher education even when COVID-19 is no longer a threat. Why does it matter? First, most of those students pay full tuition and have helped to defray rising costs at many U.S. colleges and universities. NAFSA, the association of international educators, has estimated a $3 billion loss in revenues for U.S. colleges and universities just from a lower enrollment of foreign students in fall 2020. Harder to estimate, but arguably more important, is the loss of one of our country’s major tools of soft diplomacy: international students. Whatever the political rhetoric coming from Washington, D.C., foreign students have been able to experience a different vision of the United States and its people than the one shown on their televisions back home. Many describe it as a transformational experience. The stereotype of the “pushy” or “ugly” American vanishes and is replaced by the smiling landlady, the kind professor, and the funny classmates. In short, the U.S. gains a friend for life: not a friend right or wrong, but nonetheless a friend.

Over 150 College Athletes Contracted Coronavirus After Being Pressured to Practice – More than 150 players at NCAA Division I revenue sports have tested positive for coronavirus, weeks after returning to their university campuses for voluntary workouts in early June. While not every program is disclosing positive test numbers, Clemson, Kansas State, the University of Texas, and the University of Iowa each report more than a dozen confirmed cases of coronavirus among the athletes who’ve come back to campus so far. Clemson is currently reporting the highest number, with 28 total confirmed cases, 23 of which are football players preparing for a still-scheduled 2020 season.How, or why, are schools being allowed to put players in a situation where so many of them are getting sick? Via a loophole: Division I schools are currently prohibited from resuming official practices, but athletic departments have started so-called “voluntary workouts,” or preseason strength and conditioning sessions that aren’t led by coaches. On paper, voluntary workouts are optional, but coaches and former college athletes say it’s not so black and white. Athletes are effectively being forced to put themselves at risk, and in one case even sign waivers that potentially indemnify the school if they get sick. This is all in spite of the fact that no one has figured out yet how college games will even happen this fall. Football games are currently scheduled to begin on August 29; Anthony Fauci recently said it’s up to league officials to decide whether that actually happens. It’s impossible to imagine that new cases will decline dramatically in two months. So for now, athletes are traveling back to campus to carry on practicing amid the pandemic on the chance that the NCAA and its member schools will ultimately choose their multi-billion dollar bottom line over the health of uncompensated college athletes.

‘They Just Dumped Him Like Trash’: Nursing Homes Evict Vulnerable Residents NYT – Nursing homes across the country are kicking out old and disabled residents and sending them to homeless shelters and rundown motels. On a chilly afternoon in April, Los Angeles police found an old, disoriented man crumpled on a Koreatown sidewalk. Several days earlier, RC Kendrick, an 88-year-old with dementia, was living at Lakeview Terrace, a nursing home with a history of regulatory problems. His family had placed him there to make sure he got round-the-clock care after his condition deteriorated and he began disappearing for days at a time. But on April 6, the nursing home deposited Mr. Kendrick at an unregulated boardinghouse – without bothering to inform his family. Less than 24 hours later, Mr. Kendrick was wandering the city alone. According to three Lakeview employees, Mr. Kendrick’s ouster came as the nursing home was telling staff members to try to clear out less-profitable residents to make room for a new class of customers who would generate more revenue: patients with Covid-19. More than any other institution in America, nursing homes have come to symbolize the deadly destruction of the coronavirus crisis. More than 51,000 residents and employees of nursing homes and long-term care facilities have died, representing more than 40 percent of the total death toll in the United States. But even as they have been ravaged, nursing homes have also been enlisted in the response to the outbreak. They are taking on coronavirus-stricken patients to ease the burden on overwhelmed hospitals – and, at times, to bolster their bottom lines. A Lakeview official said the company’s evictions were appropriate and weren’t an attempt to free space for Covid-19 patients. But similar scenes are playing out at nursing homes nationwide. They are kicking out old and disabled residents – among the people most susceptible to the coronavirus – and shunting them into homeless shelters, rundown motels and other unsafe facilities, according to 22 watchdogs in 16 states, as well as dozens of elder-care lawyers, social workers and former nursing home executives. Many of the evictions, known as involuntary discharges, appear to violate federal rules that require nursing homes to place residents in safe locations and to provide them with at least 30 days’ notice before

