Written by rjs, MarketWatch 666
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 the prospects for an infrastructure bill, stimulus checks, government funding, the Fed, the latest employment data, housing market reports, mortgage delinquencies & forbearance, travel, layoffs, lockdowns, and schools, as well as GDP. The bulk of the news is from the U.S., with a few more articles from overseas at the end. (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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I left most of the infrastructure articles I have in the report this week – don’t know how much really relates to the pandemic. Also, looking for news on new lockdowns, but have found none yet. However, we’re starting to see the first round of travel restrictions with the global Covid surge.
The news:
Fed’s reverse repo program sees demand soar to just under $1 trillion overnight – Overnight demand for the Federal Reserve’s reverse repo program surged to a record $991.9 billion on Wednesday, the last day of the year’s first half.A total of 90 counterparties, which can include banks, U.S. housing giants Fannie Mae FNMA, and Freddie Mac, and money-market funds, tapped the increasingly popular Fed program, which essentially serves as short-term parking for hordes of cash. Since mid-June, the program began paying users a modest 5 basis points, or 0.05%, in interest. Before that they were paid zero interest to hold risk-free assets, like Treasurys and agency mortgage-backed securities MBB,, overnight.The facility had been met with growing demand since April, as firms look for ways to temporarily invest cash on hand as trillions worth of fiscal and monetary stimulus slosh through the economy.Earlier in June, demand for the facility hit $755.8 billion but continued to climb toward the $1 trillion mark anticipated by several analysts watching the sector closely.”Essentially, the Fed is keen to reduce cash balances in the banking system to avoid any overnight rate from going negative,” wrote Gordon Shannon, a portfolio manager at TwentyFour Asset Management, in emailed commentary this week. “The repo operations soak up some of the excess liquidity currently overwhelming US money market funds, which have been flooded with cash this year sending their total holdings above $4trln.”
Fed’s Bullard warns inflation could be higher than expected in 2022 – A recent burst of inflation could prove more long-lasting than expected as the surging U.S. economy faces widespread bottlenecks that have severely disrupted the global supply chain, a Federal Reserve official said on Thursday. St. Louis Fed President James Bullard predicted that prices for most goods and services will continue to climb in 2021 and 2022 after companies were thrown off by the speed of the economic recovery from the pandemic and the wave of pent-up demand among consumers who are flush with cash. “Those things I don’t think are as easy to fix as some people think,” Bullard said during an interview with FOX Business’ Maria Bartiromo. “We’re going to see continuing price pressure well into 2022.” Bullard’s comments come as policymakers at the U.S. central bank grapple with how to handle conflicting economic data: While inflation is on the rise – in May, the government reported that consumer prices for goods and services rose 5% in May from a year prior, the fastest year-over-year jump since 2008 – job growth has been mostly lackluster. There are still some 9.3 million Americans out of work. During their two-day, policy-setting meeting in June, Fed officials unanimously voted to hold interest rates near zero, where they have sat since March 2020, and committed to keep purchasing $120 billion in bonds each month. But updated economic projections released by the Fed showed that officials expect to raise rates twice, to about 0.6%, by late 2023, in part due to heightened expectations for inflation. “The risk here for us policymakers is that there’s still upside risk to inflation,” Bullard said. “Even though we’re going to have higher inflation this year, it could even be higher than we anticipated, and it could be higher than we anticipated next year. We have to be ready for that situation.” The Fed gave no signs in June that it was imminently considering scaling back its aggressive bond-buying program, even though policymakers raised headline inflation expectations to 3.4% for 2021 – a full point higher than the March forecast. But Bullard suggested on Thursday that it was time for officials to “get moving” on the tapering discussion.
IMF lifts US growth outlook for this year to 7%, says Fed may need to hike rates earlier than it expects – The International Monetary Fund has lifted its outlook for US economic growth to 7% for this year, and believes the Federal Reserve will raise interest rates by the end of 2022, as recovery takes root. The IMF had previously anticipated an annual growth rate of 4.6% for this year. Should the US economy indeed by 7% in 2021 – as both the Fed and now the IMF expect – this would be the fastest expansion since 1984. Kristalina Georgieva, the IMF managing director, said the improved outlook was based on the American Jobs and Families plans being implemented in line with the outlines presented by the Biden administration, as they appear likely to improve living and income standards in the long term. “We believe that these two packages will add to near-term demand, raising GDP by a cumulative 51/4 percent over 2022-24. And-perhaps more importantly-our assessment is that GDP will be 1 percent higher even after 10 years, thanks to the significant, positive effects on labor force participation and productivity introduced by these two plans.” she said in a report released on Thursday.Biden’s infrastructure plan was also referenced in the IMF’s assessment. The bipartisan program allocates $1.2 trillion over the next five years to improving things such as roads, broadband access and education. The IMF also said it expected US interest rates to rise more quickly than the Fed currently anticipates. “Presuming staff’s baseline outlook and fiscal policy assumptions are realized, policy rates would likely need to start rising in late-2022 or early-2023,” the IMF said. At its mid-June meeting, the Fed said it expected to raise interest rates by 2023. Several individual policymakers have however since said they expect monetary policy to tighten sooner than this. The Fed’s more hawkish outlook initially fueled some concern among investors, particularly relating to the implications for the central bank’s highly accommodative monetary policy stance. Stocks wavered for a few weeks, but have since recovered and hit successive record highs in the last week. Government bond yields have fallen to around six-month lows, highlighting that investors trust the Fed’s ability to target inflation without derailing the economy. Both the IMF and the Fed expect inflation to be transitory and short-term, rather than weigh on markets for a prolonged period of time.
Business Cycle Indicators as of June 27 – Menzie Chinn – Personal income and consumption for May were released last week, as well as the April manufacturing and trade industry sales figure. Figure 1: Nonfarm payroll employment from May release (dark blue), Bloomberg consensus as of 6/27 for June nonfarm payroll employment (light blue +), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (6/1/2021 release), NBER, and author’s calculations.As suggested by retail sales ex. food (discussed in this post), manufacturing and trade industry sales pulled back, as did consumption, albeit in both cases moderately. Here’s an updated version of the graph from that post. Figure 2: Retail sales excluding food services in 1982-84$ (teal), manufacturing and trade sales in 2012$ (black), and consumption in 2012$ (red), all in logs, 2020M02=0. Retail sales ex-food deflated using CPI-all. Source: Census, BEA, BLS, St. Louis Fed via FRED, and author’s calculations.The consensus (Bloomberg) is for continued increase in nonfarm payroll employment in the June release (July 2nd), at 675,000. Assuming no revision to the May level, employment will still be 4.7% below peak levels (in log terms).Nowcasts for Q2: Atlanta GDPNow at 8.3% (6/25), NY Fed at 3.4% (6/25), and IHS-Markit at 8.1% (6/25).
Seven High Frequency Indicators for the Economy – These indicators are mostly for travel and entertainment. The TSA is providing daily travel numbers. This data shows the seven day average of daily total traveler throughput from the TSA for 2019 (Light Blue), 2020 (Blue) and 2021 (Red). The dashed line is the percent of 2019 for the seven day average. This data is as of June 27th. The seven day average is down 23.7% from the same day in 2019 (76.3% of 2019). (Dashed line) The second graph shows the 7 day average of the year-over-year change in diners as tabulated by OpenTable for the US and several selected cities. This data is updated through June 26, 2021. This data is “a sample of restaurants on the OpenTable network across all channels: online reservations, phone reservations, and walk-ins. Note that this data is for “only the restaurants that have chosen to reopen in a given market”. Since some restaurants have not reopened, the actual year-over-year decline is worse than shown. Dining picked up during the holidays, then slumped with the huge winter surge in cases. Dining is picking up again, and was up slightly in US (7-day average compared to 2019). Florida and Texas are above 2019 levels. This data shows domestic box office for each week and the median for the years 2016 through 2019 (dashed light blue). The data is from BoxOfficeMojo through June 24th. Movie ticket sales were at $70 million last week, down about 79% from the median for the week. This graph shows the seasonal pattern for the hotel occupancy rate using the four week average. Occupancy is now above the horrible 2009 levels and weekend occupancy (leisure) has been solid. This data is through June 19th. Hotel occupancy is currently down 10% compared to same week in 2019). Note: Occupancy was up year-over-year, since occupancy declined sharply at the onset of the pandemic. However, the 4-week average occupancy is still down from normal levels. This graph, based on weekly data from the U.S. Energy Information Administration (EIA), shows gasoline supplied compared to the same week of 2019. As of June 18th, gasoline supplied was down slightly compared to the same week in 2019 (about 99.7% of the same week in 2019). Four weeks ago was the only week this year when gasoline supplied was up compared to the same week in 2019. This graph is from Apple mobility. From Apple: “This data is generated by counting the number of requests made to Apple Maps for directions in select countries/regions, sub-regions, and cities.” There is also some great data on mobility from the Dallas Fed Mobility and Engagement Index. This data is through June 26th for the United States and several selected cities. According to the Apple data directions requests, public transit in the 7 day average for the US is at 96% of the January 2020 level and moving up. Here is some interesting data on New York subway usage. This graph is from Todd W Schneider. This is weekly data since 2015. Schneider has graphs for each borough, and links to all the data sources. He notes: “Data updates weekly from the MTA’s public turnstile data, usually on Saturday mornings”.
GDP Forecasts from CBO and IMF – Menzie Chinn – CBO released an Update to its Budget and Economic Outlook, while the IMF released a mission concluding statement for its Article IV review of the United States. Here are the implied GDP levels for year-end 2021. Figure 1: GDP as reported (black), Atlanta Fed nowcast (thin black line to 2021Q2), Administration (red square), Survey of Professional Forecasters (blue triangle), FT-IGM (pink circle), CBO as projected in June (orange *), IMF Article IV (green inverted triangle), and potential GDP as estimated by CBO in February 2021 (gray line). NBER recession dates assuming trough at 2020Q2. Dates indicated denote when the forecasts were “locked down”. Source: BEA, Atlanta Fed as of 6/25, OMB FY’22 Budget, Philadelphia Fed SPF (May), and FT-IGM survey (June), CBO (February, July), IMF (July), and author’s calculations. The IMF forecasts 8% q/q growth, while CBO projects 7.4% (compare to 3.7% in February). Using the CBO’s February estimate of potential GDP and the CBO’s July projection, the output gap at year’s end will be about 2%; using the IMF’s estimate of output, it’ll be about 2.6%. There is no reason why either the CBO’s or IMF’s estimates of potential as of today will be the same as what CBO estimated in February. In fact, the CBO notes: As the pandemic eases and demand for consumer services surges, real (inflation-adjusted) GDP is projected to increase by 7.4 percent and surpass its potential (maximum sustainable) level by the end of 2021. That statement seems to indicate that its current estimate of potential GDP is considerably higher than what it indicated in the February report. That would be consistent with assessments that the extent of scarring in the business sector has been less profound than previously feared.
The Fed: Why Federal Spending Soared In 2020 But State And Local Spending Flatlined –In the wake of the Covid Recession and the drive to pour ever larger amounts of “stimulus” into the US economy, the Federal Government in 2020 spent more than double – as a percentage of all government spending – of what all state and local governments spent in 2020, combined.By the end of 2020, the US’s federal government was spending 68 percent of all government spending in America, while state and local governments spent only 31 percent of all government spending.More specifically, federal expenditures reached 6.8 trillion for the year while state and local spending reached “only” 2.9 trillion.This was a sizable change from the decade leading up to 2020 when the federal government’s share of all government spending tended to hover around 60 percent, while state and local spending remained close to 40 percent.The sudden spike to 68 percent pushed the federal share up to the highest it’s been since the 1960s and the Vietnam War.Moreover, from 2019 to 2020, growth in state and local spending nearly flatlined, dropping to 0.38 percent growth over the previous year. That’s the lowest growth rate in state and local spending since 2011 in the wake of the 2008 financial crisis. Yet, at the same time, federal spending increased by 25 percent. This was the largest year-over-year increase in federal spending since the Korean War.Yet, these numbers actually understate the extent to which federal spending dominates all government spending in America. This is because a lot of state and local spending is really federal spending, thanks to federal grants.As noted by the Center on Budget and Policy Priorities in 2018,Federal grants to state and local governments help finance critical programs and services across the country. These grants provide roughly 31 percent of state budgets and 23 percent of state and local budgets combined, according to the most recent data.The share of state spending composed of federal grants varies from state to state with the largest share at 41.9 percent in Michigan, and the smallest in Hawaii at 17.5. Of course, this percentage is driven both by total state spending and by the total amount of federal grants. States that tax a lot and spend a lot in general (e.g., Hawaii, Massachusetts) tend to have a small share of federal spending within their state budgets. In any case, this is a continuation of a well-established trend. In fiscal year 2011, federal grants accounted for about 25 percent of state and local spending.
Inflation’s The Nail In the Coffin Of Biden’s Spending Plans – Stephen Moore – Inflation is accelerating — every consumer in the country feels it every day. If there is any economic sense left in Washington, the rising inflation threat should grind President Biden’s big-government spending plans to a halt. Federal Reserve officials have called inflation “transitory,” but what if they are wrong? The public is clearly worried. According to a new Harvard CAPS/Harris poll released this week, 85 percent of Americans are concerned about inflation. For good reason. Last month, the Consumer Price Index rose at its fastest level since 2008.At the same time, the Producer Price Index, which measures wholesale costs, rose at its most rapid rate in recorded history. Rising producer prices translate into higher consumer prices. This inflation tax could dramatically slow the vaccine-induced economic recovery and make ordinary Americans poorer. At its recent meeting this month, the Fed announced that it would accelerate its expected interest rate hike timeline and discuss tapering its $120 billion in monthly bond purchases. We hope they do. But another factor that would inflame inflation is adding to the heavy U.S. debt loads that the Fed’s bond purchasing has facilitated. It’s Economics 101 that more money creation means the dollars in our wallets and bank accounts are worth less.Yes, monetary policy is the Fed’s domain, but Congress can make the Fed’s job of heading off even steeper inflation easier by putting the kibosh on Biden’s massive deficit spending plans. Biden has proposed $4 trillion in “once-in-a-generation investments” (in addition to the $1.9 trillion Covid relief package that passed in March). This week’s bipartisan infrastructure bill “compromise” still spends way too much money on green energy, high-speed rail projects, electric vehicle subsidies, and the like. Even liberal economists like Larry Summers have warned that Biden’s spending blowout can overheat the economy and “set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability.” Summers argues, “the primary risk to the U.S. economy is overheating – and inflation.” Biden’s spending would fan the flames.
Bernie Sanders to Biden and Manchin: ‘No reconciliation bill, no deal’ – Sen. Bernie Sanders (I-Vt.) is warning President Biden and Sen. Joe Manchin (D-W.Va.) that he will not support a bipartisan infrastructure bill that does not include a provision for reconciliation. “Let me be clear: There will not be a bipartisan infrastructure deal without a reconciliation bill that substantially improves the lives of working families and combats the existential threat of climate change,” Sanders said in a tweet on Sunday afternoon. “No reconciliation bill, no deal. We need transformative change NOW.” The demand from Sanders comes a day after Biden walked back remarks on Thursday suggesting he would only support signing a bipartisan bill if a larger reconciliation package was also passed. “At a press conference after announcing the bipartisan agreement, I indicated that I would refuse to sign the infrastructure bill if it was sent to me without my Families Plan and other priorities, including clean energy,” Biden in a statement on Saturday afternoon before saying his comments “also created the impression that I was issuing a veto threat on the very plan I had just agreed to, which was certainly not my intent.” On Sunday morning, several Republican senators said they accepted Biden’s clarification and indicated they trusted the president to stick to his word. “I recognize that he and his Democratic colleagues want more than that, they want other legislation as well,” Sen. Mitt Romney (R-Utah) said. “And we Republicans are saying absolutely no, we will not support a bill which is to be passed with a massive tax increase, and at the same time trillions of dollars in new spending. That is not something we will support.” Manchin, a moderate who represents a critical swing vote within the Democratic caucus and helped broker the deal between the White House and Senate Democrats, defended his position in Congress on Sunday. “It’s the way I’ve basically been in public life, and I’m not changing. I’m sorry that this 50/50 worked out and people were unhappy with it, but it is what it is. And if they think that I’m going to change and be something that I’m not, I won’t. And I’ve been very clear,” Manchin said.
Biden, Pelosi on collision course –President Biden and Speaker Nancy Pelosi (D-Calif.) are on a collision course, at least at the moment, as they race to realize their sweeping infrastructure agenda heading into next year’s midterm elections. The two Democratic heavyweights face identical pressures, as both are under enormous strain from their party’s liberal base to make sure a big social spending agenda isn’t undercut or even torpedoed by work on a bipartisan infrastructure bill. But there are also subtly different motivations for Biden, a centrist who is not up for reelection until 2024 and vowed to break Washington’s fever by working with Republicans, and Pelosi, the veteran liberal leader with a narrow House majority dominated by progressive voices. She and her caucus are facing headwinds in next year’s midterms, historically a losing proposition for a House majority in the president’s party. Sen. Mark Warner (D-Va.) said that he would “never underestimate Nancy Pelosi’s ability to get things done” but acknowledged that Democrats are going to have to manage a “balancing act” between their competing crosscurrents. “This isn’t our first rodeo … we’ve never seen any of these go from point A to point B to point C without hiccups, bumps. There will be more twists and turns,” Warner, a member of the Senate’s bipartisan group, said during an interview with MSNBC on Monday. Biden, after appearing to hitch a nascent bipartisan infrastructure deal to the broader package of Democratic priorities, walked back that linkage on Saturday, saying he won’t withhold his signature on the first while awaiting Senate action on the second. Pelosi, on the other hand, has made plain her intention to delay House consideration of a bipartisan infrastructure bill until the Senate has passed the second package – a grab bag of health, social and climate programs – by a process known as reconciliation, which nullifies the Republicans’ filibuster powers. Pelosi’s strategy, assuming she sticks to it, would leave the bipartisan deal in limbo, likely for months, including a long August recess when Republicans would certainly launch attacks that Democrats were obstructing a popular public works package.
