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Economic Research: U.S. Real-Time Data: The Recovery Backtracks

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Economic Research: U.S. Real-Time Data: The Recovery Backtracks

As 2020 comes to an end, we take stock of where the U.S. economy stands through the lens of real-time data.

New COVID-19 cases per million population have continued to steadily climb since we last published our real-time economic data report (see "Real Time Economic Data Tracker: An Odd Juncture," published Nov. 17). The new daily highs in transmission rates have led to soaring hospital utilization rates and death rates per million that are approaching the highs of the spring (see charts 1-2). All of this comes just as we also have first doses of vaccines administered to frontline medical workers. There is light at the end of the tunnel, and we can't get there fast enough.

Chart 1

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Chart 2

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The economy goes as the virus transmission goes, at least for now until the country is widely vaccinated. That means the upcoming months look to be a difficult stretch for the economy. In response to fear of overwhelming hospitals, more areas have started to close indoor activities such as in restaurants, gyms, museums, and other non-essential recreational types. Still, states and localities have so far avoided the same kind of strict lockdowns that were put in place in the spring, indicating that the medical profession now knows more about how the virus spreads and how to prepare hospitals.

S&P Global Ratings believes there remains a high degree of uncertainty about the evolution of the coronavirus pandemic. While the early approval of a number of vaccines is a positive development, countries' approval of vaccines is merely the first step toward a return to social and economic normality; equally critical is the widespread availability of effective immunization, which could come by mid-2021. We use this assumption in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

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Summary Of Indicators
Indicator How the data looks
Businesses closures/open Businesses continue to function as usual in most of the states, despite surge in new cases. However, a few states imposed restrictions on touch-sensitive sectors such as restaurants, entertainment, and outdoor recreation.
Potential U.S. home loss Nearly 6.7 million people are likely to face eviction or foreclosure in the next two months, as per the Census Bureau's recent Household Pulse Survey.
New COVID-19 cases New COVID-19 cases continue to surge, averaging nearly 215,000 per day in the past one week. Total confirmed cases already crossed 16.5 million. In other advanced countries, the second wave seems to have already peaked.
Hospitalization rate Resurgence of new cases is pushing hospitalizations to a record high. The fatality rate, however, is still well below summer.
Google mobility Mobility for retail and recreation largely remains stable in the U.S. (still 20% below February levels), while in New York and California, it is around 30%. This reflects the variation in mobility between states as people are cautious due to surging COVID-19 cases.
Weekly Economic Activity Index The composite index declined for the week ended Dec. 12 due to an increase in initial unemployment claims and a decrease in fuel sales and electricity output, which more than offset the rise in rail traffic and tax withholding.
Johnson Redbook Index The same-store sales growth is 2.5% year over year for the week ended Dec. 12, after posting a significant jump on the Thanksgiving holiday. Fading of fiscal stimulus and a second wave have started to weigh on retail sales before the upcoming holiday season.
Consumer spending on credit and debit cards Consumer spending dropped sharply in late November on the back of a spike in new cases, thereby denting the important consumer sector in the fourth quarter.
Consumer sentiment Consumer confidence remains weak as consumers are wary about the future of the virus and the economy.
Open Table Restaurants, as of Dec. 14, are operating at 66% below the same time last year. Restaurants in California and Illinois are 93% and 85% below, respectively.
Air traffic Air traffic stayed 67% below the same period last year, reflecting the impact of COVID-19 on tourism.
Energy demand Energy demand dipped amid the rise in virus cases, and active rigs count also remained quite low for the week ended Dec 11., which reflects the lower crude oil price weighing on investment.
Raw steel capacity utilization Capacity utilization shows a sideway drift after being in an uptrend for more than five months. Utilization stands at 71% for the week ended Dec. 12, which was almost 10% below its 2019 level.
New business applications Business applications increased by 31% year over year for the week ended Dec. 5, and growth has been steady since October.
Home mortgage applications Mortgage applications remain elevated, indicating strong housing demand on the back of record-low mortgage rates and change in housing market dynamics. Demand for single-unit homes surged as the pandemic triggered relocation of working individuals with large numbers of people working from home.
Lumber futures Lumber prices continue to soar, crossing $800/1000 board feet. This is largely due to supply chain issues as mills were closed while housing demand remains upbeat.
Industrial Metal Price Index Industrial metal prices continued to move up and stayed above their 2019 average for more than two months on the back of steady recovery in industrial activities.
Rail traffic Rail traffic continued to trend higher. It increased by 4.9% year over year for the week ended Dec. 12 and remained above pre-COVID-19 levels.
Jobless claims Initial jobless claims (regular state) increased by 23,000 to 885,000 for the week ended Dec. 12.