The Double Pandemic Of Social Isolation And COVID-19: Cross-Sector Policy Must Address Both – The struggle to balance literal survival with all the things that make surviving worthwhile has never been so clear, with the COVID-19 pandemic forcing many to sacrifice social connections – and therefore quality of life – for life itself. And yet, as I wrote in a recentHealth Affairs policy brief, Social Isolation and Health (released June 22, 2020), being socially connected in meaningful ways is actually key to human health and survival.The COVID-19 pandemic and the need to slow the virus’ spread have highlighted the pervasiveness of social contact within, and social relevance of, nearly every sector of our lives, including employment, education, entertainment, travel, transportation, and recreation. The pandemic has also highlighted the underlying weaknesses of our current social “support systems” for older adults, students, families, workers, and at-risk populations. As such, COVID-19 has underscored the necessity of strengthening local and federal systems to rebuild and sustain the social and emotional needs of the population – a task that will be critical to the nation’s public health recovery from the pandemic. In this post, I explain why concerns about social isolation are heightened during the pandemic; discuss why policy responses must consider the impact of reduced or changed social connection across all sectors; highlight possible unintended consequences of improved digital connection; and, emphasize the importance of prioritizing social needs in recovery efforts.

The unintended impact of COVID-19 on cancer – Over the last few months, many patients have been in fear of their cancer journey. This fear had nothing to do with receiving their diagnosis or walking into a screening because of a found lump or increased risk. The fear was caused by our country’s myopic focus on flatting the COVID-19 curve. While we may have successfully flattened the proverbial curve, we have created a potentially larger, more dangerous shadow curve in the world of cancer. In April 2020, the IQVIA Institute for Human Data Science published a report that shined a light on the unintended impact of our response to the treat of COVID-19. According to the report, it is estimated that the delay in 22 million cancer screening tests will result in an increased risk of delayed or missed diagnoses for 80,000 patients. While COVID-19 exposed some major vulnerabilities in our health care infrastructure, most notably, the system’s ability to continue to care for every high-risk chronic health care case – such as cancer and heart conditions – when other aspects of our health care system were overwhelmed by an unpredictable health care crisis. The long-term implications may be devastating, particularly if we do not recognize and address the looming Cancer Shadow Curve, a dramatic spike in undiagnosed and untreated cancer cases as a side-effect of the pandemic. So where are we after the health care system essentially placed cancer care on hold for three months? The U.S. has already witnessed a 37 percent drop in cancer care diagnosis compared to this same time period last year, and we have experienced massive drops in cancer screenings including mammography (87 percent drop), colonoscopy (90 percent drop) and Pap Smear (83 percent drop). Doctors find a lot of cancers during screenings – and much more incidentally as they meet with patients for non-cancer examinations. Typically, there are nearly 1.8 million cases of cancer diagnosed each year, but people who have skipped appointments over the last three months are not getting diagnosed. That is a major concern. If people wait until next year to get screened, their undiagnosed condition may worsen, even if cancer remains treatable. That can lead to dramatically worse consequences to their quality of life for years, particularly if, during that time, their cancer progresses from Stage 2 to State 3 or 4. From the “Shadow Curve” perspective it means the health care system will start to see an influx of very difficult to treat cancer cases all at once instead of doctors being able to address cancers during more treatable stages, giving them more opportunities to find the right solutions.

