Tom Moeller

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The Federal Reserve Bank of Philadelphia reported that its
Nonmanufacturing Business Index of current general activity at the company level
dropped to -12.8 during March after rising to 36.1 in February. The index
of expected general activity similarly declined to -16.3 from 44.2.

Components of the company general activity index were
uniformly weak this month. New orders figures collapsed to -16.4. A reduced 17% of firms reported improved new orders while a
greatly increased 33% reported a decline. The sales or revenue series fell m/m to -4.9, the lowest
level in over four years. The index of unfilled orders improved but the inventories
measure cratered.

The labor market measures retreated in March. The full-time
permanent employment measure fell to -1.7, indicating job cutbacks at the
greatest rate since 2012. A greatly lessened 19% of firms reported increased hiring while a surging 20% reported a
decline. Part-time/temporary employee hiring also weakened sharply to a roughly
five-year low. The average workweek reading similarly collapsed as did the wages &amp; benefits measure.

Pricing power was constrained. The index of prices paid
fell sharply to 6.0, down from 34.7 just three months ago. A greatly lessened
15% of firms reported higher prices while an increased nine percent
indicated a decline, the most in five years. Prices received also were
significantly weakened.

The capital expenditure measures fell sharply. The physical
plant measure declined to the lowest level since October. The
equipment &amp; software expenditure reading also weakened to a four-month low.

The Philadelphia Fed figures are diffusion indexes which are
calculated by subtracting the percent of respondents reporting decreases in
business activity from those reporting improvement. So, readings above zero
indicate more positive than negative responses. These indexes have a good
correlation with growth in the series covered. The data are available in Haver's
SURVEYS database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	 	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Federal Reserve Bank of
 Philadelphia: Nonmanufacturing Business Outlook Survey (Diffusion Index,
 SA)</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Mar'19</th>
 <th scope="col" >2019</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Activity - Company</td>
 <td>-12.8</td>
 <td>36.1</td>
 <td>23.5</td>
 <td>35.7</td>
 <td>23.4</td>
 <td>33.5</td>
 <td>27.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; New Orders</td>
 <td>-16.4</td>
 <td>28.1</td>
 <td>16.6</td>
 <td>24.0</td>
 <td>16.7</td>
 <td>24.2</td>
 <td>19.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Sales or Revenue</td>
 <td>-4.9</td>
 <td>39.8</td>
 <td>29.2</td>
 <td>41.0</td>
 <td>24.0</td>
 <td>30.8</td>
 <td>27.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Inventories</td>
 <td>-1.7</td>
 <td>5.6</td>
 <td>2.6</td>
 <td>9.7</td>
 <td>4.0</td>
 <td>5.2</td>
 <td>3.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Number of Full-Time Permanent
 Employees</td>
 <td>-1.7</td>
 <td>21.5</td>
 <td>12.5</td>
 <td>32.3</td>
 <td>20.9</td>
 <td>18.1</td>
 <td>14.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Part-Time/Temporary/Contract
 Employees</td>
 <td>-11.2</td>
 <td>10.4</td>
 <td>7.5</td>
 <td>18.1</td>
 <td>14.6</td>
 <td>15.5</td>
 <td>12.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Prices Paid</td>
 <td>6.0</td>
 <td>21.3</td>
 <td>25.0</td>
 <td>26.7</td>
 <td>25.0</td>
 <td>28.3</td>
 <td>21.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Wage &amp; Benefit Costs</td>
 <td>26.6</td>
 <td>30.7</td>
 <td>49.9</td>
 <td>41.6</td>
 <td>39.4</td>
 <td>40.1</td>
 <td>33.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Expected General Activity - Company</td>
 <td>-16.3</td>
 <td>44.2</td>
 <td>55.6</td>
 <td>44.2</td>
 <td>41.7</td>
 <td>49.9</td>
 <td>49.8</td>
 </tr>
 </tbody>
 </table>
 
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The Federal Reserve Bank of Philadelphia reported that its Nonmanufacturing Business Index of current general activity at the company level dropped to -12.8 during March after rising to 36.1 in February. The index of expected general [...]

Philadelphia Fed Nonmanufacturing Business Activity Collapses

Robert Brusca

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We have known for some time that the impact of the coronavirus was coming and that it would hit data. Until now, few reports save last month's PMI for China gave any indication of the severity of the weakness that was encroaching. But with lockdowns and travel restrictions, it was very clear that something big was about to undercut economic reports. And here it is. It strikes in March, the month that comes in like a lion and out like a lamb...or vice versa. The Markit PMIs for manufacturing, services and the composite index, show incredible sudden weakness. Many areas are registering record drops. The flash data were released today. There will be more to come.

The EMU manufacturing gauge drops to 44.8 in March from 49.2 in February. The services gauge plummets to 28.4 from 52.6. The EMU composite drops to 31.4 from 51.6. There are sharp drops all around.



Now what? 
Governments and central banks are gearing up all sorts of program to try to shore up people's lives as engineered activity shutdowns are engaged to stop the spread of the virus. While some have called this a macroeconomic shock, I completely disagree. This is an engineered program that drastically slows growth with the objective of stopping spread of the virus. I do not wish to call it a macroeconomic shock since that conjures up us traditional macroeconomic tools to fight it and nothing could be more wrong than that. The idea now is not to stimulate the economy but to provide a lifeline for those whose jobs disappear and who have lost income support and who need medical care because of these government run programs that are stopping growth and in some cases throwing people out of work. The macroeconomic POLICY here is to slow growth; it is not a SHOCK.

Make no mistake about it, if people go unemployed, or if businesses bust and if people wring their hands in despair of their degraded economic circumstances- blame government. Governments HAVE CHOSEN to put health officials in charge of economic policy and so economic systems are being shut down with the sole objective of stopping a virus from spreading one that gives you cold and flu-like symptoms but can also be deadly to a few known groups such as old people and those with pre-existing medical conditions. Rather than choosing to isolate these groups or give them special attention, authorities have opted to shut everything down in many cases. That decision is evident in the plunge of the PMI statistics in March.

