Fiduciary

Demand and Deflation Watch

The U.S. lost 21.2 million jobs in March and April and has now gained bacl< 12.3 million or 58% of the total lost. One item that rose was average weeks unemployed which rose to 21.2 weeks from 20.7 weeks. The total number unemployed for 27 weeks or more rose to 3,556 thousand, up from 2,405 thousand in September. The total unemployed rose to 12,504 thousand but the actual unemployed is 19,428 thousand because many of the unemployed are not eligible for benefits. The number of persons working part-time rose to 26,163 thousand up from 25,161 thousand.
The October U.S. nonfarm payrolls came in somewhat better than expected at 638,000 vs. an expectation of 600,000 and a revised September nonfarm payroll of 672,000. The unemployment rate (U3) fell to 6.9% from 7.9%. That too was much better than the expected 7.7%. The Bureau of Labor Statistics (BLS) also reported the U6 unemployment rate at 12.1% vs. 12.8% in September. U6 is the BLS’s broadest unemployment measure, including short-term discouraged workers plus other marginally attached workers as well as those forced to work part-time because they can’t find full-time employment. Shadow Stats (www.shadowstats.com) reports their broadest unemployment measure at 26.3% vs. 26.9% in September. The Shadow Stats number is U6 plus long-term discouraged workers who were largely defined out of the labour force in 1994.


The US Recovery Tracker posted its third consecutive decline in the week ended Oct. 23, falling 0.6ppts to 79.4. The dangerous cocktail of surging Covid infections and fading fiscal support led to a visible slowdown in economic activity in October, with the tracker falling to its lowest level in 10 weeks.


The recovery picture as the US election neared reflected a rapidly deteriorating health situation that’s weighing on mobility, while slower employment gains proved insufficient to offset the lapse in fiscal aid. That’s keeping demand in check, which is largely flat over the past six weeks. With pre-election volatility leading to tighter financial conditions and production cooling, the Recovery Tracker headed in the wrong direction in late October.


Subnational conditions deteriorated broadly, with 41 State Recovery Trackers declining. Health conditions worsened again across all regions, leading to widespread drops in activity and employment. Conditions in most of the largest State economies weakened, led by Georgia, Michigan, Illinois, California, and Pennsylvania. Florida, New York, and Texas held steady.


The economy is sending distressing signals to policymakers, but it’s uncertain whether significant fiscal support will arrive before year-end, particularly with post-election policy gridlock likely in Washington, DC.

After an aggressive rebound off deflationary lows during the spring/summer, consumer price growth was expected to slow modestly in October and in fact it was unchanged (0.0%
MoM), pushing the YOY CPI down to +1.2%…Core CPI was unchanged in October following an increase of 0.2% in September.

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