McConnell to Schumer, Pelosi: Don’t hold bipartisan bill ‘hostage’ –Senate Minority Leader Mitch McConnell (R-Ky.) on Monday demanded that Senate Majority Leader Charles Schumer (D-N.Y.) and House Speaker Nancy Pelosi (D-Calif.) de-link a bipartisan infrastructure deal from a sweeping Democratic-only bill. McConnell’s statement is the first he’s made since President Biden walked back his pledge that he wouldn’t sign the bipartisan deal if it was the only thing that came to his desk, saying over the weekend that the veto threat wasn’t his “intent.” But McConnell, in his statement, argued that without a similar de-linking of the two parts of the Democratic infrastructure plan by congressional leadership that Biden’s remarks would be a “hollow gesture,” in the latest sign that the bipartisan deal isn’t yet back on firm footing. “Unless Leader Schumer and Speaker Pelosi walk-back their threats that they will refuse to send the president a bipartisan infrastructure bill unless they also separately pass trillions of dollars for unrelated tax hikes, wasteful spending, and Green New Deal socialism, then President Biden’s walk-back of his veto threat would be a hollow gesture,” McConnell said in a statement. “The President cannot let congressional Democrats hold a bipartisan bill hostage over a separate and partisan process,” he added. McConnell’s rhetoric was immediately picked up by other Republicans, who are hoping to squeeze Democrats on their infrastructure strategy. “Joe Biden reversed his threat to veto a bipartisan infrastructure bill if it isn’t accompanied by a $6 trillion socialist boondoggle. Will Speaker Pelosi do the same?” the National Republican Campaign Committee, the House GOP’s campaign arm, asked in an email blast to reporters on Monday. Democrats are pursuing a two-track infrastructure plan: On one track is the bipartisan deal that would cost approximately $1.2 trillion over eight years with more than $570 billion in new spending. On the second track is a sweeping multitrillion-dollar bill that Democrats plan to use under reconciliation, which allows them to bypass the 60-vote legislative filibuster. To unlock that option, Democrats will need all 50 members of their Senate caucus united so they can move without Republicans. McConnell said during a separate press conference on Monday that there was “bipartisan support for a significant infrastructure package” and that he would “like to see us get there” but Democratic leaders had to agree to de-link the two plans. “I appreciate the president saying that he’s willing to deal with infrastructure separately but he doesn’t control the Congress. And the speaker and the majority leader of the Senate will determine the order,” McConnell said. McConnell, pointing back to negotiations Biden had with Republican senators, added that “there was no agreement” that the bipartisan plan be linked to a Democratic-only bill. Schumer has said the Senate will vote on the bipartisan bill and a budget resolution that greenlights and includes the instructions for a second, larger Democratic-only bill in July. The Senate would still need to pass the sweeping multitrillion-dollar bill, which could get pushed into the fall.
Green groups shift energy to reconciliation package – Environmental advocates are shifting their focus to a multi-trillion, Democrat-led spending package after seeing that a smaller bipartisan infrastructure deal is unlikely to include many of their priorities. The bipartisan agreement is expected to include some scaled-down versions of President Biden’s climate proposals, but activists are optimistic that they can achieve many of their goals through a Democrat-only measure that is poised to advance alongside the smaller $1.2 trillion package. “Our eyes are on the prize,” Ben Beachy, director of the Sierra Club’s living economy program, told The Hill on Thursday. “We’re fighting for a big bold infrastructure package, and the path for that, as confirmed today, is the reconciliation path, and that is certainly our focus,” he said. During weeks of bipartisan negotiations, advocates have stressed that they see infrastructure as crucial to getting key climate provisions across the finish line. That bipartisan deal announced on Thursday is slated to include just $15 billion for electric vehicles and transit, compared with Biden’s initial goal of $174 billion. It also appears to omit other Biden proposals, such as a push for energy efficient building upgrades and a clean electricity standard, which would make power providers get all of their energy from clean sources by 2035. Biden said, however, that he also wants to pursue a separate bill to be passed through budget reconciliation, a process that would allow Democrats to sidestep a GOP filibuster and pass the measure with a simple majority. That measure is more likely to have Democratic priorities on climate, especially as a large group of senators in the party have pledged not to vote for it unless there are major climate provisions. The 50-50 split in the Senate means all 50 members of the Democratic caucus would have to be on board to pass a reconciliation package. Sen. Joe Manchin (D-W.Va.), a crucial swing vote, called reconciliation “inevitable,” and Biden spoke with moderate Sen. Kyrsten Sinema (D-Ariz.) about a path forward on Friday. Elizabeth Gore, senior vice president for political affairs at the Environmental Defense Fund, said advocates will have a role to play in convincing Manchin and Sinema that strong climate action is in their best interest. “Both of those senators are concerned about climate and they’re committed to finding solutions… and they have unique constituencies and states. And as advocates, our job is to ensure, first of all, that they see a transition to a clean energy economy as an opportunity…and that they see it as a political winner,” Gore said. “We’ve really tried to tie specific policies back to the impact for jobs and communities and the economy back in their…home state,” she added. “This isn’t about brow-beating them into supporting a policy that goes against their interest. It’s demonstrating and advocating that climate policy and this clean energy transition is good for their state.”
A third infrastructure bill cruises into Dems’ ‘two-track’ traffic jam – House Democrats this week are taking an early victory lap for their massive infrastructure bill that would spend hundreds of billions on roads, bridges, transit and rail.No, not the one you’re thinking of. House Speaker Nancy Pelosi’s caucus is preparing to pass a $715 billion transportation package this week – perhaps even with a handful of Republicans – that would spend big on areas that are also centerpieces of President Joe Biden’s infrastructure push.”It’s a strong job-creating package that seizes the once-in-a-century opportunity to rebuild America’s infrastructure,” Pelosi said at a press conference to tout the bill, flanked by committee chairs.The bill comes before Congress every few years for these programs to be renewed, and so far has proceeded separately from Biden’s high-profile infrastructure talks. Though it’s not surprising that it’s being sucked up into the broader fray, where the legislative highway goes next is anybody’s guess. As top Democrats pitch a dual-track approach to infrastructure – a bipartisan deal alongside a monster party-line plan that goes beyond just roads and bridges – some Democrats are arguing that the transportation bill could present a new, third lane.Pieces of the bill set to pass the House Thursday might have a better shot at becoming law as the infrastructure drama wobbles forward, some Democrats say, given that it comes with a Sept. 30 deadline to extend key surface transportation programs. Its emergence as an option marks the latest twist in months of convoluted talks about what a narrowly divided Congress can achieve on one of the White House’s top legislative priorities, and presents party leaders a way to maintain the aggressive July timeline they’ve been promising. House Transportation Committee Chair Peter DeFazio (D-Ore.), who authored the bill, said Wednesday that he’s personally urged Senate Majority Leader Chuck Schumer to merge major parts of his measure, along with existing Senate work on a similar bill, into the Biden-endorsed bipartisan infrastructure deal. That agreement is still more of an outline than a formal piece of legislation, DeFazio noted.
House passes $715 billion transportation and water infrastructure bill – The House of Representatives voted on Thursday to approve a $715 billion transportation and water infrastructure bill focused on improving and repairing roads, bridges, transit and rail, and ensuring clean drinking water.The vote was 221-201 with two Republicans voting with Democrats in favor.House Democrats say the bill — known as the INVEST in America Act — will deliver on key priorities in President Joe Biden‘s American Jobs Plan, and they hope the legislative text can be used to negotiate with the Senate and the White House to determine what specific policy proposals can be included as part of the recently announced bipartisan infrastructure framework.Democratic Rep. Peter DeFazio of Oregon, the lead sponsor of the INVEST Act and chair of the House Transportation and Infrastructure Committee, said at a news conference on Wednesday, “I’m suggesting that substantial amounts of the policy in our bill should be negotiated by the White House, and the Senate and the House to be part of that bipartisan proposal.”The framework deal reached between Biden and a bipartisan group of senators last week outlines top-line spending numbers for a variety of priorities, but many other details of the plan remain unclear.”The Senate bipartisan deal is an outline,” DeFazio said. “There’s no policy attached to their proposal. You have to have policy to do a bill.”The INVEST in America Act authorizes $343 billion for roads, bridges and safety measures, $109 billion for transit, $95 billion for passenger and freight rail, $117 billion for drinking water infrastructure resources and roughly $51 billion for wastewater infrastructure, according to a fact sheet on the bill.House Speaker Nancy Pelosi praised the bill on Wednesday, calling it “a strong jobs-creating package that seizes a once in a century opportunity to rebuild America’s infrastructure.”The legislation is an authorization measure, not an appropriations bill, and it does not include a pay-for mechanism as it came out of the Transportation and Infrastructure Committee and that is not part of the committee’s jurisdiction. When asked about how to address funding, DeFazio told reporters earlier this week, “this is always a sticking point,” but said that the Ways and Means committee, which is the chief tax-writing committee in the House, “has held a number of hearings and there are members of that committee that have a multiplicity of ideas.” DeFazio added, “I fully expect, in concert with the Biden administration, that they will put forward proposals after we begin to meld the policy and the numbers together on the Senate side.” Democratic congressional leaders have been pursuing a dual track approach to infrastructure, pushing for a bipartisan infrastructure proposal, while at the same time setting the stage for the Senate to pass a broader package with only Democratic votes through reconciliation that could include any priorities left out of a bipartisan deal. The approach has led to tension on Capitol Hill, however, and the future of the bipartisan deal is still uncertain.
Ralph Nader: Leaves Must be Canceled. All Hands on the Congressional Deck. –Readers of the Washington Post this past Sunday, many of whom work at least a 40-hour week with short vacations, were informed by reporter Paul Kane about the large number of recess days the Senate and the House are taking this summer. In the midst of a huge backlog of critical legislation – as with the multi-trillion-dollar public and human infrastructure bills and other responsibilities deferred under prior periods of Republican control – these recess periods constitute reckless abandon and endangerment to the country. Here are Mr. Kane’s words: “When the Senate finishes up Thursday [June 24th, 2021], the chamber will shut down until July 12 for an unusually long Independence Day recess. After returning for four weeks, the Senate is supposed to break by Aug. 6 for more than four weeks of the beloved August recess. That’s a nearly 75-day run from late June through Labor Day in which current planning would have senators here voting about 16 days.” “The original House schedule is even more impractical. When members of the House leave town July 1, they are slated to be in session just two of the next 11 weeks.” “Yes, you read that right. From July 2 through Sept. 19, the House is only in session for nine days.” It gets worse. As with other long absences throughout the year, all these recesses come with full pay and with bipartisan concurrence. But there is no agreement on Biden’s big-ticket legislative initiatives that should be dealt with, with meticulous detail to assure that whatever passes comes with rigorous oversight by adequate overseers for preventing waste, fraud, and abuse in the Executive Branch departments and agencies. That takes Congressional work. Even when Congress is in session, Senators and Representatives usually work a three-day week – Tuesdays to Thursdays – with time to rush to nearby campaign offices and dial for campaign dollars.
The Biden administration advances a law to protect patients from surprise medical bills. – Biden administration took its first steps Thursday toward finalizing the details of a ban on surprise medical bills thatCongress passed and President Donald J. Trump signed into law last winter. Some experts see the policy as the most important consumer protection legislation regarding health care to come out of Washington in more than a decade.Surprise medical bills can arise when a doctor or other provider who isn’t in a patient’s insurance network becomes unexpectedly involved in a patient’s care. Patients may go to a hospital in their network, for example, but get treatment from emergency room physicians or anesthesiologists who are not – and who then send patients big bills directly. Millions of Americans get such bills each year, and the pandemic highlighted the scope of the problem. Those hospitalized with Covid-19 sometimes found themselves facing thousands of dollars in medical debt from bills they could never have prevented. One Covid patient in Philadelphia ended up with a $52,112 bill for an air ambulance transfer between hospitals while she was unconscious and on a ventilator. A woman in Texas was charged $4,000 by out-of-network doctors who cared for her during a 10-day hospitalization.The new law, which goes into effect in 2022, would have prevented bills like those. The law was created in late 2020, but Congress gave regulators about a year to write more specific rules about how the policy will work. On Thursday, federal officials began completing the particulars of how that legislative plan will translate to action, by publishing the first major regulationinterpreting it. The law establishes a system for calculating a benchmark payment and a way for insurers and health providers to appeal to a neutral arbiter when they feel that amount is not appropriate.”This law represents the single greatest patient protection since Obamacare,” said Adam Buckalew, who worked as a Republican staff member on the committees that wrote the bill in both the House and the Senate. “And it’s solidly bipartisan,” he added. Mr. Buckalew, now a consultant, is advising some health insurance groups interested in the details of the regulation.
Biden Administration Issues Interim Rule Barring Surprise Billing – Yves Smith -CMS has released an interim rule, based on the No Surprises Act, that puts the kibosh on most so-called surprise billing. Bear in mind that this sneaky practice, greatly accelerated by private equity buying up outsourced hospital practices, like ER doctors, afflicts members of employer and individual plans.Even though the proposed rule is subject to the usual 60 day comment period, public opinion is so opposed to balance billing that none of the commentary I have seen thus far expects the rule to change much prior to its planned effective date, in January 2022.First, from Modern Healthcare:The Biden administration on Thursday unveiled the first in a series of rules aimed at banning surprise billing.The interim final rule bars surprise billing for emergency services and high out-of-network cost-sharing for emergency and non-emergency services. It also prohibits out-of-network charges for ancillary services like those provided by anesthesiologists or assistant surgeons, as well as other out-of-network charges without advance notice … .Under the new rule, health plans that cover emergency services cannot use prior authorization for those services and must pay for them regardless of whether the clinician is an in-network provider or emergency facility. Likewise, insurers can’t charge their enrollees higher out-of-pocket costs for emergency services delivered by an out-of-network provider. They also have to count beneficiaries’ cost-sharing for those emergency services toward their in-network deductible and out-of-pocket maximums.Plans will have to calculate consumers’ out-of-pocket expenses based on a state’s all-payer model agreement or other applicable state law in most cases. As the Wall Street Journal put it:The rule seeks to implement key parts of the legislation protecting patients from being billed by out-of-network doctors who provide treatment at in-network hospitals, as well as protecting them from surprise bills for both emergency and nonemergency care … Out-of-network charges have added to medical debt and rising out-of-pocket payments for consumers: An April 2021 study in the journal Health Affairs found that patients receiving a surprise out-of-network bill for emergency physician care paid more than 10 times as much as in-network emergency patients paid out-of-pocket.The interim final rule is expansive. Emergency services, regardless of where they are provided, would have to be billed at lower, in-network rates without requirements for prior authorization.The rule also bans higher out-of-network cost-sharing, such as copayments, from patients for treatment they receive either in an emergency or nonemergency situation. Under the rule, any coinsurance or deductible can’t be higher than if such services were provided by an in-network doctor …
Biden’s Medicare plan spells trouble for the whole system –The administration recently proposed lowering Medicare’s eligibility age, and Senate Democrats are apparently eager to include the reform in their forthcoming $6 trillion reconciliation bill. The policy seems straightforward: take a popular program and expand it so that people as young as 60 can enroll. But, as with many of Biden’s proposals, the devil is in the details. To begin, President Biden’s proposal could be charitably described as undeveloped. There are only a handful of sentences devoted to the idea in the president’s budget and precious few details from the administration about how the plan would work. Indeed, there are a myriad of questions that the administration and congressional Democrats who support the idea have not yet answered. How would lowering Medicare’s eligibility age to 60 affect those who currently receive coverage through Medicaid or the Affordable Care Act’s (ACA) exchanges? Would late-enrollment penalties apply to those who defer coverage until the current eligibility age of 65? Would reimbursement rates to providers differ for the new population? And would the newly eligible face the same premium requirements, including income-related premiums, that the current Medicare population pays? We analyzed the impacts of a proposal like Biden’s and found that lowering the Medicare eligibility age to 60 would move millions of Americans from their private plans to government coverage, increase the federal deficit, and accelerate the insolvency date of Medicare’s Health Insurance Trust Fund. To compensate, policymakers would either be required to increase taxes or plug the hole with general revenues, severing the tie between Medicare’s hospital benefit and the exclusive payroll taxes that finance it. The vast majority of those who would become eligible for Medicare already have insurance. In fact, only about 10 percent of the early-eligible population currently lacks coverage. About half have existing employer-sponsored coverage. And almost a quarter of the newly Medicare-eligible under Biden’s proposal already have government coverage through, for example, state Medicaid programs or the Affordable Care Act’s marketplace plans. We estimate the expansion would increase the ten-year deficit by $394 billion with about 14 million Americans enrolling in at least Medicare Part A (which provides coverage for hospitalizations). The impact on Medicare spending would be even larger – it would rise by almost $1 trillion over the next ten years. The increase in Part A spending would hasten the insolvency date of Medicare’s Hospital Insurance (HI) Trust Fund without corresponding offsets. Under the current baseline, the Congressional Budget Office projects the HI trust fund will be insolvent in 2026. We estimate that, absent alternative financing options, lowering the Medicare eligibility age to 60 in 2022 would accelerate the insolvency date to 2024.