Coronavirus Pandemic Threatens to Derail Polio Eradication – but There’s a Silver Lining – The year 2020 was on track to be a good one for South Sudan’s polio hunters. But now many of those working in the global polio eradication campaign are grappling with the potential reversal of much of their work. All house-to-house immunization efforts have been suspended because of the continuing coronavirus pandemic. Disease surveillance officers can scarcely travel at all. Polio samples awaiting testing are trapped in South Sudan because there are no flights to transport them to external laboratories, and local experts are bracing for the worst. The worldwide polio eradication effort was suspended in late March, bringing campaigning to a near halt. More than 20 million doctors, technicians, and other medical and community practitioners have put much of their work on hold, leaving at least 13.5 million children unvaccinated or undervaccinated for polio so far, according to estimates by the public-private global health organization GAVI, the Vaccine Alliance. The WHO says that number could rise to at least 60 million by June in the eastern Mediterranean region alone (the area includes northern Africa, the Middle East and Central Asia). Yet even those figures mask the full extent of a disruption that could stifle polio eradication efforts for years, a dozen doctors, senior scientists and public health officials say. Millions of stored polio vaccine doses will lose their effectiveness if the pandemic prevents immunization for much longer, and some countries that are proceeding with limited vaccinations might run out before they can be resupplied. “If the lockdowns are in place for too long, then vaccines will just expire in many places,” says Thabani Maphosa, managing director of country programs at GAVI. “And we’re currently not able to get vaccines where we need to.” But in spite of these setbacks, the global polio program’s adaptability may actually have a silver lining for the current pandemic. Many countries have been quick to realize the usefulness of the polio network – the largest immunization program of its kind in the world – in fighting the pandemic. Much of the network has been redeployed accordingly.Polio contact tracers, who are accustomed to searching out telltale signs of the disease such as sudden leg weakness, are now pursuing reports of severe respiratory distress, fever and other symptoms of COVID-19.

A Common Snake Oil Reemerges for the Coronavirus To the silver salesmen, moms must have seemed like an ideal demographic. Last year, Candy Keane, a 44-year-old lifestyle blogger in Florida, heard about colloidal silver – silver particles suspended in liquid – from a mom’s group she’s part of. A company called My Doctor Suggests was sending out free samples of its products, including colloidal-silver solution, lozenges, lotion, and soap, to bloggers who might be willing to review the products online.Keane spoke with Doug Godkin, the vice president of My Doctor Suggests, who she says assured her that taking the silver was as harmless as taking a vitamin, and that the solution could help with all kinds of ailments. She remembers him saying it would be safe to drink up to a bottle a day.Keane thought the silver might clear up some white splotches that had spread across her skin. She tried all the products and sipped the metallic-tasting “silver solution” daily. While they didn’t seem to do much, they didn’t make anything worse, either. She wrote up her results, such as they were, in a blog post. When she later read an (erroneous) online claim that silver can kill the coronavirus as it enters the mouth, she let her 5-year-old son eat the rest of the lozenges – he liked their sweet taste. Before I called her, Keane hadn’t realized that in April, a federal court in Utah shut down My Doctor Suggests for allegedly fraudulently promoting their colloidal-silver products as a treatment for COVID-19. Godkin and My Doctor Suggests’s founder, a self-proclaimed naturopathic doctor named Gordon Pedersen, released videos and podcasts in which they suggested that colloidal silver could protect against the coronavirus because “the silver can isolate and eliminate that virus.” Pedersen has no medical license, and he has been cited in the past for the unauthorized practice of medicine. Pedersen’s efforts may have been halted, but he’s far from the only one selling this substance. The state of Missouri recently filed suit against the televangelist Jim Bakkerfor promoting a “Silver Solution” for the coronavirus on his show. And last month, the U.S. Food and Drug Administration went to court to stop an Oklahoma company called N-Ergetics from allegedly touting colloidal silver as a cure for everything from the coronavirus to yeast infections.

Hump!, the online porn fest that wouldn’t have happened without quarantine -However cooped up you may feel after months of bingeing films and TV series in quarantine, it’s not entirely likely that you’d look at this article’s headline and say, “Yes, I need to kick my viewing habits up a notch with a curated selection of homemade porn.” The people behindHump!, the United States’ best-known amateur-pornography festival, certainly didn’t want things this way, either.”One thing about Hump! is, if you couldn’t get to a theater, you weren’t going to see it,” series curator and sex columnist Dan Savage tells me over the phone from his Seattle home. “Ever since the first Hump!, people have asked, ‘Are you going to sell DVDs?’ Which turned into, ‘Can you watch it online?’ But you can’t. There are no DVDs, and you can’t see it online.”Hump! was always supposed to be offline. But just like pretty much everything else this year, Savage’s creation had to concede to the realities of coronavirus. And after launching a test run earlier in 2020, Hump! Greatest Hits, Volume 1 is following as a streamed-video exclusive (not VOD) over the next three weekends. And while the festival was never designed for online distribution, the silver lining is a very weird, and surprisingly eye-opening, perspective on what porn on the Internet can look like in 2020. The festival began life as a Seattle-only experiment, produced by The Stranger, a weekly newspaper where Savage once served as editor in chief. (He continues writing for the paper’s print and online editions, primarily in the form of his nationally syndicated Savage Love column, which also has a popular podcast.) The Stranger had already begun promoting local arts and music events, and Savage thought an old-school, all-local porn fest, screened only in theaters, would be a gas. It had a slogan: “Be a porn star for a weekend in a movie theater, without becoming a porn star for an eternity on the Internet.”