And while some big spending/support programs are being announced offering monies to some… getting support to all the affected workers especially at small firms or free lancers is a job too big. Basic government support is not going to make these people whole; we can expect that, regardless of the size of the 'package,' people are going to fall through the cracks between these support programs.

For what purpose? 
Is stopping the spread of 'flu' that important? Is it the risk of death to members of the special groups? If so, why not target THEM for special treatment and let economic growth continue under less drastic behavior modification than a lockdown? At some point, someone will come to their senses on this. I consider most of these policy-responses knee-jerk heath-official-inspired overkill. If this were Ebola or a Bubonic plague-type of disease, this response would make sense; in that case, in fact, it would be too-little and too late. But the risk/reward for these polices in this circumstance simply IS NOT THERE. Maybe the end of this shutdown will come because protests will mount by people who have run out of resources. The risk of some sort of groundswell of resistance to this policy increases each day that the lockdown strategy is in play.

So that is the real risk: severe social unrest. The risk is not depression or economic collapse unless policymakers turn the tourniquet too tight and keep it on for too long – and that is a risk. But long before irreparable economic damage will be done, there will be social backlash to this. Governments simply are not set up in most places to provide the scope of support needed by all displaced persons. Most help-programs support large corporations. Banks are always a focus of support. But small businesses, the gig economy, independent businesses, freelancers -all of whom have seen their numbers grow- these are the groups where the dissent will foment. So be sure to read the news and see the clues.


Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
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We have known for some time that the impact of the coronavirus was coming and that it would hit data. Until now, few reports save last month's PMI for China gave any indication of the severity of the weakness that was encroaching. But [...]

Corona Clobbers PMIs; It's Here! Are YOU Next?

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The per barrel price of West Texas Intermediate crude oil
has weakened due to reduced demand from around the globe and increases in
supply. It declined to $23.36 yesterday from an average $24.79 last week after
averaging $32.34 in the prior week. It was the lowest price since March 2002.
Prices have fallen from $61.75 averaged in the first week of January. The price
of Brent crude oil weakened to $27.07 per barrel yesterday from an average of
$28.09 last week, down from $34.97 in the prior week. The price has fallen from
a $67.38 high averaged in the last week of December.

Retail gasoline prices declined to $2.12 per gallon
(-19.2% y/y) in the week ended March 23 from $2.25 per gallon
in the previous week. Prices remained below an early-May peak of $2.90 per
gallon. Haver Analytics adjusts prices for seasonal variation. The seasonally
adjusted gasoline price fell to $2.14 per gallon.

The average price of natural gas fell to $1.79/mmbtu
(-37.4% y/y) last week and reversed the prior week's increase to $1.87/mmbtu. The price
weakened to $1.70/mmbtu yesterday and remained below the peak of $2.81/mmbtu early in November.

In the four weeks ending March 13, gasoline demand
increased 2.1% y/y, while total petroleum product demand improved 0.3% y/y. Gasoline
inventories eased 0.3% y/y and inventories of all petroleum products
increased 1.5% y/y. Crude oil input to refineries declined 1.4% y/y in the past
four weeks.

These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's WEEKLY and DAILY databases.
Greater detail on prices, as well as the demand, production and inventory data,
along with regional breakdowns, are in OILWKLY.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Weekly Energy Prices</th>
 <th>03/23/20</th>
 <th>03/16/20</th>
 <th>03/09/20</th>
 <th>Y/Y %</th>
 <th>2019</th>
 <th>2018</th>
 <th>2017</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Retail Gasoline ($ per Gallon Regular,
 Monday Price, End of Period)</td>
 <td>2.12</td>
 <td>2.25</td>
 <td>2.38</td>
 <td>-19.2</td>
 <td>2.57</td>
 <td>2.27</td>
 <td>2.47</td>
 </tr>
 <tr>
 <td class="firstcol" >Light Sweet Crude Oil, WTI ($ per bbl,
 Previous Week's Average)</td>
 <td>24.79</td>
 <td>32.34</td>
 <td>45.55</td>
 <td>-58.3</td>
 <td>56.91</td>
 <td>64.95</td>
 <td>50.87</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Natural Gas ($/mmbtu, LA, Previous
 Week's Average)</td>
 <td>1.79</td>
 <td>1.87</td>
 <td>1.80</td>
 <td>-37.4</td>
 <td>2.57</td>
 <td>3.18</td>
 <td>2.99</td>
 </tr>
 </tbody>
 </table>
 
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The per barrel price of West Texas Intermediate crude oil has weakened due to reduced demand from around the globe and increases in supply. It declined to $23.36 yesterday from an average $24.79 last week after averaging $32.34 in the [...]

U.S. Energy Product Costs Plumb New Lows

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The per barrel price of West Texas Intermediate crude oil
has weakened due to reduced demand from around the globe and increases in
supply. It declined to $23.36 yesterday from an average $24.79 last week after
averaging $32.34 in the prior week. It was the lowest price since March 2002.
Prices have fallen from $61.75 averaged in the first week of January. The price
of Brent crude oil weakened to $27.07 per barrel yesterday from an average of
$28.09 last week, down from $34.97 in the prior week. The price has fallen from
a $67.38 high averaged in the last week of December

Retail gasoline prices declined to $2.12 per gallon
(-19.2% y/y) in the week ended March 23 from $2.25 per gallon
in the previous week. Prices remained below an early-May peak of $2.90 per
gallon. Haver Analytics adjusts prices for seasonal variation. The seasonally
adjusted gasoline price fell to $2.14 per gallon.

The average price of natural gas fell to $1.79/mmbtu
(-37.4% y/y) last week and reversed the prior week's increase to $1.87/mmbtu. The price
weakened to $1.70/mmbtu yesterday and remained below the peak of $2.81/mmbtu early in November.

In the four weeks ending March 13, gasoline demand
increased 2.1% y/y, while total petroleum product demand improved 0.3% y/y. Gasoline
inventories eased 0.3% y/y and inventories of all petroleum products
increased 1.5% y/y. Crude oil input to refineries declined 1.4% y/y in the past
four weeks.