Gensler Throws a Wrench in SEC’s Revolving Door; Appoints Career Prosecutor as Crime Chief — Pam Martens — SEC Chair Gary Gensler has selected the sitting Attorney General of New Jersey, Gurbir Grewal, age 48, to be his Director of Enforcement. The selection has pleased progressive public interest groups who have been advocating for years against allowing former Wall Street defense attorneys to take the top leadership positions at the SEC. The nonpartisan watchdog group, Better Markets, Tweeted a quote from its President and CEO, Dennis Kelleher, saying that Grewal “appears to be the opposite of a Wall Street defense lawyer, which is a welcome break with the past and exactly what the SEC division of enforcement needs.”Gensler came under withering criticism from progressives when he appointed a law partner from Paul Weiss for the job in April, Alex Young K. Oh. She abruptly resigned after just six days on the job when it became clear she was going to be sanctioned by a judge over her conduct in an Exxon case. (Our critique of Paul Weiss as the law firm Wall Street banks had flocked to for decades in hopes of dodging their serial fraud charges perhaps didn’t help her standing either.)Grewal won’t take his post at the SEC until July 26, apparently needing some time to wind up matters in the New Jersey Attorney General’s office.Grewal has served as the New Jersey Attorney General since January 16, 2018. Before that he had been the Bergen County Prosecutor from January 2016 to January 2018. Prior to that he held various positions in the U.S. Attorney’s Office for the District of New Jersey from November 2010 to January 2016. His last position there was Chief of the Economic Crimes Unit.Prior to his years in public service, Grewal worked for the large law firm Howrey LLP, which dissolved in 2011. His work included representing publicly-traded companies in proceedings with financial regulators. Grewal is a graduate of Georgetown University and received his law degree from the College of William & Mary. He is the father of three. His wife, Amrit, is a neurologist.
Witness Drops Bombshell at House Hearing: Hedge Funds Are Getting “100 Times” Leverage on Crypto – By Pam Martens – Yesterday, the House Financial Services’ Subcommittee on Oversight and Investigations held a critically important hearing on the crypto craze that has engulfed U.S. financial markets. The hearing was titled: “America on ‘FIRE’: Will the Crypto Frenzy Lead to Financial Independence and Early Retirement or Financial Ruin?” Before the witnesses could testify, the Republican Ranking Member of the Subcommittee, Congressman Tom Emmer of Minnesota, delivered Alice in Wonderland opening remarks that downplayed the legitimate concerns of the hearing and effectively characterized crypto as the best innovation since sliced bread. (Emmer is a former registered lobbyist in Minnesota and his Congressional campaign coffers are stuffed with money from the financial services industry.) It didn’t take long, however, for that farcical assessment to collapse under the weight of testimony from a Wall Street veteran, Alexis Goldstein, who is the current Director of Financial Policy for the nonprofit group, the Open Markets Institute. Goldstein was asked by Congresswoman Maxine Waters about a survey released earlier this year by the accounting firm, PwC, which indicated that 1 in 7 hedge funds have 10 to 20 percent of their total assets under management invested in crypto. (Equally frightening, the same survey found that 86 percent of the hedge funds currently investing in crypto intend to deploy more capital by the end of this year.) Goldstein responded that the public has already witnessed this year the collapse of the family office hedge fund, Archegos, which demonstrated that when banks have prime broker relationships with hedge funds it can create losses at the banks, which hold federally-insured (taxpayer-backstopped) deposits. (Large global banks lost more than $10.4 billion when Archegos defaulted on its margin loans to the banks in March.) Goldstein explained: “If hedge funds get farther into crypto, they don’t care about direction. They’ll go long, they’ll go short. They can use leverage. There are lots of cryptocurrency exchanges like FTX and Binance and many others that allow people to use insane amounts of leverage – 100 times to 1 … So what happens if a huge number of hedge funds have prime broker relationships with too-big-to-fail banks [and] all happen to be in similar crypto positions, whether it’s long or short and there’s massive volatility in the market. They may have to sell some of their other assets. It may lead to margin calls in their non-crypto assets which could lead to forced liquidations and sort of redound to the banks themselves in the form of counterparty risk.” Not to put too fine a point on it but counterparty risk is what led to the financial contagion that crashed Wall Street in 2008, leading to the worst economic crisis in the U.S. since the Great Depression of the 1930s. (For a nightmare snapshot of what insane leverage and interconnectivity looked like at that time, here’s a chart of Goldman Sachs’ derivative exposure to other banks as of June 2008.)Waters then asked Goldstein if there was any transparency on which specific hedge funds held the largest positions in crypto and who their counterparties are. Goldstein responded that crypto is not currently reported on the 13F forms that hedge funds are required to file with the SEC so regulators are currently “totally in the dark.”Hmmm. Darkness and 100 to 1 leverage. What could possibly go wrong?Goldstein rounded out this potential doomsday scenario in her written testimony to the Subcommittee. Goldstein explained how the mega banks on Wall Street, which provide margin lending and securities lending to hedge funds under a program they quaintly call “prime broker” services, are themselves taking a “growing presence in the cryptocurrency market.”
Finra orders Robinhood to pay $70m penalty — FT Alphaville is shocked, shocked, to find out that commission-free trading app Robinhood might not have been strictly following the rules when it comes to its wildly popular stock market service.US broker-dealer sheriff Finra just announced it’s slapping a $57m fine on the trading platform, plus ordering it to pay $12.6m in restitution, plus interest, to customers. The reason? For communicating “false and misleading information to its customers” on “a variety of critical issues, including whether customers could place trades on margin, how much cash was in customers’ accounts, how much buying power or ‘negative buying power’ customers had, the risk of loss customers faced in certain options transactions, and whether customers faced margin calls”. Quite a mouthful of alleged malfeasance, that.That makes it the largest penalty the self-regulatory organisation has ever handed out. For the record, Finra states that Robinhood has neither admitted nor denied the charges.The press release, as you might imagine, has all sorts of mouldy nuggets (or tendies?). For instance, did you know that Finra found that Robinhood was offering call-option trading to customers without exercising the necessary due diligence on whether they should be given access to these financial products?Just wow, who could have guessed? More on this one to come we’re sure. $70m might not seem like a lot, but given the apparent political interest in retail investors, we doubt this is the end of the story.
Q2 2021 Update: Unofficial Problem Bank list Decreased to 65 Institutions –The FDIC’s official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public (just the number of banks and assets every quarter). Note: Bank CAMELS ratings are also not made public. CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest. Here are the quarterly changes and a few comments from surferdude808: Update on the Unofficial Problem Bank List through June 25, 2021. Since the last update at the end of March 2021, the list decreased by two to 65 institutions after four additions and six removals. Assets decreased by $7.2 billion to $51.8 billion, with the change entirely from a $7.2 billion decrease because of updated asset figures through March 31, 2021. During the first quarter of 2021, assets at Deutsche Bank Trust Company Americas declined by $7.6 billion.On May 26, 2021, the FDIC released first quarter results and provided an update on the Official Problem Bank List. In that release, the FDIC said there were 54 institutions with assets of $55 billion on the official list, little changed from the 55 institutions with assets of $54 billion a quarter earlier.With the conclusion of the second quarter, we bring an updated transition matrix to detail how banks are transitioning off the Unofficial Problem Bank List. Since we first published the Unofficial Problem Bank List on August 7, 2009 with 389 institutions, 1,777 institutions have appeared on a weekly or monthly list since then. Only 3.7 percent of the banks that have appeared on a list remain today as 1,712 institutions have transitioned through the list. Departure methods include 1,008 action terminations, 411 failures, 274 mergers, and 19 voluntary liquidations. Of the 389 institutions on the first published list, only 3 or less than 1.0 percent, still have a troubled designation more than ten years later. The 411 failures represent 23.1 percent of the 1,777 institutions that have made an appearance on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC’s official list.
Big banks raise dividends after Fed affirms their strength –Many of the nation’s largest banks announced plans Monday to increase shareholder payouts following stress tests that validated the strong performance of industry balance sheets during the pandemic.Nine of the 12 largest banking holding companies – JPMorgan Chase, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Financial Services Group, Truist Financial and U.S. Bancorp – all proposed raising their quarterly dividends payments. No. 15, State Street, did the same. With stock prices at high levels, share buyback proposals were less common, though PNC, BNY Mellon, Morgan Stanley and Wells Fargo unveiled plans to repurchase their stock or increase their buybacks.
Wall Street Watchdog Assails Fed’s Stress Tests of Mega Banks as “Toothless” – Provides a Wakeup Call to Biden Administration – Pam Martens – Dennis Kelleher, the co-founder, President and CEO of the nonpartisan Wall Street watchdog, Better Markets, has issued a scathing rebuke of the Federal Reserve’s so-called “stress tests” of the mega banks on Wall Street, calling them “toothless.”Kelleher’s criticisms revolve around two key points. The Fed is preordaining the outcome of the tests by (1) pumping up the banks’ capital with financial handouts prior to the tests and (2) by removing key aspects of the stress tests that would negatively impact the outcome.Kelleher writes that the Fed’s “unprecedented” support to financial markets and the economy since last March was $4 trillion and “has materially helped to bolster bank balance sheets and capital levels.” But Kelleher is overlooking the more than $9 trillion in cumulative repo loans that the Fed showered on the trading units of these mega Wall Street banks, at far below market interest rates, from September 17, 2019 through early July of 2020, the month that the Fed simply stopped reporting this handout to the Wall Street banks.This is also how the Fed has ginned up the tests, writes Kelleher:”Making matters worse, the stress test program has been seriously weakened under the Powell chairmanship by, among other things, the removal of two key components: the inclusion of dividend payouts and a growing balance sheet. If those factors were included, as they should have been, the banks would have had materially lower post-stress capital ratios.”Kelleher says the Fed “trumpeted” the fact that all of the banks passed the stress tests to justify letting the banks launch a “flood of dividends and share buybacks likely to approach $200 billion and exceed bank earnings by as much as 167%.”When banks are paying out more than they’re earning, it implies a “reduction in capital, making the banking system less safe,” Better Markets notes in a related five-page fact sheet. The fact sheet includes this warning for Powell:”History may judge the Fed’s decisions to deregulate and weaken the stress tests as to allow such outsized, capital-depleting payouts to be as dangerous as many of the Fed’s actions were before the 2008 GFC [Global Financial Crisis], which made that financial crash much worse, if not inevitable, and all but guaranteed the need for taxpayers to bailout Wall Street’s biggest banks.” This would not be the first time that the Wall Street mega banks paid out more in dividends and share buybacks than their net income. In fact, they’ve been doing it for years under the unwatchful eye of their captured regulator, the Fed.Bloomberg News reporters Lisa Lee and Shahien Nasiripour broke the story in June of last year that Bank of America, Citigroup, JPMorgan Chase and Wells Fargo had, since 2017, spent more on dividends and share buybacks than they had earned. According to an audit conducted by the Government Accountability Office (GAO), those four banks named above that are paying out more to shareholders than they are earning received the following amounts in cumulative secret loans from the Fed, at interest rates of almost zero, from 2007 to 2010: (See chart below.)
JPMorgan Chase Spent $59.5 Billion Buying Back Its Stock from 2017-2019 while Its Bank Tellers Didn’t Make Enough to Pay for Basic Living Expenses – Pam Martens –According to the 10-K (Annual Report) forms that JPMorgan Chase has filed with the SEC for years 2017, 2018, and 2019, it has bought back a total of $59.5 billion of its own common stock, thus inflating its share price by that sum of money. In 2019 the bank bought back a whopping 212,975,185 shares for $24.12 billion; 181,504,483 shares in 2018 for a total of $19.98 billion; and 166,557,198 shares in 2017 for $15.4 billion. Notice that the growth in the dollar amount of the buybacks grew by 56.6 percent from 2017 to 2019.Who benefitted tremendously from this boosting of the share price? Insiders.According to the proxy JPMorgan Chase filed with the SEC on April 7, Jamie Dimon, the Chairman and CEO of JPMorgan Chase, owns 9,385,141 shares of the bank’s common stock – the bulk of which he obtained under “performance” awards given to him by his Board of Directors. (Never mind that Dimon’s “performance” has included racking up an unprecedented five felony counts against the bank and paying out more than $43 billion in fines and settlements for egregious financial abuses since 2014.) As of Friday’s closing price, Dimon’s shares had a market value of $1.44 billion,illustrating how handsomely crime pays on Wall Street.The only person on the JPMorgan Chase board with more shares of JPMorgan Chase common stock than Dimon is James S. Crown, the Chairman and CEO of Henry Crown and Company. According to the proxy, Crown owns 12,479,698 shares valued at $1.9 billion as of Friday’s close. The bank has an incestuous relationship with Crown, providing financing for his family’s sprawling businesses. Nonetheless, he is called an “independent” director in the proxy.Both Dimon and Crown benefit greatly from the stock buybacks while thousands of the bank’s workers can’t even meet their monthly bills for the basic necessities of life.At a 2019 House hearing with Wall Street bank CEOs, Congresswoman Katie Porter (D-CA) asked Dimon for help with a math problem. Porter contrasted how Jamie Dimon’s $31 million in compensation for 2018 compared to what his bank is paying one of its bank tellers – a single mother with a 6-year old daughter.Porter explained that she went to Monster.com and found a job in her hometown of Irvine, California for a bank teller at JPMorgan Chase. Porter said the job pays $16.50 per hour or $35,070 per year for an after-tax amount of $29,100 for a single mother with a six-year old child. After deducting for rent on a 1-bedroom apartment, utilities, car payment on a 2008 car, gas, food, the cheapest cell phone, and after-school child care, Porter said the single mom would be $567 in the whole each month.Porter then asked Dimon how this woman should manage her budget short-fall while she’s working full time at his bank. Dimon said he didn’t know what he would advise the woman to do but he’d like to have a conversation with her and try to be helpful. Porter responded: “What I’d like you to do is provide a way for families to make ends meet. So that little kids who are six years old living in a one-bedroom apartment with their mother aren’t going hungry at night because they’re $567 short … ” (See the YouTube video clip of the exchange below.)
A government-run credit bureau? Lawmakers sharply divided over idea. – – House lawmakers and consumer advocates sparred on Tuesday over legislation that would create a public credit reporting agency that President Biden endorsed on the campaign trail last summer. The House Financial Services Committee held a hearing examining the current state of the U.S. credit reporting system, which is currently dominated by the private credit bureaus Equifax, Experian and TransUnion. Lawmakers debated legislation that would overhaul the system and create a public credit reporting agency, which would be housed within the Consumer Financial Protection Bureau. “The big credit reporting agencies have skirted responsibility time and time again” to reform their practices, says House Financial Services Committee Chairwoman Maxine Waters, D-Calif., citing rising consumer complaints and litigation. Yet Rep. Blaine Luetkemeyer, R-Mo., countered that “if you believe the government is going to make less errors than the private sector … you’re either naive or misinformed, or worse.”
What is FHFA’s next move? – Following last week’s ouster of the Trump appointee atop the Federal Housing Finance Agency, mortgage industry officials and community advocates alike are hoping new leadership will rethink many of the policies the agency put in place last year that they say run counter to the missions of Fannie Mae and Freddie Mac. Acting FHFA Director Sandra Thompson – who was appointed by the Biden administration to run the agency last Wednesday after a Supreme Court ruling gave the president the authority to fire her predecessor, Mark Calabira, at will – is already facing pressure to reconsider many of Calabria’s hallmark achievements, including recent reforms to the government’s oversight of the companies. “I do hope there’s a chance for course correction with new leadership,” said Doug Ryan, a senior fellow at Prosperity Now, a nonprofit consumer advocacy group. “I think there’s an opportunity for this to support the larger housing goals of the Biden administration.”
CFPB allows foreclosures to resume, provides more borrower protections -Mortgage servicers can resume foreclosures on some borrowers under a set of rule changes by the Consumer Financial Protection Bureau designed to help millions of struggling homeowners exiting mortgage forbearance plans.The CFPB issued a temporary final rule Monday that provides added borrower protections such as required outreach and loss mitigation reviews by servicers. But the agency essentially abandoned a proposal from April that would have required a pre-foreclosure review period, which some said imposed a foreclosure moratorium until 2022. “Let me be clear: Our final rule does not impose a foreclosure moratorium,” acting CFPB Director Dave Uejio said on a conference call with reporters.