China dog meat festival goes ahead but virus takes a toll – (AFP) – Volunteers at a Beijing dog shelter hand out treats to dozens of rescued animals which had been bound for a controversial dog meat festival under way this week in southern China. The annual event in Yulin city always provokes outrage from animal rights activists, but this year they hope the coronavirus epidemic will be the death knell of a tradition they see as cruel. It is “inhumane and barbaric”, said Jeffrey Beri, founder of the No Dogs Left Behind organisation, which keeps around 200 canines in large wire enclosures on the outskirts of the Chinese capital and re-homes them. Activists save hundreds of dogs every year by raiding slaughterhouses and intercepting trucks. They say traders steal pets and strays and transport them long distances, mostly to the country’s south. “You feel a kind of achievement because you’ve changed some dog’s life,” said Ling, who volunteers at the centre. Dog meat is traditionally believed to be good for the health in certain parts of China, but the habit has been in steady decline as more and more affluent urban dwellers choose to keep the animals as pets. The COVID-19 outbreak appears to have further reduced the appetite for dog meat after the disease was linked to a market in the central city of Wuhan selling live animals for food. Amid growing concerns about hygiene, China fast-tracked laws banning the consumption and trade of wildlife. While the law does not apply to dog meat, Shenzhen and Zhuhai — southern cities not far from Yulin — banned the consumption of dogs in April, becoming the first cities in China to do so. And last month the agriculture ministry reclassified dogs as companion animals, not livestock, though it did not explicitly prohibit eating them.

Kenya: 3 people killed in clash with police over face masks – A witness says three people were killed in a small town in Kenya’s Rift Valley during a confrontation between police and residents over the wearing of face masks to prevent the spread of the coronavirus. Police confirmed the deaths but gave a different account. Human rights activists for weeks have protested alleged killings by Kenyan police officers while enforcing virus-related restrictions. They also accuse officers of using the measures to extort bribes. Kenneth Kaunda told The Associated Press that violent protests erupted in Lessos on Thursday after residents tried to prevent police officers from taking a motorcycle taxi rider to the station for not wearing a mask. Kenya has made it compulsory to wear face masks in public and failure to comply brings a $200 fine, a hefty fee for many. Kaunda says residents were tired of police shaking down people for not wearing masks. He asserted that a policeman who had arrested the driver opened fire at the angry crowd, killing a local cobbler. “He shot at least five times into the crowd,” said Kaunda, a stone mason. Angered by the cobbler’s death, residents set fire to the house of the local police chief and attacked a police station with stones. In the chaos two other people were shot dead, Kaunda said. Police said something else sparked the incident.

Global Markets Face Reckoning With Risks Coming True All at Once – Markets may be headed for a wake-up call as scenarios that investors brushed aside to fuel a global rally move closer to reality. These include seeing the rate of Covid-19 infections pick up in nations that have eased lockdowns, growing tension between the U.S. and China and corporate finances faltering. The number of defaults in China’s dollar bond market is climbing and second-quarter earnings are just around the corner. “I would add the growing realization that the official stimulus pipeline that has been feeding the risk rally is drying up,” said Valentin Marinov, head of Group-of-10, foreign-currency strategy at Credit Agricole. “It’s a matter of critical mass of bad news that could tip the rally over and investors turn defensive again.” The brief but sudden drop in stocks in Asian trading on Tuesday after White House adviser Peter Navarro sowed confusion over the U.S.-China trade deal is evidence that, despite the trillions of dollars in stimulus being pumped into global markets, risk sentiment may be fragile. Rabobank’s Michael Every described the jolt as a “a taste of things to come.” “It’s concerning how few tail risks are priced stemming from a second wave, the U.S. presidential election and a hard Brexit,” said Jordan Rochester, a Group-of-10 currency strategist at Nomura International Plc in London. Before Tuesday’s knee-jerk reaction in markets, stock and currency volatility had fallen to levels last seen before the virus, and the Japanese yen — a globally recognized haven — dropped below its five-year average, having underperformed almost all its Group-of-10 peers this quarter. The gap between the Stoxx Europe 600 index and profit forecasts for its members is near the widest on record. Markets are on tenterhooks for second-quarter results, which will indicate how badly lockdowns have hurt companies. And bears have been retreating from the British pound, even as the prospect of a no-deal Brexit looms.