These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's WEEKLY and DAILY databases.
Greater detail on prices, as well as the demand, production and inventory data,
along with regional breakdowns, are in OILWKLY.
Federal Reserve issues FOMC statement: <a href="https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323a1.pdf">https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323a1.pdf</a>

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1046">Weekly Energy Prices</th>
 <th width="117">03/23/20</th>
 <th width="117">03/16/20</th>
 <th width="117">03/09/20</th>
 <th width="117">Y/Y %</th>
 <th width="117">2019</th>
 <th width="118">2018</th>
 <th width="118">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="1046">Retail Gasoline ($ per Gallon Regular,
 Monday Price, End of Period)</td>
 <td align="center" width="117">2.12</td>
 <td align="center" width="117">2.25</td>
 <td align="center" width="117">2.38</td>
 <td align="center" width="117">-19.2</td>
 <td align="center" width="117">2.57</td>
 <td align="center" width="118">2.27</td>
 <td align="center" width="118">2.47</td>
 </tr>
 <tr>
 <td class="firstcol" width="1046">Light Sweet Crude Oil, WTI ($ per bbl,
 Previous Week's Average)</td>
 <td align="center" width="117">24.79</td>
 <td align="center" width="117">32.34</td>
 <td align="center" width="117">45.55</td>
 <td align="center" width="117">-58.3</td>
 <td align="center" width="117">56.91</td>
 <td align="center" width="118">64.95</td>
 <td align="center" width="118">50.87</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1046">Natural Gas ($/mmbtu, LA, Previous
 Week's Average)</td>
 <td align="center" width="117">1.79</td>
 <td align="center" width="117">1.87</td>
 <td align="center" width="117">1.80</td>
 <td align="center" width="117">-37.4</td>
 <td align="center" width="117">2.57</td>
 <td align="center" width="118">3.18</td>
 <td align="center" width="118">2.99</td>
 </tr>
 </tbody>
 </table>
 
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<title>Empire State Manufacturing Conditions Strengthen by Tom Moeller&nbsp;
March 16</title>
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The per barrel price of West Texas Intermediate crude oil
has weakened due to reduced demand from around the globe and increases in
supply. It declined to $23.36 yesterday from an average $24.79 last week after
averaging $32.34 in the prior week. It was the lowest price since March 2002.
Prices have fallen from $61.75 averaged in the first week of January. The price
of Brent crude oil weakened to $27.07 per barrel yesterday from an average of
$28.09 last week, down from $34.97 in the prior week. The price has fallen from
a $67.38 high averaged in the last week of December.
Retail gasoline prices declined to $2.12 per gallon
(-19.2% y/y) in the week ended March 23 from $2.25 per gallon in the previous
week. Prices remained below an early-May peak of $2.90 per gallon. Haver
Analytics adjusts prices for seasonal variation. The seasonally adjusted
gasoline price fell to $2.14 per gallon.
The average price of natural gas fell to $1.79/mmbtu
(-37.4% y/y) last week and reversed the prior week's increase to $1.87/mmbtu.
The price weakened to $1.70/mmbtu yesterday and remained below the peak of
$2.81/mmbtu early in November.
In the four weeks ending March 13, gasoline demand
 increased 2.1% y/y, while total petroleum product demand improved 0.3% y/y. Gasoline
inventories eased 0.3% y/y and inventories of all petroleum products
increased 1.5% y/y. Crude oil input to refineries declined 1.4% y/y in the past
four weeks.
These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's WEEKLY and DAILY databases.
Greater detail on prices, as well as the demand, production and inventory data,
along with regional breakdowns, are in OILWKLY.
Federal Reserve issues FOMC statement: <a href="https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323a1.pdf">https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323a1.pdf</a>
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1046">Weekly Energy Prices</th>
 <th width="117">03/23/20</th>
 <th width="117">03/16/20</th>
 <th width="117">03/09/20</th>
 <th width="117">Y/Y %</th>
 <th width="117">2019</th>
 <th width="118">2018</th>
 <th width="118">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="1046">Retail Gasoline ($ per Gallon Regular,
 Monday Price, End of Period)</td>
 <td align="center" width="117">2.12</td>
 <td align="center" width="117">2.25</td>
 <td align="center" width="117">2.38</td>
 <td align="center" width="117">-19.2</td>
 <td align="center" width="117">2.57</td>
 <td align="center" width="118">2.27</td>
 <td align="center" width="118">2.47</td>
 </tr>
 <tr>
 <td class="firstcol" width="1046">Light Sweet Crude Oil, WTI ($ per bbl,
 Previous Week's Average)</td>
 <td align="center" width="117">24.79</td>
 <td align="center" width="117">32.34</td>
 <td align="center" width="117">45.55</td>
 <td align="center" width="117">-58.3</td>
 <td align="center" width="117">56.91</td>
 <td align="center" width="118">64.95</td>
 <td align="center" width="118">50.87</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1046">Natural Gas ($/mmbtu, LA, Previous
 Week's Average)</td>
 <td align="center" width="117">1.79</td>
 <td align="center" width="117">1.87</td>
 <td align="center" width="117">1.80</td>
 <td align="center" width="117">-37.4</td>
 <td align="center" width="117">2.57</td>
 <td align="center" width="118">3.18</td>
 <td align="center" width="118">2.99</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. New Home Sales Jump to 2007 High; Prices Reach
Record 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;March 24, 2020
Sales of new single-family homes increased 7.9% (18.6% y/y)
during January to 764,000 units (SAAR), the highest level since July 2007. Sales
increased from 708,000 in December, revised from 694,000. Figures for 2019 were
revised. The Action Economics survey expected sales of 710,000.
The median price of a new home rose 7.4% (14.0% y/y) last
month to a record $348,200. The average price of a new home also increased to a
record of $402,300 (11.4% y/y). The home price figures are not seasonally
adjusted.
Sales activity was mixed across the country in January. In
the Midwest, sales rose 30.3% (47.8% y/y) to 99,000. Sales in the West rose
23.5% (49.1% y/y) to 252,000 units. Sales in the Northeast gained 4.8% (46.7%
y/y) to 44,000. Working 4.4% lower to 369,000 (-2.4% y/y) were new home sales in
the South.&nbsp;
The supply of homes on the market declined to 5.1 months in
January from 5.5 in the prior two months. It was the lowest level since November
2017 and down from a high of 7.4 months at the end of 2018. The medium number of
months that a new home was for sale rose to 3.3, up from 3.0 in December.
The data in this report are available in Haver's USECON
database. The consensus expectation figure from Action Economics is available in
the AS1REPNA database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="880">U.S. New Single-Family
 Home Sales (SAAR, 000s)</th>
 <th scope="col" width="141">Feb</th>
 <th scope="col" width="141">Jan</th>
 <th scope="col" width="141">Dec</th>
 <th scope="col" width="141">Feb Y/Y %</th>
 <th scope="col" width="141">2019</th>
 <th scope="col" width="141">2018</th>
 <th scope="col" width="141">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="880">Total</td>
 <td align="center" width="141">765</td>
 <td align="center" width="141">800</td>
 <td align="center" width="141">724</td>
 <td align="center" width="141">14.3</td>
 <td align="center" width="141">682</td>
 <td align="center" width="141">615</td>
 <td align="center" width="141">617</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="880">&nbsp; Northeast</td>
 <td align="center" width="141">50</td>
 <td align="center" width="141">36</td>
 <td align="center" width="141">39</td>
 <td align="center" width="141">47.1</td>
 <td align="center" width="141">31</td>
 <td align="center" width="141">32</td>
 <td align="center" width="141">40</td>
 </tr>
 <tr>
 <td class="firstcol" width="880">&nbsp; Midwest</td>
 <td align="center" width="141">89</td>
 <td align="center" width="141">96</td>
 <td align="center" width="141">84</td>
 <td align="center" width="141">15.6</td>
 <td align="center" width="141">71</td>
 <td align="center" width="141">75</td>
 <td align="center" width="141">72</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="880">&nbsp; South</td>
 <td align="center" width="141">404</td>
 <td align="center" width="141">400</td>
 <td align="center" width="141">393</td>
 <td align="center" width="141">6.3</td>
 <td align="center" width="141">399</td>
 <td align="center" width="141">348</td>
 <td align="center" width="141">341</td>
 </tr>
 <tr>
 <td class="firstcol" width="880">&nbsp; West&nbsp;</td>
 <td align="center" width="141">222</td>
 <td align="center" width="141">268</td>
 <td align="center" width="141">208</td>
 <td align="center" width="141">24.7</td>
 <td align="center" width="141">182</td>
 <td align="center" width="141">160</td>
 <td align="center" width="141">164</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="880">Median Price (NSA, $)</td>
 <td align="center" width="141">345,900</td>
 <td align="center" width="141">325,300</td>
 <td align="center" width="141">327,700</td>
 <td align="center" width="141">7.8</td>
 <td align="center" width="141">318,817</td>
 <td align="center" width="141">323,125</td>
 <td align="center" width="141">321,633</td>
 </tr>
 </tbody>
</table>

