Why one economist thinks the economy has bottomed: Morning Brief

Thursday, April 23, 2020

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And why the rebound is still a long way off

In a few hours, we’ll get the latest reading on initial jobless claims.

For the fifth straight week, the numbers will mind-boggling. Expectations are another 4.5 million Americans filed first-time claims for unemployment insurance, according to data from Bloomberg.

This data indicates that over the last five weeks in excess of 25 million Americans have found themselves out of work. The consequences of this kind of economic hard stop are only beginning to be understood and felt.

But one economist thinks the state of the economy isn’t likely to grow increasingly grim in the weeks ahead.

“The economy itself has probably bottomed,” said Neil Dutta at Renaissance Macro in an email on Wednesday.

“Let me be clear: that DOES NOT mean a return to robust activity, but it does mean that economic conditions are not getting any worse at the moment,” Dutta adds.

“We’ve seen an uptick in weekly steel production, TSA travel numbers have stabilized, mortgage purchase applications have ticked up, and motor gasoline demand has ticked up, a sign vehicle miles driven are up.”

Now, of course, given the magnitude of the fall-offs we’ve seen in the labor market, in restaurant reservations, consumer spending, and consumer confidence it’d be difficult for the data to get worse indefinitely.

And given the backward looking nature of economic data, reports due out in early May that will more fully reflect the economic halt in April — readings like retail sales, the jobs report, and services and manufacturing PMIs — will be shocking. The record decline in GDP economists have been forecasting for a month now won’t be seen until late July when the first reading on second quarter GDP is published.

There is, no doubt, plenty of bad data to come. But the real-time experience of an economy shutting down and the immediate labor, demand, and supply shocks seen during April are likely to be the worst of this downturn.

An American flag flutters in the breeze as the sun rises on Hollywood Beach, Tuesday, Feb. 2, 2016, in Hollywood, Fla. (AP Photo/Wilfredo Lee)

The road ahead, however, is going to be hard, with Dutta writing that “the fragile process of re-opening the economy…is going to be bumpy for both the economy and stocks.”

And while the drumbeat of “re-opening” the economy continues to grow louder, healing the U.S. economy is far from a completed task. “With long-term interest rates still very low, there is no constraint for Uncle Sam to do more,” Dutta writes.

“Now is not the time to worry about the debt, nor is it the time to ask how things will be paid for. Plugging the revenue shortfall for state and local should be an important priority; our rough estimate is that $300 billion is needed for aid to the states.”

Comments from Senator Majority Leader Mitch McConnell on Wednesday that lawmakers are pushing a “pause” button on offering support to the economy — particularly state and local governments — are not encouraging on this front.

A long and bumpy road indeed.

By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

What to watch today


  • 8:30 a.m. ET: Initial Jobless Claims, week ended April 18 (4.5 million expected, 5.245 million prior); Continuing Claims, week ended April 11 (17.271 million expected, 11.976 million prior)

  • 9:45 a.m. ET: Bloomberg Consumer Comfort, week ended April 19 (44.5 prior)

  • 9:45 a.m. ET: Markit US Manufacturing PMI, March preliminary (38.5 expected, 48.5 in February)

  • 9:45 a.m. ET: Markit US Services PMI, March preliminary (32.5 expected, 39.8 in February)

  • 9:45 a.m. ET: Markit US Composite PMI, March preliminary (40.9 prior)

  • 10 a.m. ET: New Home Sales, March (650,000 expected, 756,000 in February); New Home Sales month-on-month, March (-15% expected, -4.4% in February)



  • 6:30 a.m. ET: PulteGroup (PHM) is expected to report earnings of 70 cents per share on $2.33 billion in revenue

  • 7:30 a.m. ET: Domino’s Pizza (DPZ) is expected to report adjusted earnings of $2.82 per share on $869.36 million in revenue

  • 8 a.m. ET: Union Pacific (UNP) is expected to report earnings of $1.86 per share on $5.12 billion in revenue

  • Other notable reports: Blackstone (BX), Eli Lilly (LLY), Hershey (HSY)



Top News

Mounted police officers patrol along a deserted Regent Street in London, as the country is in lockdown to help curb the spread of the coronavirus, Wednesday, April 15, 2020. Experts in the UK have warned that the economy could shrink by up to 35% as a knock on effect of the lockdown. The highly contagious COVID-19 coronavirus has impacted on nations around the globe, many imposing self isolation and exercising social distancing when people move from their homes. (AP Photo/Frank Augstein)

UK economy suffers record blow ‘with worse to come’ [Yahoo Finance UK]

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