How the Coronavirus Will Reshape World Trade – WSJ -When the global economy finally gets beyond the pandemic, expect it to be less globalized than before.Governments, including many longtime advocates of global trade, are using the crisis to erect barriers to commerce and bring manufacturing home. Japan now pays companies to relocate factories from China. French President Emmanuel Macron pledges “full independence” in crucial medical supplies by year-end. In Washington, Republicans and Democrats alike back new “Buy American” requirements for government health spending.From semiconductor makers to surgical-gown producers, companies are reassessing far-flung, multinational production networks that have proven vulnerable to disruption.”What the pandemic has done is highlight some of the ways that globalization may have gone a bit too far,” said Peter Anderson, vice president of supply chain and manufacturing for Indiana-based engine maker Cummins Inc., which has 125 factories in 27 countries. A decade of disease, natural disasters and trade wars has shown how companies have been “putting a huge amount of risk in global supply chains,” he said.Those disruptions, he said, are prompting Cummins to accelerate plans to make its production systems less global and to concentrate manufacturing closer to where the final goods get sold.In the post-pandemic world, more economic activity will be designated vital to national security, and thus deemed to require self-sufficiency. If governments wall off segments of their economies, costs could rise and growth could slow. Richer economies may grow more slowly while newly industrializing one – winners in recent years – may fall back. The World Bank this month warned of lasting harm to low-income countries from “prolonged damage to global supply chains, global trade and financial flows, and global collaboration.””Global capitalism will have to be rebalanced,” said Pascal Lamy, former director-general of the World Trade Organization and now European chairman of consulting firm Brunswick Group. “That pre-Covid balance between efficiency and resilience will have to tilt to the side of resilience.”Not all the pandemic responses have been inward-looking. A coalition of smaller nations, led by Singapore and New Zealand, is promoting a tariff-cutting pact to expand trade in medical products, saying that international cooperation is the most efficient way to boost scarce health supplies. A videoconferencing boom is accelerating a move toward online work and remote services, such as telemedicine, that could globalize sectors that have long been primarily domestic.By forcing a sudden expansion of online work, the pandemic has severed more jobs from physical locations. “It’s not as simple as saying globalization is over,” said Susan Lund, a partner at the McKinsey Global Institute. “Globalization will be reshaped.”

WTO Says ‘Historic’ World Trade Plunge Could Have Been Worse, Cushioned By Government Response — The World Trade Organization (WTO) outlines, in a new report, that “rapid government responses helped temper the contraction” in the world trade and likely thwarted the worst-case scenario projected in April.WTO is referring to massive fiscal stimulus deployed by governments, and the balance sheet of the G-6 central banks that has exploded, with the Fed’s total asset expected to double in 2020 amid an avalanche of money printing that has helped arrest the collapse in world trade. The Geneva-based organization said the volume of merchandise trade contracted 3% YoY in the first quarter and plunged 18.5% in the second. WTO’s previous outlook in April set out two growth models: an optimistic scenario in which world trade in 2020 would contract by 13%, and a pessimistic scenario in which trade would drop by 32%. As things currently stand, the report said, “trade would only need to grow by 2.5% per quarter for the remainder of the year to meet the optimistic projection. However, looking ahead to 2021, adverse developments, including a second wave of COVID‑19 outbreaks, weaker than expected economic growth, or widespread recourse to trade restrictions, could see trade expansion fall short of earlier projections.” “The fall in trade we are now seeing is historically large – in fact, it would be the steepest on record. But there is an important silver lining here: it could have been much worse,” said Director‑General Roberto Azevedo. “Policy decisions have been critical in softening the ongoing blow to output and trade, and they will continue to play an important role in determining the pace of economic recovery. For output and trade to rebound strongly in 2021, fiscal, monetary, and trade policies will all need to keep pulling in the same direction,” said Azevedo.