Retail Sales And Consumer Spending Dip

Still, it is likely that locally administered restrictions on activity will be on the rise in the coming weeks (and could be stricter). And this comes as several people-facing sectors are already showing signs of stalling out. Mobility trends in retail and recreation weakened across America the last month or so, Redbook weekly retail sales data has slowed, and consumer spending--tracked by credit and debit card spending--fell sharply the last week of November, according to Opportunity Insight (see charts 3-5). Consumer sentiments have been dampened this holiday season (see chart 6). And virus fears and stricter restrictions no doubt have affected restaurants and bars. Reservations for seated diners have plummeted once again with increased capacity restrictions. Also, with increased fear of virus transmission, flying remains out of favor (see charts 7-8).

Chart 3

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Chart 4

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Chart 5

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Chart 6

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Chart 7

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Chart 8

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Jobless Claims Continue To Climb, And Job Postings Aren't Growing Fast Enough

Our preferred composite indicator of economic activity--from the New York Fed--showed that November ended with the economy tracing back some of the gains made during the current recovery (see chart 9). We anticipate December and January will be two consecutive months when growth takes a step back.

It also appears to be particularly difficult on the jobs market front as growth in job postings is nowhere fast enough to absorb those who are out of work (see chart 10). The number of people who were unemployed and seeking benefits, in fact, rose last week. Initial jobless claims for regular state benefits increased 23,000 last week to 885,000 (the Bureau of Labor Statistics' survey week for the December employment situation report), their highest level since early September (see chart 11). Combined claims for regular and Pandemic Unemployment Assistance (PUA) benefits inched up further to 1.4 million. The number of continuing claims for all programs rose, in total, by 1.6 million to 20.6 million in the week ended Nov. 28 (see chart 12).

Many early unemployed (those who remain unemployed) have exhausted their 26 weeks of regular state benefits and are now likely tapping into Pandemic Emergency Unemployment Compensation (PEUC) benefits. Both PEUC and PUA benefits were established as part of the CARES Act and are set to expire at the end of December. If some form of extension to unemployment benefits is not passed soon, we are looking at these folks facing an income cliff.

Chart 9

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Chart 10

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Chart 11

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Chart 12

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And it is not just unemployment benefits, but also eviction moratorium that is expiring this month. If both forms of support are pulled out, those who say they don't have enough to sustain more than two months of rent or mortgage payments could face eviction or foreclosure. Using the U.S. Census Bureau's latest Household Pulse Survey, we calculate that there are 19 million folks who are not current on rent or mortgage, out of which nearly 7 million are at risk of losing their homes in the next two months if support is not extended.

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Housing Continues To Post Solid Growth

That said, the applications for new businesses that plan on hiring remain elevated, which bodes well for the coming year (see chart 13). The housing market has also continued to hold up at high growth levels, with mortgage applications remaining above pre-pandemic levels (see chart 14). The housing market continues to be the bright light during this recovery, driven by changes in household preferences and low mortgage rates, combined with the fact that most white-collar well-paying jobs haven't seen massive layoffs during the pandemic.

State and local governments are unlikely to shut down construction activities that can be done outside and with workers socially distanced. That means housing starts should continue to provide the spark for construction works. Housing starts surged in November, with the level of starts rising closer to the 14-year record set in January. Building permits, the more forward-looking gauge of housing activity, rose 6.2% in November to 1.64 million--the highest since September 2006. Lumber prices, in tandem, have climbed back to record highs as supply tries to meet builder demand (see chart 15).

Industrial metal prices have also climbed well past pre-pandemic levels as the recovery in the industrial sector has taken hold around the world (see chart 16). In the U.S., even as people-facing sectors are dealing with lockdowns, the manufacturing sector has been by and large spared. Trade has picked up and rail traffic carrying goods across supply chains continues to trend up (see chart 17). Shipments for chemicals, in particular, were at a two-year high, which bodes well for industrial production in the coming months. Still, while machines continue to hum, certain sectors, such as energy production and steel production, remain well under their pre-pandemic normal. The demand for finished motor gasoline products has fallen to just under 8 million barrels per day, now a six-month low.

As we close out the year, the Fed appears poised to stay ultra-accommodative in its policy stance. The policy response so far has eased financial stress across the markets (see chart 20), and perhaps households and small businesses will get extended help from Congress before the holidays.

Chart 13

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Chart 14

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Chart 15

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Chart 16

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Chart 17

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Chart 18

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Chart 19

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Chart 20

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The views expressed here are the independent opinions of S&P Global's economics group, which is separate from, but provides forecasts and other input to, S&P Global Ratings' analysts. The economic views herein may be incorporated into S&P Global Ratings' credit ratings; however, credit ratings are determined and assigned by ratings committees, exercising analytical judgment in accordance with S&P Global Ratings' publicly available methodologies.

This report does not constitute a rating action.

U.S. Chief Economist:Beth Ann Bovino, New York + 1 (212) 438 1652;
bethann.bovino@spglobal.com
U.S. Senior Economist:Satyam Panday, New York + 1 (212) 438 6009;
satyam.panday@spglobal.com
Research Contributors:Shruti Galwankar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai
Debabrata Das, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai
Arun Sudi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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