&nbsp;
Philadelphia Fed Nonmanufacturing Business Activity
Collapses 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;March 24, 2020
The Federal Reserve Bank of Philadelphia reported that its
Nonmanufacturing Business Index of current general activity at the company level
dropped to -12.8 during March after rising to 36.1 in February. The index
of expected general activity similarly declined to -16.3 from 44.2.
Components of the company general activity index were
uniformly weak
this month. New orders figures collapsed to -16.4. A reduced 17% of firms reported improved new orders while a
greatly increased 33%
reported a decline. The sales or revenue series fell m/m to -4.9, the lowest
level in over four years. The index of unfilled orders improved but the inventories
measure cratered.
The labor market measures retreated in March. The full-time
permanent employment measure fell to -1.7, indicating job cutbacks at the
greatest rate since 2012. A greatly
lessened 19% of firms reported increased hiring while a surging 20% reported a
decline. Part-time/temporary employee hiring also weakened sharply to a roughly
five-year low. The average workweek reading similarly collapsed as did the wages &amp; benefits measure.
Pricing power was constrained. The index of prices paid
fell sharply to 6.0, down from 34.7 just three months ago. A greatly lessened
15% of firms reported higher prices while an increased nine percent
indicated a decline, the most in five years. Prices received also were
significantly weakened.
The capital expenditure measures fell sharply. The physical
plant measure declined to the lowest level since October. The
equipment &amp; software expenditure reading also weakened to a four-month low.
The Philadelphia Fed figures are diffusion indexes which are
calculated by subtracting the percent of respondents reporting decreases in
business activity from those reporting improvement. So, readings above zero
indicate more positive than negative responses. These indexes have a good
correlation with growth in the series covered. The data are available in Haver's
SURVEYS database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1380">Federal Reserve Bank of
 Philadelphia: Nonmanufacturing Business Outlook Survey (Diffusion Index,
 SA)</th>
 <th scope="col" width="69">Mar</th>
 <th scope="col" width="69">Feb</th>
 <th scope="col" width="69">Jan</th>
 <th scope="col" width="70">Mar'19</th>
 <th scope="col" width="70">2019</th>
 <th scope="col" width="70">2018</th>
 <th scope="col" width="70">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1380">General Activity - Company</td>
 <td align="center" width="69">-12.8</td>
 <td align="center" width="69">36.1</td>
 <td align="center" width="69">23.5</td>
 <td align="center" width="70">35.7</td>
 <td align="center" width="70">23.4</td>
 <td align="center" width="70">33.5</td>
 <td align="center" width="70">27.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; New Orders</td>
 <td align="center" width="69">-16.4</td>
 <td align="center" width="69">28.1</td>
 <td align="center" width="69">16.6</td>
 <td align="center" width="70">24.0</td>
 <td align="center" width="70">16.7</td>
 <td align="center" width="70">24.2</td>
 <td align="center" width="70">19.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Sales or Revenue</td>
 <td align="center" width="69">-4.9</td>
 <td align="center" width="69">39.8</td>
 <td align="center" width="69">29.2</td>
 <td align="center" width="70">41.0</td>
 <td align="center" width="70">24.0</td>
 <td align="center" width="70">30.8</td>
 <td align="center" width="70">27.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Inventories</td>
 <td align="center" width="69">-1.7</td>
 <td align="center" width="69">5.6</td>
 <td align="center" width="69">2.6</td>
 <td align="center" width="70">9.7</td>
 <td align="center" width="70">4.0</td>
 <td align="center" width="70">5.2</td>
 <td align="center" width="70">3.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Number of Full-Time Permanent
 Employees</td>
 <td align="center" width="69">-1.7</td>
 <td align="center" width="69">21.5</td>
 <td align="center" width="69">12.5</td>
 <td align="center" width="70">32.3</td>
 <td align="center" width="70">20.9</td>
 <td align="center" width="70">18.1</td>
 <td align="center" width="70">14.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Part-Time/Temporary/Contract
 Employees</td>
 <td align="center" width="69">-11.2</td>
 <td align="center" width="69">10.4</td>
 <td align="center" width="69">7.5</td>
 <td align="center" width="70">18.1</td>
 <td align="center" width="70">14.6</td>
 <td align="center" width="70">15.5</td>
 <td align="center" width="70">12.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Prices Paid</td>
 <td align="center" width="69">6.0</td>
 <td align="center" width="69">21.3</td>
 <td align="center" width="69">25.0</td>
 <td align="center" width="70">26.7</td>
 <td align="center" width="70">25.0</td>
 <td align="center" width="70">28.3</td>
 <td align="center" width="70">21.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Wage &amp; Benefit Costs</td>
 <td align="center" width="69">26.6</td>
 <td align="center" width="69">30.7</td>
 <td align="center" width="69">49.9</td>
 <td align="center" width="70">41.6</td>
 <td align="center" width="70">39.4</td>
 <td align="center" width="70">40.1</td>
 <td align="center" width="70">33.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">Expected General Activity - Company</td>
 <td align="center" width="69">-16.3</td>
 <td align="center" width="69">44.2</td>
 <td align="center" width="69">55.6</td>
 <td align="center" width="70">44.2</td>
 <td align="center" width="70">41.7</td>
 <td align="center" width="70">49.9</td>
 <td align="center" width="70">49.8</td>
 </tr>
 </tbody>
</table>