IMF Downgrades Already-Glum Economic Outlook Due to Coronavirus Crisis – WSJ — Economists at the International Monetary Fund now say the global economy will contract even more sharply than they expected in estimates released in April, which called for the steepest recession since the Great Depression.The IMF said on Wednesday the global economy will shrink 4.9% this year, compared with its April estimate of 3%. The international lending institution downgraded its 2020 forecast for all major economies, citing economic data that was even grimmer than expected in April.Most countries are beginning to emerge from the lockdowns imposed around much of the world beginning in March to stem the spread of the novel coronavirus, and in many cases there areencouraging signs that large numbers of workers are returning to work and economic activity is stabilizing or even picking up.But in sum, the world has made less progress than expected in April in terms of combating the pandemic and salvaging businesses, and so the forecasts have deteriorated.”The steep decline in activity comes with a catastrophic hit to the global labor market,” the IMF said in an update to its flagship World Economic Outlook report that analyzes the economic health of the IMF’s 189 member countries. The IMF said global employment loss in the second quarter of 2020 could be equivalent to losing 300 million full-time jobs.

IMF Projects Deeper Global Recession on Growing Virus Threat – The International Monetary Fund downgraded its outlook for the coronavirus-ravaged world economy, projecting a significantly deeper recession and slower recovery than it anticipated just two months ago. The fund said Wednesday it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, the fund sees growth of 5.4%, down from 5.8%.Having already warned of the biggest slump since the Great Depression, the IMF said its increased pessimism reflected scarring from a larger-than-anticipated supply shock during the earlier lockdown, in addition to the continued hit to demand from social distancing and other safety measures. For nations struggling to control the virus spread, a longer lockdown also will take a toll on growth, the IMF said.IMF chief economist Gita Gopinath said that the cumulative loss for the world economy this year and next as a result of the recession is expected to reach $12.5 trillion.”A high degree of uncertainty surrounds this forecast with both upside and downside risks,” Gopinath said in a virtual press conference for the update to the World Economic Outlook. “On the upside, better news on vaccines and treatments and further policy support could trigger a faster recovery. On the downside, further waves of infections can reverse increased mobility in spending and rapidly tighten financial conditions, triggering debt distress.” The current downturn compares with a loss of about 10% of global economic output in the 1930s, Gopinath said.The IMF warned that while financial conditions have been a bright spot, easing in advanced economies and to a lesser extent in emerging markets, the rebound “appears disconnected from shifts in underlying economic prospects” that leave it at risk for reversal.Announced fiscal measures amounting to about $11 trillion globally, up from $8 trillion estimated in April, have helped cushion the blow to workers and businesses. But emergency spending by governments is set to push the global debt ratio above 100% for the first time, the IMF said. The jump in the burden this year alone is forecast to be close to 19 percentage points, dwarfing the increase in 2009 during the global financial crisis.

Massive Credit Losses to Hit European Banks in Q2 and into 2021, Particularly When Debt Moratoriums Are Lifted – The second quarter results of most large Western European banks will reveal further increases in expected credit losses as the economic outlook has “weakened substantially since the publication of 1Q20 results”, Fitch Ratings warns in its latest “Large European Banks Quarterly Credit Tracker.” This will put substantial pressure on the sector’s operating profitability. European banks already had a profitability problem before this crisis began. The last time that average return on equity (ROE) in the sector reached the 10% threshold, which is broadly considered a healthy minimum, was in 2007, when the shares of European banks were at the highest level they have ever been. Since then, the average ROE of European banks has not come even close to regaining that level. in the first quarter, Covid hit, forcing many banks to provision for expected credit losses (ECL), with the result that sector-wide ROE slumped to 4%. Many large banks reported sharp drops in profits. Five big banks – HSBC, Deutsche Bank, Unicredit, BBVA and Societe Generale – posted net losses. In the second quarter, more banks could take a hit if so-called “loan-impairment charges” (LICs) – an amount that a bank sets aside in case its customers cannot make the required loan repayments – rise sharply, Fitch warns. At the 20 banks in Fitch’s analysis, LICs almost tripled year on year in the first quarter, to around euro 24 billion, eating up more than 55% of pre-impairment operating profit (compared with less than 20% in 2019). Fitch estimates that approximately half of the LICs “resulted from expected credit losses amid weaker macro-economic forecasts and management overlays on specific riskier loan portfolios, including the most vulnerable corporate sectors and unsecured consumer finance” [such as credit cards]. Bad loans are still a problem in many parts of Southern Europe, including Italy, Portugal, Greece and Cyprus, a long-lingering legacy of the last crisis. Warnings are also being issued about a sudden surge of non-performing loans (NPLs) in Eastern Europe. The “Vienna” Initiative, a European bank coordination framework set up in the wake of the last crisis with a view to safeguarding the financial stability of emerging economies in Central and Eastern Europe, warnedthis week that banks in the region will soon be hit by a wave of bad loans that may last beyond 2021. The Vienna initiative is anticipating three waves of bad loans: a first wave in the fourth quarter of this year as anti-Covid stimulus measures expire and struggling borrowers begin defaulting; a second, slower and more spread-out wave that may follow in the first half of 2021; and a third wave, resulting from the contagion effects of failures in different parts of the economy and supply chains, that is likely to appear towards the end of 2021.