The Supreme Court keeps in place the moratorium on evictions. -The Supreme Court on Tuesday refused to lift a moratorium on evictions that had been imposed by the Centers for Disease Control and Prevention in response to the coronavirus pandemic.The vote was 5 to 4, with Chief Justice John G. Roberts Jr. and Justices Stephen G. Breyer, Sonia Sotomayor, Elena Kagan and Brett M. Kavanaugh in the majority.The court gave no reasons for its ruling, which is typical when it acts on emergency applications. But Justice Kavanaugh issued a brief concurring opinion explaining that he had cast his vote reluctantly and had taken account of the impending expiration of the moratorium.”The Centers for Disease Control and Prevention exceeded its existing statutory authority by issuing a nationwide eviction moratorium,” Justice Kavanaugh wrote. “Because the C.D.C. plans to end the moratorium in only a few weeks, on July 31, and because those few weeks will allow for additional and more orderly distribution of the congressionally appropriated rental assistance funds, I vote at this time to deny the application” that had been filed by landlords, real estate companies and trade associations. He added that the agency might not extend the moratorium on its own. “In my view,” Justice Kavanaugh wrote, “clear and specific congressional authorization (via new legislation) would be necessary for the C.D.C. to extend the moratorium past July 31.”At the beginning of the pandemic, Congress declared a moratorium on evictions, which lapsed last July. The C.D.C. then issued a series of its own moratoriums.”In doing so,” the challengers told the justices, “the C.D.C. shifted the pandemic’s financial burdens from the nation’s 30 to 40 million renters to its 10 to 11 million landlords – most of whom, like applicants, are individuals and small businesses – resulting in over $13 billion in unpaid rent per month.” The total cost to the nation’s landlords, they wrote, could approach $200 billion.The moratorium defers but does not cancel the obligation to pay rent; the challengers wrote that this “massive wealth transfer” would “never be fully undone.” Many renters, they wrote, will be unable to pay what they owe. “In reality,” they wrote, “the eviction moratorium has become an instrument of economic policy rather than of disease control.”
Supreme Court Leaves Eviction Moratorium Intact As Roberts And Kavanaugh Join Liberals – While it has long been known that Supreme Court Chief Justice John Roberts is a CINO (conservative in name only), it may come as a surprise that one of Trump’s own SCOTUS appointees, Brett Kavanaugh, sided with the three supreme court justices in a divided decision refusing to lift the moratorium on evictions implemented by the CDC during the covid pandemic and which is due to expire in any case at the end of July. The 5-4 vote had little practical value, and rejected calls by landlords and real-estate trade associations from Alabama and Georgia to block the moratorium while their challenge goes forward. They contend the U.S. Centers for Disease Control and Prevention exceeded its authority by imposing the ban. Chief Justice John Roberts and Justice Brett Kavanaugh joined the court’s three liberals in the majority. Kavanaugh cast the pivotal vote, saying he was letting the ban stay in effect even though he thought the CDC had exceeded its power.”Because the CDC plans to end the moratorium in only a few weeks, on July 31, and because those few weeks will allow for additional and more orderly distribution of the congressionally appropriated rental assistance funds, I vote at this time to deny the application,” Kavanaugh wrote. One wonder how he would have voted if the moratorium was set to end at the end of the year, or next summer?
Fannie Mae: Mortgage Serious Delinquency Rate Decreased in May -Fannie Mae reported that the Single-Family Serious Delinquency decreased to 2.25% in May, from 2.38% in April. The serious delinquency rate is up from 0.89% in May 2020.These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble, and peaked at 3.32% in August 2020 during the pandemic.By vintage, for loans made in 2004 or earlier (2% of portfolio), 5.27% are seriously delinquent (down from 5.44% in April). For loans made in 2005 through 2008 (2% of portfolio), 9.09% are seriously delinquent(down from 9.33%), For recent loans, originated in 2009 through 2021 (96% of portfolio), 1.82% are seriously delinquent (down from 1.94%). So Fannie is still working through a few poor performing loans from the bubble years.Mortgages in forbearance are 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.
MBA Survey: “Share of Mortgage Loans in Forbearance Slightly Decreases to 3.91%” – Note: This is as of June 20th. From the MBA: Share of Mortgage Loans in Forbearance Slightly Decreases to 3.91%: The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 2 basis points from 3.93% of servicers’ portfolio volume in the prior week to 3.91% as of June 20, 2021. According to MBA’s estimate, 2 million homeowners are in forbearance plans.The share of Fannie Mae and Freddie Mac loans in forbearance decreased 3 basis points to 2.02%. Ginnie Mae loans in forbearance decreased 2 basis points to 5.13%, while the forbearance share for portfolio loans and private-label securities (PLS) decreased 1 basis point to 7.97%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 2 basis points to 4.03%, and the percentage of loans in forbearance for depository servicers declined 2 basis points to 4.14%.”The share of loans in forbearance declined for the 17th straight week, with small declines across almost every loan category,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “The rate of forbearance exits slowed – as has been typical in mid-month reports – but the pace of new forbearance requests remained at a very low level of 4 basis points.”, “The steady improvement in the aggregate forbearance numbers is heartening, as it is evidence that improving economic conditions are allowing more homeowners to get back on their feet. However, we continue to closely monitor the number of forbearance re-entries, reflecting borrowers who exited forbearance but had to re-enter due to hardships. These re-entries accounted for 6.2 percent of loans in forbearance this week.”This graph shows the percent of portfolio in forbearance by investor type over time. Most of the increase was in late March and early April 2020, and has trended down since then.The MBA notes: “Total weekly forbearance requests as a percent of servicing portfolio volume (#) remained the same relative to the prior week at 0.04%”. Note: These deferral plans are very popular. Basically when the homeowner exits forbearance, they just go back to making their regular monthly payments, they are not charged interest on the missed payments, and the unpaid balanced is deferred until the end of the mortgage.
Black Knight: Number of Homeowners in COVID-19-Related Forbearance Plans Decreased — Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance. This data is as of June 29th. From Black Knight: Mild Forbearance Improvement as Quarterly Reviews Continue: As we mentioned last week, there were still more than 300,000 homeowners in forbearance whose plans were scheduled for review by the end of June. Well, of the roughly 146,000 plans reviewed for extension or removal over the past week, 44,000 homeowners left forbearance, while the plans of the other 102,000 were extended. All in all, we wound up with a net decline of 6,000 plans. Not overly impactful, but it does set us up nicely for what could be a larger improvement next week as some 218,000 plans were still scheduled for review by Wednesday, June 30. Our weekly snapshots run through Tuesday, though. As of June 29, our McDash Flash daily loan-level performance dataset showed 2.05 million homeowners – representing 3.9% of mortgaged properties – remaining in COVID-19 related forbearance plans.This puts the overall number of active plans down 145,000, a 6.6% decline from the same time last month with the rate of improvement picking up from 6% last week and 5.4% the week before. A 5,000 reduction in the number of active GSE forbearance plans and a 2,000 drop in FHA/VA plans were partially offset by a rise of 1,000 among portfolio and privately held mortgages. Plan starts continued to fall over the last seven days. In fact, last week saw the lowest total starts in five weeks (since the shortened business week of Memorial Day). There have been about 9% fewer starts over the last four weeks than there were in the preceding four-week period..
FHFA House Price Index: Up 1.8% in April – The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for February. Here is the opening of the press release: House prices rose nationwide in April, up 1.8 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index (FHFA HPI). House prices rose 15.7 percent from April 2020 to April 2021. The previously reported 1.4 percent price change for March 2021 was revised upward to a 1.6 percent increase. For the nine census divisions, seasonally adjusted monthly house price changes from March 2021 to April 2021 ranged from +1.2 percent in the West North Central division to +2.6 percent in the Mountain and Middle Atlantic divisions. The 12-month changes ranged from +13.0 percent in the West North Central to +20.6 percent in the Mountain division. “House prices recorded another monthly and annual record in April,” said Dr. Lynn Fisher, FHFA’s Deputy Director of the Division of Research and Statistics. “This unprecedented price growth persists due to strong demand, bolstered by still-low mortgage rates, and too few homes for sale.” The chart below illustrates the monthly HPI series, which is not adjusted for inflation, along with a real (inflation-adjusted) series using the Consumer Price Index: All Items Less Shelter.
Case-Shiller: National House Price Index increased 14.6% year-over-year in April –S&P/Case-Shiller released the monthly Home Price Indices for April (“April” is a 3 month average of February, March and April prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.From S&P: S&P Corelogic Case-Shiller Index Shows Annual Home Price Gains Surged to 14.6% In April: The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 14.6% annual gain in April, up from 13.3% in the previous month. The 10-City Composite annual increase came in at 14.4%, up from 12.9% in the previous month. The 20-City Composite posted a 14.9% year-over-year gain, up from 13.4% in the previous month.Phoenix, San Diego, and Seattle reported the highest year-over-year gains among the 20 cities in April. Phoenix led the way with a 22.3% year-over-year price increase, followed by San Diego with a 21.6% increase and Seattle with a 20.2% increase. All 20 cities reported higher price increases in the year ending April 2021 versus the year ending March 2021. Before seasonal adjustment, the U.S. National Index posted a 2.1% month-over-month increase, while the 10-City and 20-City Composites both posted increases of 1.9% and 2.1% respectively in April.After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 1.6%, and the 10-City and 20-City Composites both posted increases of 1.4% and 1.6% respectively. In April, all 20 cities reported increases before and after seasonal adjustments. “The National Composite Index marked its eleventh consecutive month of accelerating prices with a 14.6% gain from year-ago levels, up from 13.3% in March. This acceleration is also reflected in the 10- and 20-City Composites (up 14.4% and 14.9%, respectively). The market’s strength is broadly-based: all 20 cities rose, and all 20 gained more in the 12 months ended in April than they had gained in the 12 months ended in March. The 14.6% gain in the National Composite is literally the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data. Housing prices in all 20 cities rose; price gains in all 20 cities accelerated; price gains in all 20 cities were in the top quartile of historical performance. In 15 cities, price gains were in top decile. Five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – joined the National Composite in recording their all-time highest 12- month gains. The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).
House prices continue to surge, with affordability near its worst since the Great Recession – The FHFA and Case Shiller house price indexes for May and April, respectively, were released this morning. Because housing affordability is very much an issue, let’s take a look. YoY the FHFA index is up 15.7%, and the Case Shiller national index is up 13.9%: Not shown, but recall that last week the median price for new single family homes was reported up 18.1% YoY for May, and for existing homes up 23.6% YoY. This is on par with their most drastic increases during the housing bubble. A quick estimate of how (un-)affordable housing is can be seen by dividing house prices by average hourly wages, i.e., how many hours of income does it cost to buy a typical house. Here’s a long term view of what all 4 indexes looked like normed to 1 as of May 2020: Note that existing home prices are only available to FRED from the NAR for the past 12 months. But it is quite clear that “real” wage-adjusted house prices are close to their most extreme measures during the bubble. Another type of estimate, for the typical monthly mortgage payment, can be obtained by multiplying the indexes by the prevailing 30 year mortgage rate (important note: this does not produce the actual monthly mortgage payment, but is a reasonably close estimate): Here the news is much less alarming, as the typical monthly mortgage payment, while higher than a year ago, is nowhere near as high as it was during the housing bubble. As a result, at 155.8, the NAR’s “housing affordability index” is close to its lowest (I.e., least affordable) reading since 2009, although it is higher than at any point during the housing bubble, when it was always below 150 and at its worst was just above 100: An important difference vs. the housing bubble is that there were many speculators in the market, buying simply on the expectation that prices would continue to rise, i.e., “everyone knows house prices only go up!” This time around there is no evidence of such speculation, although obviously there is some panic buying for fear of being “forever priced out.” We have already seen a downturn in sales. I do not believe this level of prices can be maintained for long.
Zillow Case-Shiller House Price Forecast: “No Sign of Slowing”, 16.2% YoY in May –The Case-Shiller house price indexes for April were released today. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Matthew Speakman at Zillow: April 2021 Case-Shiller Results & Forecast: No Sign of Slowing: Mortgage rates remain near historic lows, a demographic wave of households aging into prime homeownership years continues to swell, and despite showing some signs of bottoming, the number of available homes for sale remains historically small, particularly given the elevated demand for housing. Prices have skyrocketed as a result, and price growth continues to set new record highs. What’s more, despite sharply rising prices, demand for homes remains very strong. Bidding wars for the relatively few houses available remain common and homes are going under contract at an increasingly fast pace. Inventory upticks in recent weeks suggest that a respite from these red-hot market conditions may be starting to form. But a return to a balanced market remains a long way off, and there are few, if any, signs that home price appreciation will start to subside anytime soon.Monthly and annual growth in May as reported by Case-Shiller is expected to accelerate from April and Mary 2020 in all three main indices. S&P Dow Jones Indices is expected to release data for the May S&P CoreLogic Case-Shiller Indices on Tuesday, July 27. The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 16.2% in May, up from 14.6% in April.The Zillow forecast is for the 20-City index to be up 16.5% YoY in April from 14.9% in April, and for the 10-City index to increase to be up 16.1% YoY compared to 14.4% YoY in April.
MBA: Mortgage Applications Decrease in Latest Weekly Survey –From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey: Mortgage applications decreased 6.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 25, 2021…. The Refinance Index decreased 8 percent from the previous week and was 15 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 17 percent lower than the same week one year ago.”Mortgage application volume fell to the lowest level in almost a year and a half, with declines in both refinance and purchase applications. Mortgage rates were volatile last week, as investors tried to gauge upcoming moves by the Federal Reserve amidst several divergent signals, including rising inflation, mixed job market data, strong consumer spending, and a supply-constrained housing market that has led to rapid home-price growth,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Purchase applications for conventional loans declined last week to the lowest level since last May. The average loan size for total purchase applications increased, indicating that first-time homebuyers, who typically get smaller loans, are likely getting squeezed out of the market due to the lack of entry-level homes for sale.”…The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.20 percent from 3.18 percent, with points decreasing to 0.39 from 0.48 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.The first graph shows the refinance index since 1990.With low rates, the index remains elevated.The second graph shows the MBA mortgage purchase index
NAR: Pending Home Sales Increased 8.0% in May – From the NAR: Pending Home Sales Bounce Back 8.0% in May — Pending home sales rebounded strongly in May, reaching the highest reading ever for the month of May since 2005, according to the National Association of Realtors. All four U.S. regions registered both month-over-month increases and year-over-year gains for pending home sales contract transactions for the month of May.The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose 8.0% to 114.7 in May. Year-over-year, signings increased 13.1%. An index of 100 is equal to the level of contract activity in 2001….The Northeast PHSI increased 15.5% to 98.5 in May, a 54.6% climb from a year ago. In the Midwest, the index grew 6.7% to 107.7 last month, up 7.8% from May 2020.Pending home sales transactions in the South rose 4.9% to an index of 135.5 in May, up 6.1% from May 2020. The index in the West increased 10.9% in May to 102.0, up 12.5% from a year prior.This was well above expectations of a 0.8% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in June and July.
Construction Spending Decreased 0.3% in May — From the Census Bureau reported that overall construction spending decreased:Construction spending during May 2021 was estimated at a seasonally adjusted annual rate of $1,545.3 billion, 0.3 percent below the revised April estimate of $1,549.5 billion. The May figure is 7.5 percent above the May 2020 estimate of $1,437.7 billion.Private spending increased and public spending decreased:Spending on private construction was at a seasonally adjusted annual rate of $1,203.3 billion, 0.3 percent below the revised April estimate of $1,206.8 billion. …In May, the estimated seasonally adjusted annual rate of public construction spending was $342.0 billion, 0.2 percent below the revised April estimate of $342.7 billion.This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.Residential spending is 11% above the bubble peak (in nominal terms – not adjusted for inflation).Non-residential spending is 9% above the bubble era peak in January 2008 (nominal dollars), but has been weak recently.Public construction spending is 5% above the previous peak in March 2009, and 30% above the austerity low in February 2014, but weak recently.The second graph shows the year-over-year change in construction spending.On a year-over-year basis, private residential construction spending is up 28.7%. Non-residential spending is down 5.8% year-over-year. Public spending is down 8.7% year-over-year.Construction was considered an essential service in most areas and did not decline sharply like many other sectors, but some sectors of non-residential have been under pressure. For example, lodging is down 23.2% YoY, multi-retail down 18.0% YoY, and office down 8.3% YoY. This was below consensus expectations of a 0.4% increase in spending, however construction spending for the previous months was revised up.
Update: Framing Lumber Prices Down Sharply from Recent Peak, Up Solidly Year-over-year – Here is another monthly update on framing lumber prices. This graph shows CME framing futures through June 30th. Lumber is currently at $722 per 1000 board feet. This is down from a peak of $1,733, but up from $448 a year ago.Lumber price are up 60% year-over-year.There are supply constraints, for example, sawmills cut production and inventory at the beginning of the pandemic, and the West Coast fires in 2020 damaged privately-owned timberland. The supply constraints are easing.And there has been a huge surge in demand for lumber.