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<title>Empire State Manufacturing Conditions Strengthen by Tom Moeller&nbsp;
March 16</title>
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The per barrel price of West Texas Intermediate crude oil
has weakened due to reduced demand from around the globe and increases in
supply. It declined to $23.36 yesterday from an average $24.79 last week after
averaging $32.34 in the prior week. It was the lowest price since March 2002.
Prices have fallen from $61.75 averaged in the first week of January. The price
of Brent crude oil weakened to $27.07 per barrel yesterday from an average of
$28.09 last week, down from $34.97 in the prior week. The price has fallen from
a $67.38 high averaged in the last week of December.
Retail gasoline prices declined to $2.12 per gallon
(-19.2% y/y) in the week ended March 23 from $2.25 per gallon in the previous
week. Prices remained below an early-May peak of $2.90 per gallon. Haver
Analytics adjusts prices for seasonal variation. The seasonally adjusted
gasoline price fell to $2.14 per gallon.
The average price of natural gas fell to $1.79/mmbtu
(-37.4% y/y) last week and reversed the prior week's increase to $1.87/mmbtu.
The price weakened to $1.70/mmbtu yesterday and remained below the peak of
$2.81/mmbtu early in November.
In the four weeks ending March 13, gasoline demand
 increased 2.1% y/y, while total petroleum product demand improved 0.3% y/y. Gasoline
inventories eased 0.3% y/y and inventories of all petroleum products
increased 1.5% y/y. Crude oil input to refineries declined 1.4% y/y in the past
four weeks.
These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's WEEKLY and DAILY databases.
Greater detail on prices, as well as the demand, production and inventory data,
along with regional breakdowns, are in OILWKLY.
Federal Reserve issues FOMC statement: <a href="https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323a1.pdf">https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200323a1.pdf</a>
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1046">Weekly Energy Prices</th>
 <th width="117">03/23/20</th>
 <th width="117">03/16/20</th>
 <th width="117">03/09/20</th>
 <th width="117">Y/Y %</th>
 <th width="117">2019</th>
 <th width="118">2018</th>
 <th width="118">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="1046">Retail Gasoline ($ per Gallon Regular,
 Monday Price, End of Period)</td>
 <td align="center" width="117">2.12</td>
 <td align="center" width="117">2.25</td>
 <td align="center" width="117">2.38</td>
 <td align="center" width="117">-19.2</td>
 <td align="center" width="117">2.57</td>
 <td align="center" width="118">2.27</td>
 <td align="center" width="118">2.47</td>
 </tr>
 <tr>
 <td class="firstcol" width="1046">Light Sweet Crude Oil, WTI ($ per bbl,
 Previous Week's Average)</td>
 <td align="center" width="117">24.79</td>
 <td align="center" width="117">32.34</td>
 <td align="center" width="117">45.55</td>
 <td align="center" width="117">-58.3</td>
 <td align="center" width="117">56.91</td>
 <td align="center" width="118">64.95</td>
 <td align="center" width="118">50.87</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1046">Natural Gas ($/mmbtu, LA, Previous
 Week's Average)</td>
 <td align="center" width="117">1.79</td>
 <td align="center" width="117">1.87</td>
 <td align="center" width="117">1.80</td>
 <td align="center" width="117">-37.4</td>
 <td align="center" width="117">2.57</td>
 <td align="center" width="118">3.18</td>
 <td align="center" width="118">2.99</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. New Home Sales Ease While Prices Strengthen 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;March 24, 2020
Sales of new single-family homes declined 4.4% (+14.3% y/y)
during February to 765,000 (AR) from 800,000 in January, revised from 764,000.
The Action Economics survey expected sales of 754,000.
The median price of a new home rose 6.3% (7.8% y/y) last
month to a record $345,900. The average price of a new home also increased to a
record of $403,800 (5.3% y/y). The home price figures are not seasonally
adjusted.
Sales activity was mixed across the country in February.
Sales in the West declined 17.2% (+24.7% y/y) to 222,000 units. In the Midwest,
sales fell 7.3% (+15.6% y/y) to 89,000. Working the other way, sales in the
Northeast jumped 38.9% (47.1% y/y) to 50,000 while sales in the South edged 1.0%
higher (6.3% y/y) to 404,000.&nbsp;
The supply of homes on the market rose to 5.0 months in
February, but the January figure was revised down to 4.8 months. These figures
were below the high of 7.4 months at the end of 2018. The medium number of
months that a new home was for sale held steady at 3.3, down from 14 months at
the beginning of the economic expansion.
The data in this report are available in Haver's USECON
database. The consensus expectation figure from Action Economics is available in
the AS1REPNA database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="880">U.S. New Single-Family
 Home Sales (SAAR, 000s)</th>
 <th scope="col" width="141">Feb</th>
 <th scope="col" width="141">Jan</th>
 <th scope="col" width="141">Dec</th>
 <th scope="col" width="141">Feb Y/Y %</th>
 <th scope="col" width="141">2019</th>
 <th scope="col" width="141">2018</th>
 <th scope="col" width="141">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="880">Total</td>
 <td align="center" width="141">765</td>
 <td align="center" width="141">800</td>
 <td align="center" width="141">724</td>
 <td align="center" width="141">14.3</td>
 <td align="center" width="141">682</td>
 <td align="center" width="141">615</td>
 <td align="center" width="141">617</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="880">&nbsp; Northeast</td>
 <td align="center" width="141">50</td>
 <td align="center" width="141">36</td>
 <td align="center" width="141">39</td>
 <td align="center" width="141">47.1</td>
 <td align="center" width="141">31</td>
 <td align="center" width="141">32</td>
 <td align="center" width="141">40</td>
 </tr>
 <tr>
 <td class="firstcol" width="880">&nbsp; Midwest</td>
 <td align="center" width="141">89</td>
 <td align="center" width="141">96</td>
 <td align="center" width="141">84</td>
 <td align="center" width="141">15.6</td>
 <td align="center" width="141">71</td>
 <td align="center" width="141">75</td>
 <td align="center" width="141">72</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="880">&nbsp; South</td>
 <td align="center" width="141">404</td>
 <td align="center" width="141">400</td>
 <td align="center" width="141">393</td>
 <td align="center" width="141">6.3</td>
 <td align="center" width="141">399</td>
 <td align="center" width="141">348</td>
 <td align="center" width="141">341</td>
 </tr>
 <tr>
 <td class="firstcol" width="880">&nbsp; West&nbsp;</td>
 <td align="center" width="141">222</td>
 <td align="center" width="141">268</td>
 <td align="center" width="141">208</td>
 <td align="center" width="141">24.7</td>
 <td align="center" width="141">182</td>
 <td align="center" width="141">160</td>
 <td align="center" width="141">164</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="880">Median Price (NSA, $)</td>
 <td align="center" width="141">345,900</td>
 <td align="center" width="141">325,300</td>
 <td align="center" width="141">327,700</td>
 <td align="center" width="141">7.8</td>
 <td align="center" width="141">318,817</td>
 <td align="center" width="141">323,125</td>
 <td align="center" width="141">321,633</td>
 </tr>
 </tbody>
</table>