PMIs: perpetually misleading indicators? – Here’s some reaction to this morning’s European flash purchasing managers’ indices (PMIs). From Capital Economics:The rise in the eurozone flash Composite PMI in June confirms that economic output in the region is recovering rapidly from April’s nadir as restrictions are progressively eased.And ING-DiBa: Today’s PMI numbers provide further evidence of what initially looks like a textbook V-shaped recovery. As much as more than a month of (full) lockdowns had sent economies into a standstill, the gradual reopenings of the last two months have led to a sharp rebound in activity.Everything back to normal then? Not quite. The actual reading for the eurozone was 47.5. Even though that was way above the 31.9 figure for May, it means the headline PMI remained below the “magic” 50 level that is supposed to separate an expansion from a contraction for the third month in a row. A further contraction on top of what happened in April and in May is hardly what you’d imagine for June, given that lockdown measures have continued to ease substantially across much of the continent. In fact, we’d go as far as to say there is absolutely no way that official data will show that output fell between April and May, and May and June (something that Chris Williamson, chief business economist at IHS Markit, which constructs the PMIs, has acknowledged too). So does the PMI need renaming as the Perpetually Misleading Indicator? There certainly does appear to be a problem here. The main question IHS Markit poses to purchasing managers is whether or not activity improved this month compared with the previous month. The fact that, on average, purchasing managers across Europe believe conditions in April were not the nadir and that matters became even worse in May and June seems very odd to us indeed. There are some compelling reasons why the headline PMI readings aren’t rising above the 50 level despite common sense suggesting output must have increased as lockdowns eased. That we are experiencing a demand and supply shock could be distorting the headline reading due to the way in which the subindices, which measure everything from job losses to delivery times, feed into the main number. The main distortion comes from the fact that delivery times tend to move in the opposite direction to the headline reading – the reason being that in normal times slower deliveries reflect high demand and not border closures (more on that here).The problem is that leaving people to weed out the nuance and place whatever weight they feel like on the various sub-readings leads to myriad interpretations of the data.

All schools in England to open in September – UK Education Minister Gavin Williamson announced on Friday that all pupils in all year groups in England will go back to school in September. He said the government was “signed up to bring every child back, in every year group, in every school.” The announcement follows the government’s climbdown only 10 days earlier over the reopening of primary and nursery schools to all children. This was met with huge resistance by parents, who rightly feared risks to their children being exposed to COVID-19. On average, primary schools have 28 children per class, whilst secondary schools have 22. There will be no social distancing in cramped and often dilapidated buildings. Children will be forced to share resources and play together. The document from the NI Education restart programme calls for classes to stay in one classroom and the teachers to move between, with food being delivered to the classroom. Classrooms could be located in large halls and canteens to ensure social distancing. Students will also have staggered breaks. It also states that students will only need to be one metre apart in classrooms. Prime Minister Boris Johnson announced Tuesday that the two-metre social-distancing rule was to be ended and for people to stand one metre apart instead. But any social distancing is impossible in a classroom environment. To push its plans through, the government has repeated its fraudulent claims that it is acting in the interests of “disadvantaged children,” who will fall behind in their education. This claim is refuted by the fact that there were already 3.2 million children living in poverty – 9 in every classroom of 30 – before the pandemic. It was only last week that Johnson was forced to do a U-turn on providing free schools meals for 1.3 million children during the summer holidays. This campaign was not led by a Labour politician or trade union leader but by footballer Marcus Rashford, who forced the government to place the interests of hungry children on the parliamentary agenda.