Lumber prices have bottomed out, but are likely to stay double the historical average for at least the next 5 years, a lumber trader says Lumber price have probably found a bottom at current levels, but will remain higher than average for the next few years, a lumber trader told Insider. Stinson Dean, CEO and founder of Deacon Trading, expects lumber to trade above $1000 for potentially the next three to five years. The historical average is around $400, he said. “My argument is the new normal is going to be significantly higher than the old normal while others think we’re going to go back to pre-COVID price ranges,” Dean said. After an intense run-up in the beginning of the year, Lumber has fallen nearly 50% from May’s record high of over $1,700 per thousand board feet. “Business has slowed dramatically. There’s ample supply. So there’s just not pressure on buyers to cover those needs…they’ve bought enough to cover whatever needs they do have,” Dean said. He added that the current state of the lumber futures curve confirms his take that lumber prices have bottomed out. The curve can give an indication of the health of the underlying supply and demand market, he said. Lumber futures recently began trading in contango – a situation in commodities wherein the future price is higher than the spot price. For the past year, the futures curve was inverted and in backwardation, where the future price is cheaper. The backwardation and subsequent premium on front-month futures occurred because everyone needed lumber as soon as possible, and they were willing to pay whatever price for it, said Dean. “People didn’t care about two months down the road, they only cared about right now because they were in the middle of a short squeeze. They had to get covered,” he added.
Hotels: Occupancy Rate Down 7% Compared to Same Week in 2019 – Note: The year-over-year occupancy comparisons are easy, since occupancy declined sharply at the onset of the pandemic. So STR is comparing to the same week in 2019. The occupancy rate is down 7.3% compared to the same week in 2019. Leisure (weekend) occupancy has recovered, but weekday (more business) is still down double digits. From CoStar: STR: Weekly US Hotel Occupancy Inches Closer to 70%: U.S. weekly hotel occupancy hit its highest level since late October 2019, according to STR’s latest data through June 26.
June 20-26, 2021 (percentage change from comparable week in 2019*):
Occupancy: 69.9% (-7.3%)
Average daily rate (ADR): US$133.36 (-0.5%)
Revenue per available room (RevPAR): US$93.19 (-7.8%)
In addition to occupancy reaching its highest point since the week ending 26 October 2019, ADR and RevPAR were the highest of the pandemic-era. Weekend occupancy surpassed the 2019 comparable for the second time in three weeks, while ADR was 13% higher than the corresponding weekend from June 2019. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. The red line is for 2021, black is 2020, blue is the median, dashed purple is 2019, and dashed light blue is for 2009 (the worst year on record for hotels prior to 2020). Occupancy is well above the horrible 2009 levels and weekend occupancy (leisure) has been solid. With solid leisure travel, the next two months should have decent occupancy – but it is uncertain what will happen in the Fall with business travel.
Shortage of truck drivers is behind fuel delivery delays, says GasBuddy analyst – Patrick De Haan, head of petroleum analysis at GasBuddy, told CNBC on Wednesday that a shortage of truck drivers is causing fuel delivery disruptions at some gas stations.”This is a labor challenge. There’s no fuel shortage,” De Haan said on “Power Lunch,” explaining that refineries are “producing nearly all-time record highs in terms of gallons of gasoline this summer.””The problem is getting that gasoline the last leg of its journey from a local terminal to the gas station, and we’re starting to see some of these delivery delays,” he said.Temporary shortages have been reported at gas stations in southwest Missouri, Columbus, Ohio, and eastern Iowa, according to local media reports.According to National Tank Truck Carriers, the trucking industry is short at least 50,000 drivers. De Haan said it’s been a “brewing problem” since 2017 that was accelerated by the Covid pandemic, when gasoline demand plummeted. Some companies let their truck drivers go, while other drivers took early retirement, De Haan said. Now, gas station chains are offering sign-on bonuses ranging from $5,000 to $15,000 to prospective drivers, he said.De Haan said the current fuel delivery challenges are different from the Colonial Pipeline outage last month, which, in Southeastern states such as Georgia and North Carolina, was followed by a jump in prices at the pumpand some stations running out of fuel.In this instance, De Haan said fuel delivery days related to trucking availability will not have a “meaningful” impact on the price of gasoline. However, oil production levels and “basically every other aspect of this recovering economy” are leading to higher prices, he said.The national average for a regular gallon of gasoline is currently $3.118ahead of the Fourth of July weekend, when tens of millions of Americans are expected to travel, according to AAA.That is up from $3.045 per gallon a month ago. It stood at $2.178 per gallon one year ago, according to AAA, when travel was still sharply curtailed due to Covid restrictions.De Haan said smaller gas station operators may find it more difficult than larger chains to navigate the current trucking landscape. “This is kind of a survival of the fittest, and those truckers that are delivering for third parties, they may find it more lucrative to go somewhere else and deliver gasoline, so there’s kind of this fighting going on with the truck drivers that do exist,” De Haan said. “Everyone’s getting fooled and, unfortunately, for now, as the nation’s gasoline demand continues to rise, this is going to be more challenging in the future.”
June Vehicles Sales Decreased Sharply to 15.36 Million SAAR –The BEA released their estimate of light vehicle sales for June this morning. The BEA estimates sales of 15.36 million SAAR in June 2021 (Seasonally Adjusted Annual Rate), down 9.8% from the May sales rate, and up 18% from June 2020. This was well below the consensus estimate of 17.1 million SAAR.This graph shows light vehicle sales since 2006 from the BEA (blue) and the BEA’s estimate for June (red). The impact of COVID-19 was significant, and April 2020 was the worst month.Since April 2020, sales have increased, and were close to sales in 2019 (the year before the pandemic). Sales-to-date are down 1.3% compared to the same period in 2019.The second graph shows light vehicle sales since the BEA started keeping data in 1967.Note: dashed line is current estimated sales rate of 15.36 million SAAR.Sales in June were likely impacted by supply issues.
May Trade Deficit at $71.2B – The U.S. International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with data going back to 1992. The monthly reports include revisions that go back several months. This report details U.S. exports and imports of goods and services.Here is an excerpt from the latest report:The U.S. monthly international trade deficit increased in May 2021 according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit increased from $69.1 billion in April (revised) to $71.2 billion in May, as imports increased more than exports. The previously published April deficit was $68.9 billion. The goods deficit increased $2.3 billion in May to $89.2 billion. The services surplus increased $0.1 billion in May to $17.9 billion. Today’s headline number of -71.2B was better than the -71.4BInvesting.com forecast.
U.S. Trade Deficit Widened in May as Economic Rebound Fueled Demand for Imports – WSJ – The U.S. trade deficit widened in May, as American consumers and businesses stepped up purchases of imported products and materials amid a continued economic recovery. The foreign-trade gap in goods and services expanded 3.1% from the prior month to a seasonally adjusted $71.2 billion in May, the Commerce Department said Friday. Imports rose 1.3% to $277.3 billion, while exports increased 0.6% to $206 billion. Economists surveyed by The Wall Street Journal had predicted a trade deficit of $71.4 billion in May. The gains in imports were fueled by purchases of industrial supplies such as crude oil, lumber, food and beverages as the U.S. economy opened up further from the pandemic-induced shutdown with the spread of vaccines. The growth followed a drop in April when disruptions to supply chains caused shipments into the U.S. to slow from a record pace set in March. “The trade deficit is poised to remain wide as the fiscally powered, consumer-driven recovery in the US runs ahead of the global economic rebound,” . Pharmaceutical preparations and foods were among the goods fueling the rise in exports. After a robust rebound from a deep but brief slump early last year, the recovery in exports has lost some momentum in recent months, as many economies around the world continued to struggle with the fallout from Covid-19. Trade in services picked up as people started traveling again. Travel spending in the U.S. by foreigners increased by $515 million in May, helping to expand services exports to $60.5 billion, the highest level since March last year. In contrast to the strong recovery in trade in goods, services trade has been slumped as pandemic restrictions kept many people from traveling and studying abroad. This has added to the overall trade deficit for the U.S., which generally runs sizable surpluses in services. Imports of services increased by $742 million to $42.6 billion, with overseas spending by American tourists growing. Economists and corporate executives say supply chain problems, including congestion at ports, have continued to restrain international commerce. Severe shortages of semiconductors have also affected production of automobiles, home appliances and other goods, weighing on trade. Exports of cars, trucks and auto parts fell by $546 million while imports fell by $172 million. “We continue to see lots of port congestion and very slow port operations and low truck power,” Brian Sondey said he expected congestion to last through early next year, as preholiday increases in international shipments start even before the current bottlenecks ease. Even as the trade deficit with the European Union and Canada expanded, the deficit with China decreased by $5.1 billion to $27.2 billion in May, due to a $5.2-billion drop in imports.
June data starts out mixed: manufacturing strong, housing stalls – June data started out this morning with the ISM manufacturing report. There was no big change from last month’s torrid pace. The overall index declined a very slight -0.6% to 60.6, while the leading new orders component declined by 1 to 66: Any number over 60 implies a very strong economy, so this report indicates that the manufacturing sector is still red hot. The last big May number, construction spending, was also reported, showing a definite cooling in the housing sector. Total spending actually declined a slight -0.3% from April, while the leading residential sector increased a slight 0.2%, even before taking into account inflation in housing materials: In short, we start out the month with one leading sector, manufacturing, continuing to be very positive, while one long leading sector, housing, shows evidence of stalling if not a peak.
ISM Manufacturing index Decreased to 60.6% in June -The ISM manufacturing index indicated expansion in June. The PMI was at 60.6% in June, down from 61.2% in May. The employment index was at 49.9%, down from 50.9% last month, and the new orders index was at 66.0%, down from 67.0%. From ISM: June 2021 Manufacturing ISM Report On Business “The June Manufacturing PMI registered 60.6 percent, a decrease of 0.6 percentage point from the May reading of 61.2 percent. This figure indicates expansion in the overall economy for the 13th month in a row after contraction in April 2020. The New Orders Index registered 66 percent, decreasing 1 percentage point from the May reading of 67 percent. The Production Index registered 60.8 percent, an increase of 2.3 percentage points compared to the May reading of 58.5 percent. The Prices Index registered 92.1 percent, up 4.1 percentage points compared to the May figure of 88 percent and the index’s highest reading since July 1979 (93.1 percent). The Backlog of Orders Index registered 64.5 percent, 6.1 percentage points lower than the May reading of 70.6 percent. The Employment Index registered 49.9 percent; 1 percentage point lower compared to the May reading of 50.9 percent. The Supplier Deliveries Index registered 75.1 percent, down 3.7 percentage points from the May figure of 78.8 percent. The Inventories Index registered 51.1 percent, 0.3 percentage point higher than the May reading of 50.8 percent. The New Export Orders Index registered 56.2 percent, an increase of 0.8 percentage point compared to the May reading of 55.4 percent. The Imports Index registered 61 percent, a 7-percentage point increase from the May reading of 54 percent.”This was below expectations. This suggests manufacturing expanded at a slower pace in June than in May.
May Markit Manufacturing: “Output growth eases as supply-chain disruption worsens” The June US Manufacturing Purchasing Managers’ Index conducted by Markit came in at 62.1, unchanged from the final May figure. Markit’s Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.Here is an excerpt from Chris Williamson, Chief Business Economist at IHS Markit in their latest press release: “June saw surging demand drive another sharp rise in manufacturing output, with both new orders and production growing at some of the fastest rates recorded since the survey began in 2007. “The strength of the upturn continued to be impeded by capacity constraints and shortages of both materials and labor, however, meaning concerns over prices have continued to build. “Supplier delivery times lengthened to the greatest extent yet recorded as suppliers struggled to keep pace with demand and transport delays hindered the availability of inputs. Factories were increasingly prepared, or forced, to pay more to secure sufficient supplies of key raw materials, resulting in the largest jump in costs yet recorded.“Strong customer demand in turn meant producers were often able to pass these higher costs on to customers, pushing prices charged for goods up at a rate unbeaten in at least 14 years. “Capacity needs to be boosted and supply chains need to improve to help alleviate some of the inflationary pressures. However, companies reported increasing difficulties filling vacancies in June, and raising COVID-19 infection waves in Asia threaten to add to supply chain issues.” [Press Release] Here is a snapshot of the series since mid-2012. Here is an overlay with the equivalent PMI survey conducted by the Institute for Supply Management (see our full article on this series here).
June Dallas Fed Manufacturing – This morning the Dallas Fed released its Texas Manufacturing Outlook Survey for June. The latest general business activity index came in at 31.1, down 3.8 from 34.9 in May. All figures are seasonally adjusted.Here is an excerpt from the latest report:Texas factory activity expanded at a faster pace in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose 14 points to 29.4, a reading indicative of strong output growth. Other measures of manufacturing activity also pointed to accelerated growth this month.Expectations regarding future manufacturing activity pushed higher in June. The future production index rose nine points to 56.6, and the future general business activity index rose six points to 37.3. Other measures of future manufacturing activity also pushed further into positive territory. Monthly data for this indicator only dates back to 2004, so it is difficult to see the full potential of this indicator without several business cycles of data. Nevertheless, it is an interesting and important regional manufacturing indicator.
June Regional Fed Manufacturing Overview – Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. Regional manufacturing surveys are a measure of local economic health and are used as a representative for the larger national manufacturing health. They have been used as a signal for business uncertainty and economic activity as a whole. Manufacturing makes up 12% of the country’s GDP. The other 6 Federal Reserve Districts do not publish manufacturing data. For these, the Federal Reserve’s Beige Book offers a short summary of each districts’ manufacturing health. The Chicago Fed published their Midwest Manufacturing Index from July 1996 through December of 2013. According to their website, “The Chicago Fed Midwest Manufacturing Index (CFMMI) is undergoing a process of data and methodology revision. In December 2013, the monthly release of the CFMMI was suspended pending the release of updated benchmark data from the U.S. Census Bureau and a period of model verification. Significant revisions in the history of the CFMMI are anticipated.” Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. The latest average of the five for June is 26, down from the previous month. Here is the same chart including the average of the five. Readers will notice the range in expansion and contraction between all regions.
Chicago PMI Plunges Most Since April 2020 “Soft’ survey data has been doing what it does… surging ahead of actual “hard” data providing those who need it with proof that things are getting better.However, recent data has shown that soft survey data losing its lead and the latest Chicago PMI confirms that with the second biggest drop since 2015 (from 75.2 – the highest since 1973 – to 66.1)….Stagflation looms as prices accelerate and production and employment growth slows…
- Prices paid rose at a faster pace; signaling expansion
- New orders rose at a slower pace; signaling expansion
- Employment fell at a faster pace; signaling contraction
- Inventories fell at a faster pace; signaling contraction
- Supplier deliveries rose at a faster pace; signaling expansion
- Production rose at a slower pace; signaling expansion
- Order backlogs rose at a slower pace; signaling expansion
Airlines are not prepared for the surge in travelers because they don’t have enough planes – or pilots to fly them -Travel is surging in the US and airlines are once again faced with shortages, but it’s more than just pilots this time. Many US carriers shed older aircraft from their fleets in a cash-saving effort during the worst times of the pandemic. At the time, vaccines a distant dream and travel demand wasn’t expected to rebound for years. “The airlines were being forced to make very complex decisions under enormous pressure,” Henry Harteveldt, travel industry analyst and cofounder of Atmosphere Research Group, told Insider. “Key among them is: How do you bring your costs down to survive an approximately 96% decline in demand?” But Southwest Airlines, after accelerating the retirement of 737-700 aircraft in 2020, is now saying that the airline’s current fleet won’t be enough to support the carrier’s business model in the upcoming years and could hinder expansion efforts. “We don’t feel like we have enough airplanes for 2022 and 2023, and that’s just doing what you know us to be famous for,” Gary Kelly, Southwest’s chief executive officer, CNBC, referring to its current business of mostly domestic flying.Now that demand is ramping up, airlines might find themselves without enough planes to keep up and Southwest isn’t the only airline that shed planes during the pandemic. Delta Air Lines similarly parted with three fleet types including the McDonnell-Douglas MD-80/MD-90, Boeing 737-700, and Boeing 777-200 series of aircraft.Those aircraft now sit in storage facilities and bringing them back into service would be too great of an expense for airlines, according to Richard Aboulafia, vice president of analysis for Teal Group. New builds from manufacturers, including the Boeing 737 Max and Airbus A220, are preferable but come at a slower rate.
Weekly Initial Unemployment Claims decrease to 364,000 – The DOL reported: In the week ending June 26, the advance figure for seasonally adjusted initial claims was 364,000, a decrease of 51,000 from the previous week’s revised level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000. The previous week’s level was revised up by 4,000 from 411,000 to 415,000. The 4-week moving average was 392,750, a decrease of 6,000 from the previous week’s revised average. This is the lowest level for this average since March 14, 2020 when it was 225,500. The previous week’s average was revised up by 1,000 from 397,750 to 398,750.This does not include the 115,267 initial claims for Pandemic Unemployment Assistance (PUA) that was up from 111,778 the previous week.The following graph shows the 4-week moving average of weekly claims since 1971. The four-week average of weekly unemployment claims increased to 392,750.The previous week was revised up. Regular state continued claims increased to 3,469,000 (SA) from 3,413,000 (SA) the previous week. Note: There are an additional 5,935,630 receiving Pandemic Unemployment Assistance (PUA) that decreased from 5,950,861 the previous week (there are questions about these numbers). This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance. And an additional 5,261,991 receiving Pandemic Emergency Unemployment Compensation (PEUC) down from 5,274,108. Weekly claims were lower than the consensus forecast.
