New Year, Same Virus, Altered State Coeur d’Alene Regional Chamber of Commerce January 19, 2021 John W. Mitchell
Late January 2021
Heading for the Second Year of A Pandemic-”An invisible force that pushes us physically apart” Apollo’s Arrow by Christakis
Not New in Human History But New on This Scale to Us
An Economic Contraction by Exogenous Shock and Government Edict
Only State With Annual Job Growth in November
A Regressive Downturn Hitting the Service Sector
A Late Year Slowing-Resurgent Infections
We have Witnessed Massive Macro Policy Moves With More Proposed
US Finished a Year with the Lowest Population Growth Rate Since 1900 .35%
Embarking on the Process of Vaccinating Most People on the Planet
A Test of the Resilience
Job Growth Update November 2020 Data Year over Year Change – 49 States Down Source: BLS, ASU
Kansas16
Maryland 17
Virginia 18
Oklahoma 19
Florida 20
Colorado 21
North Carolina 22
Louisiana 23
Wyoming 24
Iowa 25
Kentucky 26
Washington 27
Alaska 28
Idaho 1
Utah 2
Alabama 3
Mississippi 4
Arizona 5
Nebraska 6
Arizona 7
Montana 8
Arkansas 9
South Dakota 10
South Carolina 11
Indiana 12
Missouri 13
Connecticut 29
Tennessee 14
West Virginia 30
Texas 15
Ohio 31
Oregon 32
Minnesota 33
New Mexico 34 Illinois 35 Wisconsin 36 North Dakota 37 Maine 38 Rhode Island 39 Pennsylvania 40 Nevada 41 New Jersey 42 California 43 Delaware 44 New Hampshire 45 Vermont 46 Massachusetts 47 Michigan 48 New York 49 Hawaii 50
Output and Employment (The Partial Snapback) Until December Monthly Changes Payroll Jobs (BLS)
Real GDP Q4 19-Q3 20 (SAAR) Source: BEA
10,000,000 5,000,000 0 -5,000,000 -10,000,000 -15,000,000 -20,000,000 -25,000,000
40.00% 30.00% 20.00% 10.00% 0.00% -10.00%
Q4 19
Q1 20
-20.00% -30.00% -40.00% Source: BEA
Q2 20
Q3 20
Change in Employment March to April 2020 (-20,787,000) Government Other Services Leisure&Hosp. Ed&Health Business Services Finance Information Trans,Ware,Util Trade Manufacturing Construction Mine/Log Total -25,000,000
-20,000,000
-15,000,000
-10,000,000 Source:BLS
-5,000,000
0
December
Unemployment Rate Remained at 6.7%
The Over the Month Change -140,000
Leisure and Hospitality -498,000, Government -45,000, Educational Services 62,500, Couriers, Messengers, Warehouse 45,600, Health Care 39,000, Temp Agencies 67,600
Average Hourly Earnings up 5% over the Year with Declines in Low Wage Employment
In December 15.8 million people reported that they had been unable to work because their employer closed or lost business due to the pandemic.
7.3 Million People Out of the Labor Force Currently Want a Job
Percentage Point Contributions to Real GDP Growth Q4 19, Q1 2020, Q2 2020, Q3 2020 Source: BEA 30 20 10 0 -10
Consumption Non-Residential Construction
Equipment
Intellectual Property
Residential
Govt.
-20 -30 Q4 2019
Q1 2020
Q2 2020
Q3 2020
Exports
Imports
Inventory
0.8 0.6 0.4 0.2 0 -0.2 -0.4 -0.6 -0.8 -1 February April June August October December February April June August October December February April June August October December February April June August October December
Monthly Change in the CPI 2017-20
Year over Year December Total 1.4 % and 1.6% Core
Source: BLS
Monetary Policy Back to the Zero Bound 1 Year 1/2/20 1.56% 12/31/20 .1% Mortgage Rates Below 3%
Fed cut Funds Rate Twice in March-Back to Zero Bound
Broad Liquidity Support
Now Buying $120 Billion Per Month in Govt. Securities
PPP and Main Street Lending
Security Holdings up about $3 Trillion in the Last Year
Rate Projections- Here until end of 2023
New Operating Procedure-Tolerate Inflation above 2% after Period of Below Target
No Move Soon Powell 1/14/21
Fed Funds and 10 Year 10 Year Less Than Inflation Rate at 1.1% 1/15/21 Note the Movement Up at Prospects for More Spending
Fiscal Policy Unaccustomed Speed
Five Corona Virus Bills Passed: Stimulus Checks, Forgivable Loans, Boosted Unemployment Compensation, Help to Hospitals, States and Cities, Testing Funds, Expanded Sick Leave etc.