&nbsp;
Philadelphia Fed Nonmanufacturing Business Activity
Collapses 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;March 24, 2020
The Federal Reserve Bank of Philadelphia reported that its
Nonmanufacturing Business Index of current general activity at the company level
dropped to -12.8 during March after rising to 36.1 in February. The index of
expected general activity similarly declined to -16.3 from 44.2.
Components of the company general activity index were
uniformly weak this month. New orders figures collapsed to -16.4. A reduced 17%
of firms reported improved new orders while a greatly increased 33% reported a
decline. The sales or revenue series fell m/m to -4.9, the lowest level in over
four years. The index of unfilled orders improved but the inventories measure
cratered.
The labor market measures retreated in March. The full-time
permanent employment measure fell to -1.7, indicating job cutbacks at the
greatest rate since 2012. A greatly lessened 19% of firms reported increased
hiring while a surging 20% reported a decline. Part-time/temporary employee
hiring also weakened sharply to a roughly five-year low. The average workweek
reading similarly collapsed as did the wages &amp; benefits measure.
Pricing power was constrained. The index of prices paid fell
sharply to 6.0, down from 34.7 just three months ago. A greatly lessened 15% of
firms reported higher prices while an increased nine percent indicated a
decline, the most in five years. Prices received also were significantly
weakened.
The capital expenditure measures fell sharply. The physical
plant measure declined to the lowest level since October. The equipment &amp;
software expenditure reading also weakened to a four-month low.
The Philadelphia Fed figures are diffusion indexes which are
calculated by subtracting the percent of respondents reporting decreases in
business activity from those reporting improvement. So, readings above zero
indicate more positive than negative responses. These indexes have a good
correlation with growth in the series covered. The data are available in Haver's
SURVEYS database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1380">Federal Reserve Bank of
 Philadelphia: Nonmanufacturing Business Outlook Survey (Diffusion Index,
 SA)</th>
 <th scope="col" width="69">Mar</th>
 <th scope="col" width="69">Feb</th>
 <th scope="col" width="69">Jan</th>
 <th scope="col" width="70">Mar'19</th>
 <th scope="col" width="70">2019</th>
 <th scope="col" width="70">2018</th>
 <th scope="col" width="70">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1380">General Activity - Company</td>
 <td align="center" width="69">-12.8</td>
 <td align="center" width="69">36.1</td>
 <td align="center" width="69">23.5</td>
 <td align="center" width="70">35.7</td>
 <td align="center" width="70">23.4</td>
 <td align="center" width="70">33.5</td>
 <td align="center" width="70">27.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; New Orders</td>
 <td align="center" width="69">-16.4</td>
 <td align="center" width="69">28.1</td>
 <td align="center" width="69">16.6</td>
 <td align="center" width="70">24.0</td>
 <td align="center" width="70">16.7</td>
 <td align="center" width="70">24.2</td>
 <td align="center" width="70">19.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Sales or Revenue</td>
 <td align="center" width="69">-4.9</td>
 <td align="center" width="69">39.8</td>
 <td align="center" width="69">29.2</td>
 <td align="center" width="70">41.0</td>
 <td align="center" width="70">24.0</td>
 <td align="center" width="70">30.8</td>
 <td align="center" width="70">27.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Inventories</td>
 <td align="center" width="69">-1.7</td>
 <td align="center" width="69">5.6</td>
 <td align="center" width="69">2.6</td>
 <td align="center" width="70">9.7</td>
 <td align="center" width="70">4.0</td>
 <td align="center" width="70">5.2</td>
 <td align="center" width="70">3.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Number of Full-Time Permanent
 Employees</td>
 <td align="center" width="69">-1.7</td>
 <td align="center" width="69">21.5</td>
 <td align="center" width="69">12.5</td>
 <td align="center" width="70">32.3</td>
 <td align="center" width="70">20.9</td>
 <td align="center" width="70">18.1</td>
 <td align="center" width="70">14.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Part-Time/Temporary/Contract
 Employees</td>
 <td align="center" width="69">-11.2</td>
 <td align="center" width="69">10.4</td>
 <td align="center" width="69">7.5</td>
 <td align="center" width="70">18.1</td>
 <td align="center" width="70">14.6</td>
 <td align="center" width="70">15.5</td>
 <td align="center" width="70">12.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Prices Paid</td>
 <td align="center" width="69">6.0</td>
 <td align="center" width="69">21.3</td>
 <td align="center" width="69">25.0</td>
 <td align="center" width="70">26.7</td>
 <td align="center" width="70">25.0</td>
 <td align="center" width="70">28.3</td>
 <td align="center" width="70">21.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">&nbsp; Wage &amp; Benefit Costs</td>
 <td align="center" width="69">26.6</td>
 <td align="center" width="69">30.7</td>
 <td align="center" width="69">49.9</td>
 <td align="center" width="70">41.6</td>
 <td align="center" width="70">39.4</td>
 <td align="center" width="70">40.1</td>
 <td align="center" width="70">33.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="1380">Expected General Activity - Company</td>
 <td align="center" width="69">-16.3</td>
 <td align="center" width="69">44.2</td>
 <td align="center" width="69">55.6</td>
 <td align="center" width="70">44.2</td>
 <td align="center" width="70">41.7</td>
 <td align="center" width="70">49.9</td>
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Typically when speaking of policymaking and central banks, we speak of interest rate levels. The chart and table memorialize how little room most central banks have had to work with as the coronavirus has struck and showed its hand. The U.S. has been able to make significant rate cuts but cuts that still are not substantial enough on their own. Clearly, the baton has been passed to fiscal policy. But what does that mean?