New jobless claims stall, adding to the evidence that stalling vaccinations and case counts are having an economic effect –New jobless claims have been the most important weekly economic datapoint this year, as they have correlated strongly with vaccination progress. Unfortunately, that progress has largely stalled in the past month, and now new jobless claims appear to have stalled as well. This week new jobless claims declined 7,000 to 411,000, 37,000 higher than the pandemic low of 374,000 set two weeks ago. The 4 week average of claims also rose by 1,500 above last week’s pandemic low to 397,750. At the peak of the pandemic lockdowns, new claims were running 6 million to 7 million per week. Here is the trend since the beginning of last August: From late February into May, claims had trended down an average of roughly 100,000 per month. This had slowed to roughly 50,000 per month, indicating that the “opening” of the economy is getting nearer to an endpoint. As indicated above, since 5 weeks ago, the trend is now sideways. This also implies a sharp slowing down of net job creation from the last 3 months’ levels. The story is different for continuing claims, which are reported with a one-week lag, and lag the trend of initial claims typically by a few weeks to several months. These set a new pandemic low, falling 144,000 to 3,390,000. At the same time, over the past 3 months these have only declined about 10% from roughly 3,750,000: At least some of this decline *may* be due to many States’ termination of all extended jobless benefits due to the pandemic. A long term perspective shows that these are equivalent to the worst levels of most previous recessions, or early in the expansions, versus at 2,000,000 or below later in strong expansions: As I wrote two weeks ago and reiterated last week, “I think we are going to see two tracks going forward from here, as near-normalcy does return to the more vaccinated parts of the country, while attempts to return to normalcy fail in the laggard regions.” Last week I further wrote, “Over the next 6 to 8 weeks, these States [in the South and the mountain West with low vaccination rates] are ripe for a serious outbreak of the highly infectious new ‘delta’ variant of the disease,” which in turn is going to lead to many people “re-cocooning” themselves in those areas, and thus decreasing economic activity there. This will result in there being 2 separate economic tracks in regions of the US depending on vaccinations and new outbreaks.
ADP: Private Employment increased 692,000 in June – From ADP: Private sector employment increased by 692,000 jobs from May to June according to the June ADP National Employment ReportTM. Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by the ADP Research Institute in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. “The labor market recovery remains robust, with June closing out a strong second quarter of jobs growth,” said Nela Richardson, chief economist, ADP. “While payrolls are still nearly 7 million short of pre-COVID 19 levels, job gains have totaled about 3 million since the beginning of 2021. Service providers, the hardest hit sector, continue to do the heavy lifting, with leisure and hospitality posting the strongest gain as businesses begin to reopen to full capacity across the country This was above the consensus forecast of 600,000 for this report.The BLS report will be released Friday, and the consensus is for 675 thousand non-farm payroll jobs added in June. The ADP report has not been very useful in predicting the BLS report.
First Look at June: ADP Says 692K New Nonfarm Private Jobs -This morning we have the ADP June estimate of 692K nonfarm private employment jobs gained, a decrease over the ADP revised May figure of 886K.The 692K estimate came in above the Investing.com consensus of 600K for the ADP number.The Investing.com forecast for the forthcoming BLS report is for 600K private nonfarm jobs gained and the unemployment rate to remain drop to 5.7%. Their forecast for the June new full nonfarm jobs is (the PAYEMS number) 700K.Here is an excerpt from today’s ADP report press release:“The labor market recovery remains robust, with June closing out a strong second quarter of jobs growth,” said Nela Richardson, chief economist, ADP. “While payrolls are still nearly 7 million short of pre-COVID19 levels, job gains have totaled about 3 million since the beginning of 2021. Service providers, the hardest hit sector, continue to do the heavy lifting, with leisure and hospitality posting the strongest gain as businesses begin to reopen to full capacity across the country.”Here is a visualization of the two series over the previous twelve months.
June Employment Report: 850 Thousand Jobs, 5.9% Unemployment Rate –From the BLS:Total nonfarm payroll employment rose by 850,000 in June, and the unemployment rate was little changed at 5.9 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, public and private education, professional and business services, retail trade, and other services….The change in total nonfarm payroll employment for April was revised down by 9,000, from +278,000 to +269,000, and the change for May was revised up by 24,000, from +559,000 to +583,000. With these revisions, employment in April and May combined is 15,000 higher than previously reported.
The first graph shows the year-over-year change in total non-farm employment since 1968. In June, the year-over-year change was 7.919 million jobs. This was up significantly – since employment collapsed in April 2020. Total payrolls increased by 850 thousand in June. Private payrolls increased by 662 thousand. Payrolls for April and May were revised up 15 thousand, combined. The second graph shows the job losses from the start of the employment recession, in percentage terms.The current employment recession was by far the worst recession since WWII in percentage terms, but currently is not as severe as the worst of the “Great Recession”. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate was unchanged at 61.6% in June, from 61.6% in May. This is the percentage of the working age population in the labor force. The Employment-Population ratio was unchanged at 58.0% from 58.0% (black line). The fourth graph shows the unemployment rate. The unemployment rate increased in June to 5.9% from 5.8% in May. This was above consensus expectations, and April and May were revised up by 15,000 combined.
U.S. Added 850,000 Jobs in June Labor Rebound – WSJ –The U.S. labor market recovery is accelerating after a spring lull.Employers added 850,000 jobs in June – the biggest gain in 10 months – and workers’ wages rose briskly, the government said Friday, both signs of robust demand for workers.The unemployment rate, derived from a separate survey of households, rose to 5.9% last month from 5.8% in May. That was in part because of a positive development: A modest number of Americans came off the sidelines and entered the job search, expanding the labor pool. A broader measure of unemployment that takes into account workers stuck in part-time jobs and those too discouraged to look for work fell sharply last month.Job growth lagged behind broader economic growth earlier this spring, with the economy adding 583,000 jobs in May and 269,000 in April. But big hurdles to hiring are starting to clear away. Rising vaccination rates, easing government restrictions on businesses and theexpiration of unemployment benefits in many states are stoking the latest growth.Workers are coming back to the labor market – albeit slowly – and employers, desperate to hire to serve a flood of customers, are dangling higher pay and other incentives such as signing bonuses. Hourly wages among private-sector workers rose 3.6% from a year earlier.Meanwhile, fears of the pandemic are easing. The number of workers who said they were prevented from looking for work because of the pandemic fell by 900,000 in June to 1.6 million. “In terms of the pace of hiring, this is probably close to max speed just given how quickly workers are coming back,” For investors, the gains were further evidence the economic recovery remains intact, so far fulfilling predictions by Federal Reserve Chairman Jerome Powell.The solid hiring figures aren’t likely to fundamentally change an intensifying debate within the central bank on how soon to reduce its $120 billion in monthly purchases of Treasury and mortgage securities. Some officials are eager to pull back on those purchases soon, while others have said the central bank doesn’t need to rush those decisions.Despite the latest job growth, the labor market faces challenges. There are still 6.8 million fewer jobs than in February 2020. The jobless rate remains above its pre-pandemic level of 3.5%. And while the labor force grew last month, the gain was modest.The share of adults working or looking for work was flat in June, remaining at 61.6% – 1.7 percentage points below its pre-pandemic level – even though participation among prime-age workers, or those between 25 and 54 years old, rose from a month earlier.Many workers have retired rather than attempt to get their old jobs back; others remain fearful of getting sick. Some economists and businesses say many former workers are reluctant to return lest they lose enhanced unemployment benefits that Congress and state governments provided to help laid-off workers cover living expenses during the pandemic.
June jobs report: a tale of two very different surveys – but both far from full recovery —HEADLINES:
- 850,000 jobs added. Of these, 662,000 were private sector jobs, and 188,000 were government jobs, chiefly in education. The alternate, and more volatile measure in the household report indicated a gain of only 128,000 jobs, which factors into the unemployment and underemployment rates below.
- The total number of employed is still 6,764,000, or -4.4% below its pre-pandemic peak. At this rate jobs have grown this year, it will take another full year for employment to completely recover.
- U3 unemployment rate *rose* 0.1% to 5.9%, compared with the January 2020 low of 3.5%.
- U6 underemployment rate declined -0.4% to 9.8%, compared with the January 2020 low of 6.9%.
- Those on temporary layoff declined -12,000 to 1,811,000.
- Permanent job losers declined -47,000 to 3,187,000.
- April was revised downward by -9,000, while May was revised upward by 24,000, for a net gain of 15,000 jobs compared with previous reports.
- the average manufacturing workweek decreased -0.2 hours to 40.2 hours. This is one of the 10 components of the LEI.
- Manufacturing jobs rose 15,000. Since the beginning of the pandemic, manufacturing has still lost -481,000 jobs, or -3.8% of the total.
- Construction jobs fell -7,000. Since the beginning of the pandemic, -238,000 construction jobs have been lost, or -3.1% of the total.
- Residential construction jobs, which are even more leading, rose by 2,500. Since the beginning of the pandemic, 33,100 jobs have been gained in this sector, or 3.4%.
- temporary jobs rose by 3,300. Since the beginning of the pandemic, there have still been -278,500 jobs lost, or -9.5% of all temporary jobs.
- the number of people unemployed for 5 weeks or less declined by -42,000 to 1,981,000, which is -101,000 *lower* than just before the pandemic hit.
- Professional and business employment rose by 72,000, which is still 633,000, or about -2.9%, below its pre-pandemic peak.
- Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.10 to $25.68, which is a 3.7% YoY gain. This is excellent news, considering that many low-wage workers have finally been recalled to work.
- the index of aggregate hours worked for non-managerial workers declined by -0.1%, which is a loss of -4.4% since just before the pandemic.
- the index of aggregate payrolls for non-managerial workers rose by 0.3%, which is a gain of 2.5% since just before the pandemic.
- Leisure and hospitality jobs, which were the most hard-hit during the pandemic, increased 343,000, but is still 2.2 million, or 12.9% below their pre-pandemic peak.
- Within the leisure and hospitality sector, food and drink establishments gained 194,000, but is still -1,270,200, or -10.3% below their pre-pandemic peak.
- Full time jobs decreased -183,000 in the household report.
- Part time jobs increased 408,000 in the household report.
- The number of job holders who were part time for economic reasons declined by 644,000 to 4,627,000, which is an increase of 229,000 since before the pandemic began.
SUMMARY: This month saw two very different components of the overall jobs report. The establishment survey, which tells us how many jobs were added or lost in various sectors, was very strong, while the household report, which tells us things about unemployment and underemployment, was very weak although still positive.There was lots of good news in the hardest hit sectors of leisure and hospitality and eduction, which were responsible for over half of all the job gains; while manufacturing, construction, and professional and business services were either weakly positive or even slightly negative. Wage growth also continued strongly, which is certainly good news.On the other hand, full time jobs as measured in the household report actually declined. But both permanent and temporary layoffs decreased, as did the newly unemployed, as did involuntary part time employment – all of which are very good.Putting everything together, this month’s report showed substantial and steady progress, but nowhere near enough to fully recover from the pandemic for many months to come (and that’s not taking into account what may await as a result of increasing COVID cases due to the “delta” variant).
Comments on June Employment Report – McBride – The headline jobs number in the June employment report was above expectations, and employment for the previous two months was revised up. However, the participation rate was unchanged and the unemployment rate increased slightly to 5.9%. Leisure and hospitality gained 343 thousand jobs. In March and April of 2020, leisure and hospitality lost 8.2 million jobs, and are now down 2.2 million jobs since February 2020. So leisure and hospitality has now added back almost 73% of the jobs lost in March and April 2020.Construction employment declined 7 thousand in June, and manufacturing added 15 thousand jobs. NOTE: State and Local education added 230 thousand jobs, seasonally adjusted. But this is a seasonal quirk – there were actually 413 thousand education jobs lost in June NSA, but that was fewer than normal for June, so seasonally adjusted this showed a gain. Earlier: June Employment Report: 850 Thousand Jobs, 5.9% Unemployment Rate. In June, the year-over-year employment change was 7.919 million jobs. This turned positive in April due to the sharp jobs losses in April 2020.This graph shows permanent job losers as a percent of the pre-recession peak in employment through the report today. This data is only available back to 1994, so there is only data for three recessions.In June, the number of permanent job losers decreased to 3.187 million from 3.234 million in May. These jobs will likely be the hardest to recover. 
Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. The prime working age will be key as the economy recovers. The 25 to 54 participation rate increased in June to 81.7% from 81.3% in May, and the 25 to 54 employment population ratio increased to 77.2% from 77.1% in May. From the BLS report:”The number of persons employed part time for economic reasons decreased by 644,000 to 4.6 million in June. This decline reflected a drop in the number of persons whose hours were cut due to slack work or business conditions. The number of persons employed part time for economic reasons is up by 229,000 since February 2020. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.“The number of persons working part time for economic reasons decreased in June to 4.627 million from 5.271 million in May.These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 9.8% from 10.2% in May. This is down from the record high in April 22.9% for this measure since 1994 and close to pre-recession lows. This graph shows the number of workers unemployed for 27 weeks or more.According to the BLS, there are 3.985 million workers who have been unemployed for more than 26 weeks and still want a job, up from 3.752 million in May. This does not include all the people that left the labor force. This will be a key measure to follow during the recovery. Summary: The headline monthly jobs number was above expectations, and the previous two months were revised up by 15,000 combined. However, the headline unemployment rate increased slightly to 5.9%. There was a sharp decline in part time workers (for economic reasons), but the number of permanent job losers – and the long term unemployed – remain high.
Americans can go to Europe, but not Canada. Why is that border still closed? -Americans can now vacation in France and Spain, where roughly half the people have had at least one dose of a Covid-19 vaccine. But with limited exceptions, they still cannot travel to Canada.In mid-June, to the frustration of many on both sides of the U.S. border, Canada announced that it was extending restrictions on nonessential travel until at least July 21. The ban includes travel by land, air and sea.Canada lagged behind the United States in distributing vaccines, but has quickly caught up. According to the government’s health database, 65 percent of the population has received at least one vaccine dose and 19 percent were fully vaccinated as of June 19, the latest date for which figures are available.The government has cited the spread of more transmissible coronavirus variants, such as Delta, as a reason for its caution.”Even a fully vaccinated individual can pass on Covid-19 to someone who is not vaccinated,” Prime Minister Trudeau said during a virtual news conference on June 18.The Canadian government plans to reopen the U.S. border in phases. On Monday, it will ease entry requirements for fully vaccinated Canadians, permanent residents and some eligible foreign nationals.But discretionary travel, including tourism, remains prohibited. Before the pandemic, Americans accounted for about 15 million of the 22 million overnight international visitors to Canada. They spent an estimated 11 billion Canadian dollars of the 23 billion dollars spent by all international visitors in 2019.
Disney test cruise delayed after ‘inconsistent’ COVID-19 test results – Disney Cruise Line said on Monday that it would delay its first test cruise since the COVID-19 pandemic shuttered the industry after a number of participants had inconsistent test results for the coronavirus. The Associated Press reported that the Disney Dream had been scheduled to sail on Tuesday with 300 employees who had volunteered to take part in a “simulation” cruise, but it was postponed until next month. This decision was made after a small number of employees had inconsistent COVID-19 test results, “which is considered positive by the CDC [Centers for Disease Control and Prevention],” according to Disney Cruise Lines. The two-night test cruise had been approved by the CDC, the AP noted. Earlier in June, the CDC relaxed its guidance for cruises while still recommending that only fully vaccinated people travel on the ships. “In addition to testing, passengers who are not fully vaccinated should self-quarantine for 7 days after cruise travel, even if they test negative. If they do not get tested, they should self-quarantine for 10 days after cruise travel,” the CDC’s updated guidance advised. A federal judge in Florida also ruled in June that the CDC could not regulate cruises, saying the agency’s orders on the industry were an overreach of power. Judge Steven Merryday for the Middle District of Florida wrote in his ruling that the “CDC’s conditional sailing order and the implementing orders exceed the authority delegated to CDC.”
San Francisco Homeless Camp Costs $60,000 Per Tent, Per Year – It turns out “solving” the homelessness problem that has (along with sky high taxes) been plaguing San Francisco, driving residents out of the city (and state), is a costly endeavor. In fact, a homeless encampment run by San Francisco costs the city $60,000 per year, per tent, the NY Post reported this week. The city has six “safe sleeping villages,” which offer up tents and three meals a day to homeless people. They also provide security and washrooms. Mayor London Breed reaffirmed her commitment to find care for the homeless (and burn through tons of taxpayer cash), stating last week: “For those exhibiting harmful behavior, whether to themselves or to others, or those refusing assistance, we will use every tool we have to get them into treatment and services, to get them indoors. We won’t accept people just staying on the streets, when we have a place for them to go.”The news comes as San Francisco mulls renewing the program, which could cost about $57,000 per tent. There are currently about 260 tents, the report notes.The city is paying “about twice the median cost of a one-bedroom apartment for each tent”, the report says. And the encampment is being funded by a 2018 business tax known as Proposition C.
Thousands of inmates sent home because of Covid may have to return to prison. – Some 4,000 federal offenders who were part of a mass release last year of nonviolent prisoners to help slow the spread of the coronavirus could soon return to prison – not because they violated the terms of their home confinement, but because the United States appears to be moving past the worst of the pandemic. In the final days of the Trump administration, the Justice Department issued a memo saying inmates whose sentences lasted beyond the “pandemic emergency period” would have to go back to prison. But some lawmakers and activists are urging President Biden to revoke the rule and use his executive power to keep the prisoners on home confinement or commute their sentences entirely, arguing that the pandemic offers a glimpse into a different type of punitive system in America, one that would rely far less on incarceration. Mr. Biden has vowed to make overhauling the criminal justice system a crucial part of his presidency, saying his administration could cut the prison population by more than half and expand programs that offered alternatives to detention. While the White House has yet to announce a decision about those on home confinement, the administration appears to be following the direction of the Trump-era memo. Andrew Bates, a spokesman for Mr. Biden, said in a statement that the president was “committed to reducing incarceration and helping people re-enter society,” but he referred questions about the future of those in home confinement to the Justice Department. The White House revisits the emergency declaration every three months, leaving the former prisoners in a constant state of limbo. The next deadline is in July.
