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June 2020 Economic Roundup


Tragically, 36.5 million persons have lost jobs since mid-March. While that number will grow over the next 6 weeks it is slowing and should essentially plateau by July. Thus, initial unemployment claims, is no longer the key labor number. Rather, watch continuing unemployment claims. It tells us how many people remain unemployed and continue to file weekly for unemployment. The sooner and faster it falls, the stronger the recovery.       



In 2009, the last time there was global recession, worldwide GDP declined by just 0.1% in part because fully 40% of nations continued to post per capita GDP growth. By contrast, in this recession global growth will shrink by 3%, or $2.7 trillion or the size of the Indian economy, as fewer than 10% of nations will see growth in 2020. In a normal year, planetary GDP grows 3.5%.   



As we reopen our economy three things are paramount. One, non-economic pharmaceutical interventions like masks, social distancing, serological and viral testing, sufficient PPE, tracing, and quarantining are critical. Two, low-contact, high-value workplaces, such as office work, manufacturing and construction should, after appropriate modifications, be reopened ASAP. Three, high-contact, low-value activities such as live entertainment should be suspended. These efforts will boost consumer confidence and reduce the likelihood of future outbreaks.      



Despite staggering employment losses, equities are doing quite well. One reason is that equities are a claim on future earnings, as such employment gains and losses are only relevant insofar as they impact earnings. Second, equities are appealing because the alternatives are less appealing; like bonds that yield next to nothing. Lastly, equities are on a run of late as there has been little if any unanticipated negative news.



While the personal savings rate has skyrocketed from 7.5% in 12/19 to 13.1% in 3/20, and wage growth has jumped from 3%/year in 12/19 to 7.9%/year in 4/20, the two are unrelated. Wages are up because many low wage workers have lost jobs. Savings rates have risen because spending has fallen faster than income. Savings rates should be elevated for some time as was the case following the Great Recession.



Since peaking in 2007 at six billion tons, US carbon dioxide emissions have steadily fallen and were roughly 5 billion tons in 2019 a level first breached in the late 1980s. Falling coal consumption, from a peak of 1,150 million short tons in 2007 to less than 600 million short tons in 2019, is primarily why. Due to Covid-19, 2020 emissions are expected to be just 4.5 billion tons.


Source: Elliot Eisenberg, PhD is Chief Economist for consulting firm GraphsandLaughs, LLC, serving a variety of clients across the United States. All rights reserved.

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