As fiscal policy has come into the picture even though it is more targeted and less the fiscal policy fix of your economic textbooks, the behavior of longer term interest rates has become less predictable. Concerns of fiscal excess are definitely in play. Forecasts foresee some outrageous numbers for unemployment rates as well as deeply negative GDP growth rates. Some have hinted of a U.S. unemployment rate as high as 25% to 30%. I have heard forecasts of Q2 growth as low as a -15% growth rate (at a compounded annual rate, of course). Still, that is s massive negative number.

There are no graphs or tables in anyone's data base to depict what we are at risk to. In fact, one amazing fact so far is how few economic data points point to anything out of the ordinary at all compared to what policymakers have done and what people now seem to fear.


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We have little to fear but policy itself 

I pen this tweaked sub-heading with apologies to FDR. But I believe it to be true. Policy is now inflicting much greater damage on the economy than the virus itself. Speaking as an economist and not as a public health official, let me make it clear that I see policy as a series of tradeoffs. Nothing is 100% sacrosanct. Once the marginal degree of substitution of one thing costs way too much in terms of another, it is time to rethink the trade-off. Policy right now is choking off and killing the economy and small business. Such draconian policy, if left in place too long, will create knock-on effects of its own that will have adverse consequences for public health, the state of this union, and all sorts of social economic factors. I'm not just worried about a GDP figure but about what destroying GDP would do to life.

This is a modern economy. We do not go out and forage for roots and berries or to shoot a deer in the woods when we lose our jobs. People undertake debt and make other economic decisions and some of them are not very good decisions when their backs are against the wall. Despite promises by governments to provide various monies, backstops, loan guarantees and maybe even grants, no one can know the needs of each person as well as that person himself or herself and that is the basis of capitalism. The state is meant to provide the environment for economic activity, but individuals are left to dot the i's and cross the t's. Government, in fact, does not begin to know how to do that for you. Government is set up to take money from you (taxes) not to funnel money to you except in a few specific cases.

The lockdown strategy may be a viable virus killer. But flooding your whole backyard is also a way to water your favorite plant. Some tactics simply reflect overkill. I am very worried about putting public health officials essentially in charge of economic policy. I believe we have gotten to the point where the greater risk to western nations comes from a policy of lockdown than from the coronavirus.

We know from the financial crisis that the government response will not make everyone whole and that government will play favorites. That's one reason not to assume that you can ruin people's economic lives and expect government to crazy glue them back together…just like new.

We also know that we are not facing Ebola or Dengue fever. The China evidence tells us who is most at risk, older people and people with certain pre-existing conditions. So it is time to pivot policy to protect them instead of trying to stamp out the virus everywhere --a job that is in any event nearly impossible and perhaps technically impossible without an abundance of test kits.

The mortality rates for those under 70 or so are about 0.2% and that number seems to include those with pre-existing conditions <a href="https://www.who.int/docs/default-source/coronaviruse/who-china-joint-mission-on-covid-19-final-report.pdf">(Source here)</a>. The risk of death to most is low but if the fever spreads beyond the capacity of the healthcare system as it is currently configured special steps would have to be taken. But if the at-risk groups are protected, the peak demand for hospitalization would be greatly reduced. Moreover, policy could pivot to a less invasive mitigating approach and reopen many, many, businesses. Let people in risk groups work from home or target them for aid if they stay at home and could not work. Those who become infected/symptomatic would be required to wait it out at home for 14 days. There are other reasonable approaches beyond the lockdown to manage peak demands.