UK students in precarious situation during the pandemic The coronavirus pandemic has had a devastating impact on UK students. As the WSWS reported, many have been charged rent for vacated student accommodation and threatened with eviction. In addition, many students and often their parents have lost jobs or been furloughed, depriving them of income and making it extremely hard to pay for their accommodation or daily necessities. Adding to students’ stress, they have also had to make do with online learning in the final term of this academic year. Due to the lockdown, lessons have been abruptly cut and replaced with hastily put together online alternatives. Online learning is notoriously unreliable, depending on the teachers’ familiarity with online tools as well as the suitability of the subject to being taught on the internet. Of course, to be able do that in the first place, students must have both a laptop and a decent internet connection to be able to attend the lesson, which is not guaranteed. This leaves students in a situation where they are not only paying exorbitant sums in tuition fees (Pound Sterling9,250 a year for domestic students and up to Pound Sterling26,000 a year for non-UK/European Union students, or up to Pound Sterling56,800 for some medical degrees), but they are not receiving anything in return! An online petition demanding the reimbursement of all this years’ fee due to the pandemic has gathered 345,731 signatures as of the time of writing. Another one, that only asks for refunds for the third semester, has 109,282 signatures. The petitions raise the fact that online lessons are inferior, usually consisting of simple PowerPoints and lacking any interaction with staff. Students justifiably disagree with paying for low-quality learning materials and for campus facilities they have no access to. The petition collected enough signatures to be brought before the House of Commons Petitions Committee. The Committee now has until September 23 to decide whether to bring the petition to a debate in the House of Commons. Two hearings have taken place so far. During the first hearing, with student representatives, the committee was told that students were feeling “angry and let down” and had not got what they paid for. The government’s response has been predictably dismissive, with a one sentence reply instructing students that are unhappy with the quality of their courses to complain to the Office of the Independent Adjudicator for Higher Education (OIA) individually. At the second hearing, when the Petitions Committee pressed for a more detailed response, the Universities Minister Michelle Donelan made clear it expects all higher education providers to enable students to complete their studies and “avoid charging students for any additional terms”, but made only a passing reference to the quality of the provided studies. It merely encouraged “universities and private hall providers to be fair in their decisions about rent charges for this period.” Students have reacted angrily, calling it “insulting” that they will be charged full fees for online courses. Jake, a student from Leeds university told the BBC, “There has clearly been no consideration of students with this decision. I pay tuition fees to go to my university in person, to be taught at my university in person, to access the facilities of the university – libraries, societies, sports facilities – in person.” Other students are making their opinions known on social media. The BBC quotes Livi, posting on Twitter: “So by September I’ll have lost almost Pound Sterling3,000 to rent a house I’m not even living in, and tuition fees will still be max even if it’s online – something about this seems unfair.”

Walkout by sorting office workers at Barnsley Royal Mail after coronavirus outbreak – Royal Mail workers at the central post sorting office in Barnsley, South Yorkshire walked out yesterday after colleagues tested positive for coronavirus. Dozens of workers remained outside the building on Pitt Street for several hours while a clean took place. Managers told them not to speak to the press. Many nonetheless told local reporters that they had booked personal coronavirus tests and expected to stay away from work until receiving their results. Some criticised the fact that the use of face masks had not been made mandatory. Following discussions, new working arrangements were agreed between Communication Workers Union (CWU) representatives and local management. A company spokesperson gave the standard lie: “Royal Mail takes the health and safety of its colleagues, its customers and the local communities in which we operate very seriously. “Following positive testing for coronavirus at the Barnsley delivery office, we have carried out a full, enhanced clean of the building.” “We are working to keep disruption to mail deliveries to a minimum as we address the concerns of our colleagues.” In fact, keeping disruption “to a minimum”, to ensure a continued flow of profits to their shareholders, is Royal Mail’s only concern.

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