About $4 Trillion in New Spending
In Fiscal 2020-The Deficit hit $3.1 Trillion with Spending up 47% to $6.5 Trillion and Revenues Down 1% to $3.4 Trillion- 16.1% of GDP Highest Since 1945
Year to December $3.3 Trillion- 1st Q Fiscal 2021 Deficit up 61%
Biden Proposal $1.9 Trillion: Additional $1,400, Child Tax Credit, $350 Billion State and Local, Extend Eviction and Foreclosure Moratorium, More Testing, More Vaccinations, Minimum Wage to $15
Fiscal Policy In Action (%,SAAR, BEA) Personal Income
Earnings
Transfers
35.8
-27.5
853.9
-10
32.8
-64.9
Q2
42
-25.4
684.5
Q3
-15.6
37.4
-74.9
US Q2 Q3 Idaho Source: BEA
Late January Questions and Cross Currents
Fate of the New Proposal after this Week?
Vaccine-Apparent Success-Production, Distribution, Acceptance and Timing?
New Political Dynamic
How long will the Post Holiday Surge last?
Short Term Angst-Long Term Excitement!
What is the condition of the wounded individuals, businesses, non-profits, governments? Zombie Firms?
A Grand Experiment
Modern Monetary Theory-Spend What Need To In Order to Achieve Goals
We Create the Money so Bankruptcy has no Meaning
The Deficit Worries Have not Come to Pass-Crowding Out, Rising Rates, High Inflation, Inability to Sell Debt
Tighten When Press Capacity-Grow Way Out As After WWII
Look What We Have Seen Over the Last Year, Month or Week
This Becomes Cover for Anything-Green New Deal, Defense, Infrastructure, Health Care
Looming
Exploding Health Care Costs-Alzheimer’s, Dementia-Functioning but not Life Expectancy, Increasing Dependency Ratios
Global Workforce Slowdown- The Great Demographic Reversal by Goodhart & Pradhan
Public Debt Increase Much of It Short Term
US Government Passing Out Money in Matter of Hours-Not Based on Need or Losses
Interest Rate Implications-Inflation Risks? But When?
Idaho
Population Growth 2.1% 2019-2020 US .35%
FHFA Q3 2020 All States Up Idaho #1 at 14.36% WA #3 at 10.8%
Cities Boise #1 at 16.38% Purchase Only
CoreLogic Negative Equity in Q3 Idaho 1.6% National at 3%
To November Idaho Building Permits Down 1.5% from Same Period in 2019
November Unemployment Rate 4.8%- National 6.7%
Top 50 State to State Moves 2019: 1.CA-Texas 2. NY to Florida, 3. CA to Arizona, 8. CA to Oregon, 13. CA to WA 19. CA-Idaho
December 9-21 Census Pulse Survey 566,695 adults in Idaho lived in households that had experienced loss of employment income since March 13th
Idaho Employment YoY November .7% February=100
Government 102 100 98 96 94 92 90 88 86 84 82
Other Services Leisure&Hosp. Ed and Health Pro BusServices Financial Information T,W,U Trade Manufacturing Construction
Source BLS
Mine&Log Total -6000
-4000
Source: Dept. Labor -2000 0 2000
4000
6000
Track the Recovery Chetty, Friedman, Hendren, Stepner
Track the Recovery Chetty, Friedman, Hendren, Stepner
Kootenai County
2018-2019 2.8% Population Growth about 5 Times National Average up 19.3% from 2010 to 2019 about 27,000 People
Personal Income Growth 18-19 5.6% to $7.7Billion
$728 Million Residence Adjustment for People who Work Outside But Live Here
42.9% of Income D,I,R and Transfers in 2019
Residential Permits to November 2020 up 6.3% to 2,349, National Figure 4.5%
Regional Price Parities 2019 BEA CDA 93.5, Spokane 96.5, Seattle 114.5, US 100
Coeur d’ Alene and Idaho Wage and Salary Employment Percent Change from 2019 by Month Source: BLS, ID Dept. Labor 4.00% 2.00% 0.00%
Jan-20
February
March
April
May
June
July
-2.00% -4.00% -6.00% -8.00% -10.00% -12.00% -14.00% Coeur d Alene
Idaho
August
September
October
November
Coeur d’Alene CDA Employment YoY November -3.4%
February=100 102 100 98 96 94 92 90 88 86 84
Government Other Services Leisure&Hosp. Ed and Health Pro BusServices Financial Information Trade,TP,Util Manufacturing Construction Mine&Log Total -3000
-2000
-1000
0
Source: Dept. Labor
1000
2000 Source BLS
Track the Recovery Chetty, Friedman, Hendren, Stepner
The Outlook
The Recovery is Underway, But the Trajectory is Uncertain
Expectations for 2021 3.5-4.5% Growth in GDP
Idaho Employment Growth-Consensus at 3.3% in 2021 after a drop of 1.9% in 2020
But
Virus Course
More Stimulus
Vaccination Program
Behavior
Upside Risks-Vaccine Rapid Distribution and Acceptance, Balance Sheet Strength, High Level of Savings-Relief Spending(1920s and after the Black Plague 1340s)
Downside Risks-Renewed Restrictions, B.1.1.7. Variant, Damage at this Point that is Invisible
Local Expectations
Leisure and Hospitality Drag Diminishing with Vaccine and Time
The Flow to Lower Cost Attractive Areas will Continue we have seen business firms do it, but the pandemic was a forced experiment that demonstrated remote and work from home possibilities.