The coronavirus gives MOST PEOPLE cold- and flu-like symptoms. Children under 10 apparently are very mildly affected. At this writing none in that category have died.

So putting on my economist hat what is the Cost/Benefit here? Does this approach that wrecks the economy and could bring on depression-era unemployment levels make sense to avoid flu-like symptoms? Doesn't it make more sense to build a more protective wall around at-risk groups and limit the overall economic disruption which is beginning to look more like economic destruction?

Small business will be decimated by a lockdown. The more sophisticated ones will figure out how to use the system. But many small business owners will not.

My basic tenant is that the cure should not be worse than the disease and I think we are pushing the envelope if not already exceeding that parameter. It is time to get people to realize what they are hiding from.

Central banks, in addition to whatever rate cutting they could do, have engaged in securities purchases to aid liquidity and offered various liquidity facilities both nationally and internationally; the scope of the action is truly amazing. My first take on this crisis was that the policy objective would be to slow activity so that a macroeconomic fiscal response and even rate cutting was wrong because the idea was not to prop up activity since slowing the spread would mean reducing interpersonal contact and that would slow economic gains. In my view, targeted fiscal spending would have been appropriate even if difficult to arrange. But then policy took this whole thing to an extreme that I frankly did not see coming and still do not understand- the lockdown.

Were this Ebola, I would understand these drastic measures. But it is not. Neither do I jump off the roof of a five-story building to avoid a mosquito bite. Policy actions need to be measured and calibrated. I think it is time to begin thinking about calibration and a more layered calibration before we have done more damage to the economy than we can reasonably repair in a short time. I think that the medical objective of flattening the curve is given a too-high priority. Targeting and protecting at-risk groups is less invasive and might have the same impact.

I think it is time to open our minds to what we are doing. Everything we do has risk. Some people will not drive in a car at all. Some will not drive in the rain. Some will not drive in the snow. Some people will not fly. People can choose their own level of risk as they do in everyday life with perhaps a less draconian governmental mandate as the baseline. That makes sense- much more sense than an economy-wreaking lockdown to avoid flu-like symptoms.

This report is the opinion of the author and may not reflect the views of the website that publishes it.

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Typically when speaking of policymaking and central banks, we speak of interest rate levels. The chart and table memorialize how little room most central banks have had to work with as the coronavirus has struck and showed its hand. [...]

Policy-making in the Time of the Coronavirus

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The Chicago Federal Reserve Bank indicated that these February figures likely were not much influenced by the COVID-19 outbreak.

It reported that its National Activity Index (CFNAI) improved
to 0.16 last month from -0.33 in January, revised from -0.25. February's was the
first positive reading in three months. The three-month moving average of the
index eased m/m to -0.21, but still was improved from the low of -0.52 last April.
During the last 20 years, there has been a 70% correlation between the index and
the q/q change in real GDP.

The rise in the February index reflected a sharp rise in the
Production &amp; Income component to 0.11 from -0.34 in January. It was the
first positive figure in three months. The Employment, Unemployment &amp; Hours
series edged higher to 0.05 from 0.01, the best reading since September 2019.
Working the other way, the Personal Consumption &amp; Housing gauge slipped to
0.02 from 0.03, which was the highest level in 12 months. The Sales, Orders and
Inventories measure eased to -0.03 from -0.02. 

The diffusion index of the CFNAI, which measures the breadth
of component change, fell to -0.20.

The CFNAI is a weighted average of 85 monthly indicators of
national economic activity. It is constructed to have an average value of zero
and a standard deviation of one. Since economic activity tends toward trend
growth rate over time, a positive index reading corresponds to growth above
trend and a negative index reading corresponds to growth below trend.

These figures are available in Haver's SURVEYS database.

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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Federal Reserve Bank of
 Chicago</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Feb '19</th>
 <th scope="col" >2019</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >National Activity Index (+ = Growth
 Above Trend)</td>
 <td>0.16</td>
 <td>-0.33</td>
 <td>-0.46</td>
 <td>-0.65</td>
 <td>-0.25</td>
 <td>0.16</td>
 <td>0.16</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Production &amp; Income</td>
 <td>0.11</td>
 <td>-0.34</td>
 <td>-0.32</td>
 <td>-0.30</td>
 <td>-0.17</td>
 <td>0.09</td>
 <td>0.08</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Employment, Unemployment
 &amp; Hours</td>
 <td>0.05</td>
 <td>0.01</td>
 <td>-0.08</td>
 <td>0.06</td>
 <td>-0.01</td>
 <td>0.10</td>
 <td>0.07</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Personal Consumption &amp;
 Housing</td>
 <td>0.02</td>
 <td>0.03</td>
 <td>0.00</td>
 <td>-0.14</td>
 <td>-0.03</td>
 <td>-0.06</td>
 <td>-0.05</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Sales, Orders &amp;
 Inventories</td>
 <td>-0.03</td>
 <td>-0.02</td>
 <td>-0.07</td>
 <td>-0.07</td>
 <td>-0.04</td>
 <td>0.03</td>
 <td>0.05</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; 3-Month Moving Average</td>
 <td>-0.21</td>
 <td>-0.11</td>
 <td>-0.22</td>
 <td>-0.25</td>
 <td>--</td>
 <td>--</td>
 <td>--</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Diffusion Index</td>
 <td>-0.20</td>
 <td>-0.11</td>
 <td>-0.19</td>
 <td>-0.16</td>
 <td>-0.16</td>
 <td>0.15</td>
 <td>0.08</td>
 </tr>
 </tbody>
 </table>
 
 </body></html>

The Chicago Federal Reserve Bank indicated that these February figures likely were not much influenced by the COVID-19 outbreak. It reported that its National Activity Index (CFNAI) improved to 0.16 last month from -0.33 in January, [...]

Chicago Fed National Activity Index Suggests Growth Picked Up in February

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

250501L5.jpg

250501M5.jpg

- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

250501N.jpg

250501O.jpg

The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

250501P.jpg

250501Q.jpg

- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

250501C8.jpg

250501D8.jpg

- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

U.S. Initial Jobless Claims Rise Notably in April 28 Week

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

Economy in Brief: March 2020

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