US sees record school shootings since March as students struggle with return from pandemic – A record number of school shootings have taken place since the spring, a troubling sign as parents, teachers and students prepare for a return to full-time in-person learning this fall following the coronavirus pandemic. Since March, there have been 14 school shootings across the United States, the highest amount over a four month period since 1999,according to a Washington Post analysis published Thursday. More than a quarter-million children have been exposed to gun violence during school hours since the shooting at Columbine High School in Colorado, the Post reported. The most-fatal school shooting in U.S. history was in Parkland, Fla., at Marjory Stoneman Douglas High School, where 17 people were killed and more than a dozen others were injured. Most schools have remained only partially open for in-person instruction as elected officials work to reopen their communities, but with mass vaccination efforts fully underway and many American returning to work, students are expected back in classrooms on a more regular basis this fall. The first school shooting of 2021 occurred on March 1 at Watson Chapel Junior High, the Post reported, where ninth grader Daylon “DayDay” Burnett was shot and killed at school. Another incident on April 26 involved a 12-year-old sixth grader in Minnesota who told police he suffered from depression and wanted to commit suicide by cop after shooting up his school. “I hope my death makes more senses then my life,” the 12-year-old wrote in a notebook before carrying out the shooting, later telling police he did not want to take his own life because “that way it wasn’t a sin.” Three people have been killed and eight have been wounded in school shootings so far this year, the Post analysis found.
As Delta variant spreads, Southern California schools plan full reopening of schools this fall – As California ended most of its COVID-19 restrictions this month, major school districts in the southern part of the state have loosened restrictions for summer school and are preparing for a full reopening this fall. June 15 marked the end of California’s tiered reopening system and most of the state’s COVID-19 restrictions, including mask mandates for vaccinated people and the removal of social distancing and capacity requirements at shops, restaurants, gyms, stadiums and other workplaces.Under conditions in which millions of people remain unvaccinated, including all children under 12 years old, and the more transmissible and lethal Delta variant is spreading throughout the state, these moves are criminal and will lead to an unknown number of infections and deaths throughout the region. Schools will still require masks indoors for students and staff, but the California Department of Public Health (CDPH) recently noted that “this may change pending updates for K-12 operational guidance from the CDC” for fall school reopenings. In Southern California, schools will be reopening with some restrictions, though most will not be enforced.Los Angeles Unified School District (LAUSD), the largest district in California and second largest in the country with a student population of over 600,000, recently announced its plans for a full reopening this fall, with the semester starting on August 16. Classes will be in session five days a week for all grade levels.Reopening guidelines follow CDPH and Los Angeles Department of Public Health (LADPH) protocols on reopening, which have loosened already inadequate safety measures in schools. Three-foot social distancing will now be allowed indoors between students, and required COVID-19 testing of students will be subject to change for the fall “based on evolving pandemic conditions.” Funding for distance learning from the state ends on June 30, so the option for distance learning for families will be offered through outsourced online curriculum companies, including Apex Learning and Edgenuity.LAUSD reached a tentative agreement with the United Teachers Los Angeles (UTLA) on June 17 for the full reopening of campuses during the 2021-22 school year. The UTLA and the mainstream media have touted that 94 percent of the teachers, counselors, librarians, school nurses and other certificated employees voted to support the deal. However, close to 18,000 of its more than 30,000 members, or 60 percent, abstained from the vote, which the union held after the school year had ended and teachers and staff had begun their summer break. After forcing through the reopening of schools in April, the UTLA has committed yet another betrayal against teachers, students and their families, by pushing to fully reopen schools this fall. In a recent statement, UTLA President Cecily Myart-Cruz said: “With the approval of this agreement, schools across Los Angeles will have critical COVID safety protocols in place when we welcome students back to the joys of full-time in-person learning.”
From cocktails to charter schools: How Ohio’s two-year budget will impact your life – The Columbus Dispatch -Ohio’s $75 billion, two-year budget cuts income taxes and pays for schools, prisons and healthcare. But the massive, 3,300-page document does so much more. We’ve combed through those pages to find out what those changes mean for you.From those who developed a taste for cocktail delivery during the pandemic to college athletes looking to earn a little money off their popularity, there’s something for everyone. So, if you …
- Pay income taxes: Most Ohioans will get a 3% cut on their income taxes. People earning up to $25,000 a year won’t pay any income taxes anymore. And the richest Ohioans will get a 16% income tax cut because the top bracket was eliminated.
- Homeschool your kids: You are getting a $250 tax credit for school supplies and other educational materials.
- Send your kids to certain private schools: If the school isn’t chartered (doesn’t adhere to state education requirements) you will be eligible for a $500 tax credit if you earn up to $50,000 a year or $1,000 for families who earn up $100,000.
- Get an EdChoice scholarship (school voucher): The annual amount your kid receives from Ohio’s school voucher program is going up. The K-8 scholarships will be $5,000 and $7,500 for high school students.
- Are you a famous college athlete in Ohio: You will be able to earn money off your name, image or likeness with a few caveats. You can’t advertise for alcohol brands, tobacco, casinos or adult entertainment.
- Donate money: You can get a tax credit of up to $750 for donations given to scholarship granting organizations. These are often private schools or nonprofits that give out scholarships to students who attend them.
- Have kids in after-school care: You can get some money from the state providing your family earns less than 300% of the federal poverty level. The budget allocated $125 million over two years for educational savings accounts that fund after-school and enrichment programs for both public and private school kids.
- Get child care assistance: The amount you can earn and still participate in the publicly-funded child care program will increase to 142% of federal poverty (about $30,000 for a family of three) and 150% of federal poverty for families with special needs children.
- Want to open a community (charter) school: You are no longer limited by location. For the first time, Ohio will allow charters to operate anywhere in the state.
- Have a kid in public school: Ohio completely changed the way it funds K-12 schools in this budget. Advocates have been working on this new formula for years and say it’s a better, more predictable way to fund public education.
- Have a high school student taking college courses: The parent and student will sign a permission slip that indicates they are aware of the potential for mature subject matter in College Credit Plus classes.
Who are the San Antonio, Texas, school board members who unanimously fired four teachers? – On May 10, the San Antonio Independent School District (SAISD) school board voted unanimously to fire Rachell Tucker, a dual language kindergarten teacher at Highland Park Elementary School in San Antonio, Texas. The firing took place after Tucker had advocated for increased safety measures and the halting of in-person learning at her school amid the COVID-19 pandemic. Three other teachers were fired at the same school board meeting, and at least nine other teachers in SAISD have been pressured to resign, with these other victimizations taking place for unspecified reasons. The firing of Tucker took place within the broader context of the bipartisan campaign to fully reopen schools and repudiate safety measure, pursued by the Biden administration, the corporate media, the teachers’ unions, and Texas’ Republican Governor Greg Abbott. For much of the portion of the school board meeting which allowed public comments (viewable here), colleagues and parents pleaded forcefully with the school board not to fire Tucker. The board started its deliberations on the firings at 11:21pm on Monday, May 10, after roughly an hour of closed session deliberations. The board unanimously terminated probationary contract teachers Elsa Aguilar Cordonejo, kindergarten teacher Rachell Tucker, and Rameshwar Pathak, at the end of 2020-21 school year, “in the best interest of the district.” Continuing contract teacher Jose Castro was terminated unanimously for “good cause.” Additionally, associate principal Dr. Mateen Diop’s contract was not renewed at the end of the 2020-21 school year. It is worth examining the backgrounds of the school board members responsible for unanimously victimizing these educators. According to the agenda, the following members where present when the board unanimously voted to terminate the four teachers: Patti Radle, Arthur Valdez, Debra Guerrero, Ed Garza, Steve Lecholop, Christina Martinez and Alicia Sebastian-Perry.
Nearly 100 COVID-19 cases linked to Illinois summer camp, officials say –Nearly 100 cases of coronavirus have been linked to a camp in Illinois where indoor masking was not required and vaccination status was not checked, officials said Monday, adding that one unvaccinated young adult required hospitalization. The majority of 85 cases involved teens who attended the mid-June camp session, although some involved adult staff members. Eleven additional cases were reported after several individuals who were at the camp also attended a nearby conference, the Illinois Department of Public Health (IDPH) said. Among those cases, 70% occurred in unvaccinated people. The cases are concentrated in Schuyler and Adams counties, according to a press release. “Although all campers and staff were eligible for vaccination, IDPH is aware of only a handful of campers and staff receiving the vaccine,” the IDPH said. “The camp was not checking vaccination status and masking was not required while indoors. IDPH is reminding people about the importance of vaccination, including youth, as the Delta variant and other variants continue to spread.” The department director emphasized that while risk to children may seem small, “even a mild case” can result in long-term health issues. “Additionally, infected youth who may not experience severe illness can still spread the virus to others, including those who are too young to be vaccinated or those who don’t build the strong expected immune response to the vaccine,” Dr. Ngozi Ezike said.
The Biden Bounce: US Student Visa Applications From Pakistan Jump 37% in 2021 -Student visa applications from Pakistan have jumped 37% this year. Overall, the number of international student applicants has increased by about 9% this year from last year, according to data from the Common App, as of January 22, 2021. Most of the top “sending” countries are showing increases, with the notable exception of China, the leading source of international students. But that decrease has been more than offset by substantial increases from countries like India, Canada, Nigeria, Pakistan, the United Kingdom, and Brazil, according to a report in Forbes magazine. Although applications from China are down by 18% from last year, that loss is more than offset by large increases in applicants from several other countries; including India (+28%), Canada (+22%), Nigeria (+12%), Pakistan (+37%), the United Kingdom (+23%), and Brazil (+41%), according to Forbes. American colleges and universities have welcomed the trend. 43% of educational institutions are reporting an increase in their international student applications for the 2021-2022 academic year. The bounce is being attributed to declining COVID cases and the anticipation of the Biden Administration’s liberal visa policy. President Joseph R. Biden has signaled his welcoming attitude toward foreign arrivals by signing a number of executive orders ranging from the revocation of Trump’s “Muslim ban” to reinstatement of DACA protection. In the last pre-COVID academic year 2018-19, nearly 2,000 new F-1 students arrived in the United States from Pakistan, making it the 25th largest sending country. In the same academic year, China was the top sending country with nearly 100,000 new students enrolling in American universities. India was second with about 43,000 students. There were 7,939 Pakistani students studying on F-1 visa in the United States, ranking the country as the 22nd among countries sending students to the United States. China topped with nearly 370,000 international students in the United States while India was second with just over 200,000 students. Earlier in 2021, representatives from 13 top US universities visited Pakistan and met thousands of Pakistani students at college fairs in Islamabad, Lahore, and Karachi as part of EducationUSA’s 16th South Asia Tour. They shared valuable information about their institutions’ academic programs, campus life, financial aid options, and application procedures, according to the US Embassy in Pakistan.
Falling Births? US Needs to Actually be Livable –Like most developed countries, the United States is experiencing cratering birth rates. If the replacement rate is 2.1 birth per woman, its current reported rate of 1.6 is well below that. In other words, depopulation will set in for America just as it has for the likes of Japan and others if births continue to crater and anti-immigrant sentiment scares off would-be migrants. Fewer birth and nobody being welcomed inevitably spells depopulation. Although the United States likes to portray itself in all sorts of self-aggrandizing ways–the promised land, shining city upon a hill, and all that jazz–the truth is that its livability is rather worse than any number of other places.A Bloomberg interview with demographer Lyman Stone has some interesting things to say on the matter. First, flexible work may not be the solution:I think policymakers still have this delusion that the path to high fertility is everybody having an awesome job with great benefits allowing them to be “flexible” for their family, but this just isn’t reality. As jobs, even “family-friendly” jobs, turn into careers, and careers turn into essentially religious or spiritual vocations, family is deprioritized and birth rates decline. In empirical studies of surveys across nearly 100 countries, a co-author and I found that this effect was actually as strong for men as for women, so this isn’t just about breadwinners. The boss in the movie “Elf” is the bad guy because as far as a child is concerned, a parent’s work is always the biggest competition for that parent’s mental and emotional energy. Another observation is that Trumpian racists tend to gain favor as birth rates fall, which obviously has ominous portents:Completing this downward spiral of falling birth rates mobilizing far-right ultra-racist groups is that low birth rates tends to quash innovation, too: America with all its problems has too far to go in fixing its broken society. It won’t become much more livable anytime soon, so expect its birth rates to continue stagnating.
U.S. Warns Against Travel to UAE, Citing High Virus Cases – The U.S. on Monday raised its travel warning for the United Arab Emirates to its highest level, citing a “very high level” of coronavirus in the Gulf nation. While the UAE has one of the world’s fastest vaccination programs, daily new infections have hovered around 2,000 since March. The country has been on a “red list” for travel to the U.K. since January, putting one of the world’s busiest air routes on ice. More than one-third of the UAE’s infections are of the delta strain of the pathogen first detected in India. The US State Department warning comes as Dubai, one of the emirates in the UAE, prepares for a delayed global trade fair in October. Dubai is aiming for 25 million unique visits and hopes to generate billions of dollars in revenue. Read: Dubai Lures Wall Street Jet-Setters as Business Revives Neighboring Qatar, which plans to host a soccer World Cup in 2022, said preparations are on track despite setbacks. The nation plans to provide vaccination to all attendees. Liberia, Mozambique, Uganda, and Zambia have all experienced recent outbreaks and were put in the same Level 4 category as the UAE, according to a State Department statement on Monday.
Abu Dhabi Set to Restrict Public Spaces to Vaccinated People –The oil-rich capital of the United Arab Emirates plans to restrict entry to public spaces and schools to people who have been vaccinated.Access to universities, schools, nurseries, gyms and shopping centers in Abu Dhabi will be restricted from August 20, the Emergency, Crisis and Disasters Committee said late on Monday. The decision won’t apply to people who are exempt from taking a vaccine and to children aged 15 and under.The move comes months after the UAE said it was considering restrictions on people who haven’t yet taken a vaccine despite being eligible for one,sparking criticism online and drawing in a member of Dubai’s ruling family. Earlier this month, Abu Dhabi said it’ll restrict entry to public venues to people who are vaccinated or have tested negative.The UAE, a federation of seven sheikhdoms including Abu Dhabi and Dubai, has one of the highest inoculation rates globally. Cases have fallen from a peak of 4,000 a day in February, but have still hovered at about 2,000 since March.Late on Monday, the U.S. raised its travel warning for the UAE to the highest risk level. The Gulf nation continues to be on a “red list” for travel to the U.K.
NATO begins massive anti-Russian Sea Breeze military exercises NATO intensified its provocations against Russia Monday, with the launch of two weeks of military exercises in the Black Sea region. Operation Sea Breeze will continue until at least July 10.The largest ever NATO operation in the Black Sea takes place under explosive conditions, beginning just six days after Russian armed forced fired warning shots and then dropped four bombs in the path of HMS Defender, a British warship that entered Russia’s territorial waters off Crimea. The US ignored a request made June 22 from Russia’s embassy in Washington – just hours before the UK warship incident – for Sea Breeze to be cancelled this year, with Moscow warning of the danger of military confrontation.This week’s Sea Breeze manoeuvres, which have taken place annually since 1997, are the largest ever. Co-hosted by the US and Ukrainian navies, Sea Breeze 2021 will involve 32 countries, 5,000 troops, 32 ships, 40 aircraft and 18 special operations. It is being led by the Standing NATO Maritime Group 2 (SNMG2), an immediate reaction force which consists of four to six destroyers and frigates. A squadron of US Marines are taking part, with the main naval force involved the US Navy’s Sixth Fleet headquartered in Naples, Italy. The NATO website states that “allies and partners” will participate from “Albania, Australia, Brazil, Bulgaria, Canada, Denmark, Egypt, Estonia, France, Georgia, Greece, Israel, Italy, Japan, Latvia, Lithuania, Moldova, Morocco, Norway, Pakistan, Poland, Romania, Senegal, Spain, South Korea, Sweden, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, and the United States.”Last year Sea Breeze took place over just four days between July 20 and 24. with only ships, aircraft and personnel from the United States, Ukraine, Bulgaria, Georgia, Norway, Romania, Spain and Turkey. In a June 25 statement NATO said, “The exercise will focus on multiple warfare areas including amphibious warfare, land manoeuvre warfare, diving operations, maritime interdiction operations, air defence, special operations integration, anti-submarine warfare, and search and rescue operations.”