Housing/Construction Complex Continue to Grow-Spokane/Spokane Valley and Coeur d’ Alene Metro Areas
Stronger Commodity Prices Support Forest Products and Other Commodity Sectors
2020 Will in the Rearview Mirror have been a Hiccup in a Period of Strength
The Pandemic as an Accelerant
Online Shopping
Regional Dispersion
Connectivity/Digital Divide
Digital Payments
Income Distribution Issues
Healthcare System
Vaccine Development
Coping With Change
The Disruption, Destruction and Creation
Human Tragedy
Global Poverty Increase
Viability of Business Models-List of Firms Bankrupt or In Liquidation
Industrial and Sector Impacts-Travel, Tourism, Restaurants, Aerospace, Public Transit, Education System
Booming: Grocery Stores, Bike Shops, RV, Cleaning Products, Video Conferencing, Home Remodeling, Pet Shops, Amazon, Plexiglass, Distribution
New Ways Replacing Old-This is Schumpeter’s Creative Destruction on Steroids and with that comes Shifting Employment and Skill
Opportunity Cost?
How Will This Change Us and the System In All the Roles We Play?
Savings Behavior 1/20 7.6%, 4/20 33.7%,10/20 13.6%, 11/20 12.9% Source: BEA
How long for People to Emerge from Trauma and be comfortable Going Out, Movies, Crowds, Trips? Look at How Your Own Patterns have Changed? What New Habits will Persist? Conferences?
Time Around the House-Remodel, Size, Furnishings, Classroom, Office
Supply Chain Importance, Location, More Inventory-Just in Time to Just in Case, Regional Networks-Lots More Attention-Alternatives
Remote Work (WFH) or Live Anywhere-Blip or Lasting Trend?
Geographic Implications of the Trauma? Suburban, Smaller Cities, Milder Climates?
Monetary/Fiscal Policy Institutions-Independence of Fed
The Long Shadow and Leftovers Of This Interlude
Plans Disrupted, Assumptions Changed, Downside Risks Increased, What is the worst case now for planning?
What business entities will survive? Particularly small! Deferrals, Forbearance, Eviction Moratoriums
Education Disruption-Lifetime Implications, Poor Bear The Brunt, Declining College Enrollments
Participation Rates-Stay Home, Income and Experience Loss, Drop Out
Retirement Resources Depleted by Job and Income Loss ,Premature Retirement, Using Retirement Savings Early
Millions of People with Covid-19-The Long-Term impacts-Cardiac, Renal, Pulmonary damage
The Safety Net Fissures-Highlighted by the Pandemic-Sick Leave, Insurance tied to employment, Essential Low Wage Workers-Will they be addressed?
Soaring Wealth Disparities-Financial Assets, Home Prices- Net Worth rose $8.3 Trillion in Q2 and $3.8 Trillion in Q3
Will Fiscal/Monetary Policy change when we approach capacity limits and inflation accelerates? Rising Rates with Enlarged Debt Burden
The Trade Conflicts have been Overshadowed, But They are not Gone-What will be the system for a Multipolar Word and What will be Our Role? COVAX, WTO, WHO, UN, Paris Accord, TPP
The Way We Were Is Not The Way We Are
Stay Safe