Hong Kong bars passenger flights from Britain. – Hong Kong will suspend all passenger flights from Britain beginning July 1, the government said on Monday, citing the spread of the more virulent Delta coronavirus variant in the United Kingdom, which will be reclassified as “extremely high-risk.”People who have stayed in Britain for longer than two hours will also be barred from boarding passenger flights bound for Hong Kong, the authorities said.”A number of cases imported from the U.K. involving variant virus strains have persistently been found in the past few days,” officials said, according to Hong Kong’s government news agency.The restrictions are the second time Hong Kong has suspended flights from Britain. After an outbreak of a dangerous variant in December, authorities barred passengers from entering, leavingmany Hong Kong residents angered and confused as they desperately tried to return home.Those restrictions were lifted in May.Now, Britain is struggling with rising infections, recording a 109 percent spike in cases over the past 14 days, though cases remain a fraction of their winter peak, according to a New York Times database. Experts say the rise is likely linked to the highly contagious Delta variant, which is spreading rapidly in other countries as well.The World Health Organization has said the variant is likely to become the most globally dominant strain of the disease.On Monday, the prime minister of Spain, Pedro Sflnchez, also announced new restrictions on visitors from Britain. They will be required to present a negative coronavirus test or proof of full vaccination to enter the country. In Hong Kong, restrictions on passengers arriving from Brazil, India, Indonesia, Nepal, Pakistan, the Philippines and South Africa will also remain in place.
Indonesia Covid Restriction Rules to Be Stricter as Delta Cases Rise – Indonesia is set to enforce stricter restrictions of a larger scale in a bid to halt a rapid rise in coronavirus infections. The new measures will be comprehensive and people living in heavily-infected areas will be asked to stay at home and avoid non-essential travel, Alexander Ginting, a member of the Covid-19 taskforce said in a televised interview with Metro TV on Tuesday. The government is finalizing the plan and an official announcement will be made soon, he added.President Joko Widodo has also appointed Luhut Panjaitan, coordinating minister for maritime and investment affairs, to coordinate the “emergency” set of restrictions for Java and Bali islands, said the ministry’s spokesman Jodi Mahardi. Supermarkets, shopping malls and essential sectors will continue to operate with shorter hours and stricter health protocols, he added.Southeast Asia’s biggest economy is battling a resurgence in Covid-19 cases made worse by the more contagious Delta variant. The strain has now spread widely across Java, the most populated island, while hospitalization rates exceeded 90%, according to the health ministry. Jokowi, as the president is known, previously resisted public calls for a lockdown, saying the existing restrictions focused on the most heavily-infected areas can curb the spread of infections without “killing the people’s economy,” he said last Wednesday.With less than 10% of the country’s 270 million people vaccinated, he is pushing to double inoculation rate to 2 million per day, which he hopes to achieve in August. The country added over 20,000 new infections on Tuesday, taking its total confirmed cases to more than 2.1 million.Under the new restrictions, malls in some areas will have to close at 5 p.m. and restaurants will no longer be allowed to accept dine-in customers and will operate at shorter hours until 8 p.m., Ganip Warsito, head of the Covid-19 taskforce told Metro TV in a separate interview. Earlier, The Straits Times reported, citing unnamed government officials, that non-essential workers will be told to work from home under the new rules and all domestic air services will only fly vaccinated travelers and those who have tested negative for the virus.
Almost half of Australia’s population under lockdown measures as Delta outbreak grows – Since Saturday, four state and territory governments have initiated limited lockdown measures, covering up to 12 million people, or almost half Australia’s population, as outbreaks of the highly-contagious Delta variant of COVID-19 spread across the country. Infection numbers remain relatively low, in the dozens each day in Sydney, where the current swell began, and single figures in several other cities. The governments have been compelled to impose restrictions, however, because Labor and Liberal-National administrations at the state and federal levels have created what some epidemiologists have termed a “perfect storm” for a major surge of the disease. Prior to the current outbreaks, almost all safety measures, including caps on mass events, had been lifted. Australia has the slowest vaccination rate of an advanced OECD country, with only around 7 percent of the adult population fully-inoculated. Governments have, throughout the pandemic, failed to develop an effective quarantine program, instead relying on private hotels that are incapable of stemming airborne transmission and have been the source of up to 30 COVID “leaks.” The high transmissibility of the Delta variant, which is twice as contagious as the original version of the disease, and widespread public anger over the government failures, have prompted the current lockdowns. Governments fear the public backlash, under conditions in which their political survival over the past year has largely depended on false claims to have protected the population from the coronavirus disasters witnessed internationally. Over recent days, demands for the resignation of Prime Minister Scott Morrison and denunciations of state leaders, particularly New South Wales (NSW) Premier Gladys Berejiklian, have developed on Australian social media platforms. NSW authorities this morning reported 22 infections in the 24 hours to 8 p.m. last night. This takes the total number of locally-acquired cases since June 16 to 171. They are all of the Delta variant and are in or near Sydney, the country’s most-populous city.
With The Fed In Denial, Hawkish Bank Of Russia Sees Inflation “Not Transitory”, Warns Of Possible Shock-And-Awe Rate-Hike – Consumer price inflation in Russia is red-hot, having jumped 6.0% in May compared to a year ago, 2 percentage points above the Bank of Russia’s target of 4.0%.Polls in Russia show that food inflation is a top concern, currently running at 7.4%. But inflation in the US isn’t lagging far behind: The Consumer Price Index (CPI) jumped 5.0% in May.Yet the central banks are on opposite tracks in their approach to inflation.Federal Reserve governors keep jabbering about this red-hot inflation being “temporary” or “transitory,” and likely to disappear on its own despite huge government stimulus and the Fed’s huge and ongoing monetary stimulus, though some doubts are creeping in among a couple of them. So they’ll keep interest rates at near-zero until at least next year, and they’re still buying $120 billion a month in securities to push down long-term interest rates.Russia has been on the opposite trajectory, “surprising” economists at every step along the way. This trajectory started on March 19 with a 25 basis point rate hike, to 4.5%, against the expectations of 27 of the 28 economists polled by Reuters, who didn’t expect a rate hike. On April 23, the Bank of Russia hiked its policy rate by 50 basis points, to 5.0%. On June 11, it hiked by another 50 basis points to 5.5%. The next policy meeting is scheduled for July 23. Is a shock-and-awe rate hike next? Bank of Russia Governor Elvira Nabiullina is preparing the markets for this possibility – so it won’t be a shock, but just awe.At the July meeting, the central bank “will consider” an increase in the range from “25 basis points to 1 percentage point,” she told Bloomberg TV in an interview.“We see that inflation remains elevated” and that “inflation expectations are quite high,” she said.The initial factors in this surge of inflation were the weakening ruble last year and commodity and food price increases. They alone might not require a monetary policy intervention, she said. But now inflation expectations remain elevated, which creates second-round effects, she said.
Tourism Begins to Recover in Europe, But Is It Just a Dead Cat Bounce? – Before Covid-19 brought global travel to a virtual standstill, Europe was the undisputed heavyweight of international tourism. It attracted over 700 million inbound tourists in 2019,contributed an estimated euro 2.19 trillion to EU GDP and provided as many as 35 million jobs. But much of that money has disappeared and many of those jobs are on hold. Thousands of businesses, particularly small ones, have closed their doors. Many of those that haven’t are barely hanging on.Between April 2020, when the whole region was in lockdown, and March 2021, when it began to slowly emerge after a long dark winter, the number of overnight stays in the EU slumped by 61% year over year, from 2.8 billion to 1.1 billion, according to figures released on Friday by Eurostat, the EU’s statistical office. The countries hit hardest include many of the southern European countries that were already sledgehammered by Europe’s sovereign debt crisis. Among the EU member states with available data, the sharpest falls were recorded in Malta, where overnight stays fell by a massive 80%; Spain (-78%); Greece (-74%) and Portugal (70%).Before Covid struck, tourism provided 10% of GDP in France, 13% in Italy and Spain, almost 15% in Portugal and 20% in Greece. But tourism is also heavily localised. In some parts of Spain, such as the Balearic Islands or the Canary Islands, it accounts for roughly one out of every three euros generated in the local economy. The same goes for parts of Greece, Portugal and Italy. A huge chunk of that money disappeared last year, with brutal consequences for the local economy. In Greece GDP per capita lost another two percentage points and now amounts to just 64% of the EU average, having plunged from 95 percentage points since 2009. But there are hopes that this trend may be stalled, if not reversed, as Europe’s economy reopens. The continent is currently open for unrestricted travel to 15 “Covid-19 safe countries”: Albania, Australia, the Chinese regions of Hong Kong and Macao, Israel, Japan, Lebanon, New Zealand, Republic of North Macedonia, Rwanda, Serbia, Singapore, South Korea, Taiwan, Thailand and the United States. According to a new EU tourism tracker developed by Oxford Economics, the rebound in tourism is already gathering speed. Overall tourism is up 20% on 2020’s anaemic levels and in Europe’s tourism hotspots it’s up 36% on average since March.But it’s still way down on the 2019 numbers. And warning signs are already flashing that the reopening of Europe’s tourism industry could be short lived.On Monday, Portugal imposed new quarantine rules on unvaccinated British travellers, placing the UK in the same high-risk category as Brazil, South Africa, India and Nepal. It means that all visitors from the UK to mainland Portugal must now quarantine for 14 days “at home or at a location designated by health authorities” unless they can show that they have been fully vaccinated at least two weeks earlier. Those who haven’t now have to quarantine for 14 days on arrival in Portugal and another ten days on their return to the UK. The rules are set to last until at least July 11.The tightening of rules on British travellers comes amid a surge in cases of the Delta variant first discovered in India. On Monday Britain reported another 22,868 coronavirus cases, the highestsince the end of January, even though more than 60% of the population have received both doses of the vaccine. Covid-19 related hospitalisations and deaths remain extremely low.
With an influx of British tourists on the horizon, Spain tightens entry requirements. – Prime Minister Pedro Sflnchez of Spain announced on Monday that British visitors would have to present a negative Covid-19 test or proof of full vaccination, bowing to concerns about a massive influx of summer tourists from Britain, which has been grappling with the Delta variant of the disease.Last week, the British government added Spain’s Balearic Islands to its “green list” of countries and territories from which British visitors can return without quarantining, providing a major lift to the islands’ tourism-dependent economies.But the authorities on the islands then asked Spain’s central government for tougher screening measures for arrivals from Britain. Sensitivities were also raised after an outbreak among hundreds of Spanish students who were visiting Mallorca, the largest of the islands, to celebrate the end of their academic year.Spain lifted restrictions on British visitors on May 24, just as Germany, France and some other European countries reintroduced quarantine rules for the British in order to avoid the spread of the Delta variant. Since then, Germany and France have pushed for a British quarantine obligation to be applied across the European Union, but so far to no avail, as countries like Spain rely heavily on British visitors in the summer tourism season.
With the Delta variant spreading, Portugal brings back curfews – The highly contagious Delta variant is surging in countries around the world, from Indonesia to parts of Europe, leading governments to reimpose restrictions just weeks after they had taken steps to return to ordinary life. The latest example is Portugal, which on Friday will impose a curfew from 11 p.m. to 5 a.m. in Lisbon, Porto and other popular tourism spots, reversing course after it had reopened its economy to prepare for summer travelers. Scientists believe that the Delta variant may be twice as transmissible as the original strain of the coronavirus. But in countries where high percentages of the population have been vaccinated, the outlook is encouraging, with death tolls and hospitalization numbers remaining low. The vaccines made by Pfizer, Moderna, AstraZeneca and Johnson & Johnson have been found to be effective against the Delta variant. In Portugal, 34 percent of people are fully vaccinated, compared with about 46 percent in the United States, according to Our World In Data. Portugal’s new curfews are designed to discourage gatherings of younger people at night, said Mariana Vieira da Silva, a cabinet minister. “This is a time to follow the rules, avoid gatherings, avoid parties and seek to contain the numbers,” she said. The curfews apply in 19 municipalities ranked as having a “very elevated risk” of Covid-19 and a further 26 with an “elevated risk.” On Thursday, Portugal reported almost 2,500 new cases, the highest daily rise since mid-February, although cases have remained far below its January peak of more 16,000 per day. In early June, cases in the country had remained so consistently low that Britain allowed its residents to visit without having to quarantine on return. But the day after that announcement was made, London jolted Portugal by downgrading it over concerns about the Delta variant. London’s decisions were especially significant because Portugal is a popular destination for British tourists, including many who are eager to visit after a year of pandemic lockdowns. The abrupt change in travel rules prompted thousands of tourists in Portugal to catch early flights back to Britain ahead of a quarantine deadline.
Crowds for European Championship soccer games are driving infections, the W.H.O. says. – Scotland supporters celebrating at the Euro 2020 soccer championship match between Scotland and England at Wembley Stadium in London on June 18.Credit…Carl Recine/Associated PressCrowds gathering in stadiums, pubs and bars to watch the European Championship soccer games have driven a rise in coronavirus cases across Europe, the World Health Organization said on Thursday, raising concerns about another virus wave even though vaccination campaigns have made progress.”We need to look much beyond just the stadiums themselves,” said Catherine Smallwood, the W.H.O.’s senior emergency officer. “We need to look at how people get there: Are they traveling in large, crowded convoys of buses? And when they leave the stadiums, are they going into crowded bars and pubs to watch the matches?”In Scotland, more than 2,000 people tested positive after watching a Euro 2020 game either at a stadium, a fan zone or at a pub, according to National Health Scotland. (Nearly two-thirds of those cases were linked to a Euro 2020 game in London in mid-June.) At least 120 fans from Finland were infected after traveling to St. Petersburg, Russia, to watch their team play.After months of virus restrictions, and with the European Championships postponed for a year, soccer fans have been eager to travel across borders to watch the games in person. Finnish tourists attended games in Russia, French fans traveled to Romania, and Welsh ones supported their team in the Netherlands. In countries like Belgium, Britain and France, bars had reopened just weeks before the tournament began.But given that most European countries have fully vaccinated less than a third of their populations, the risks are high. Experts say that the lax restrictions imposed on travel for the soccer championship may have serious consequences later in the summer or in the fall.The rise in cases linked to the tournament comes more than a year after soccer games hosted early last year led to some of the first outbreaks in Europe.Germany’s interior minister, Horst Seehofer, called the decision by European’s soccer governing body, UEFA, which runs the tournament, to allow large crowds in stadiums “utterly irresponsible.”Despite the warnings by the W.H.O., British officials are allowing 60,000 fans to attend each of the tournament’s three final games in London next week.
England opens up a narrow quarantine exemption for business travelers. – The British government introduced a new exemption to its quarantine rules on Tuesday for business travelers “bringing significant economic benefit” to England, but the move is unlikely to quell frustrations that certain travel routes in and out of Britain remain effectively shut.The exemption has strict criteria and applies only to executives whose work supports at least 500 British jobs. It is much tighter than one that was in place for about six weeks from early December, when travelers needed to support only 50 jobs in Britain.There has been a growing concern that Britain’s strict travel rules could lead the country to miss out on business opportunities as other countries welcome the return of travelers, especially from the United States. Since Britain left the European Union, it is also particularly anxious about not losing lucrative business activity to its neighbors across the English Channel.Parts of Britain, such as the financial and legal district of the City of London, rely heavily on the presence of large multinational corporations. But most people entering the country either must quarantine for 10 days and take coronavirus tests on the second and eighth days or must pay for an additional test to end their self-isolation after five days.Earlier this month, France reopened its borders to vaccinated American tourists, and last week, Germany said all Americans could enter the country.Jamie Dimon, the chief executive of JPMorgan Chase, met with President Emmanuel Macron of France this week in Paris and opened up a new European Union trading hub on Tuesday. The bank is increasing the number of staff in Paris to 700 by the end of the year, up from 265 before Britain left the European Union. But Mr. Dimon won’t be stopping in Britain, where the company has 19,000 employees and offices in four cities, as he has in past trips to Europe, because of the country’s travel restrictions.Any executives hoping to leave quarantine will have to meet strict requirements, including proving that the work being done in England “has a greater than 50 percent chance of creating or preserving at least 500 U.K.-based jobs” at a company that already has at least 500 employees or at a new British business. Executives have to apply to the government and get written approval, which can take up to five days, before traveling. When the executive isn’t doing business activity, they must self-isolate at all other times, the government said.
UK teachers with Long COVID face victimisation – Latest government data from a React-2 study by Imperial College London found there are two million cases of Long COVID among England population of around 56 million. Long COVID covers those people still suffering symptoms more than 12 weeks after infection. The UK’s COVID-19 death toll has passed 152,000, but the Conservative government lifted most safety restrictions on May 17. Cases since then have surged, fuelled by the spread of the highly transmissible Delta variant. This has allowed the virus to spread among young adults and school children in particular, and others who are either unvaccinated or have not received the two required jabs. Yet, despite scientists predicting a catastrophic rise in hospitalisations and deaths without the strictest public health measures, the government is intent on lifting all measures to mitigate the virus, including mask wearing, by July 19. It is impervious to the suffering inflicted, including the long-term effects of the disease. The React-2 study found that women and those admitted to hospital were at greater risk of Long COVID, and the prevalence of symptoms increased with age. It also found a correlation between deprivation and the risk of developing Long COVID. University College London and King’s College London carried out a separate study which found that symptoms persisted long after the initial infection in one in six middle-aged people, falling to one in 13 among younger adults. A survey in Norway published in Nature magazine found that out of 312 patients, 61 percent had persistent symptoms after six months – including 52 percent of 16-30-year-olds. A brain imaging study conducted by the University of Oxford and Imperial College London found damage to brain tissue in COVID patients, suggesting a possible a predisposition to dementia and Alzheimer’s at a future date.
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