- The pace of COVID-19 vaccinations has picked up, allowing some more easing of restrictions. Mobility trends also continue to strengthen as states reopen.
- Initial jobless claims remain above 700,000 per week, which should begin to decline in the coming weeks as we've already started seeing higher levels of job openings.
- The $400 billion of stimulus payments to households in late March could lead to a pickup in consumer spending in the second quarter against the backdrop of a reopening economy.
- As a result of these factors, we expect to see marked improvement on all fronts of the economy in the spring, setting the stage for second-quarter GDP to likely register double-digit annualized growth of 11.3%
|Summary Of Indicators|
|Indicator||How the data looks|
|Virus and mobility|
|New COVID-19 cases||Many states have dropped COVID-19 restrictions, which has led to a slight uptick in daily new cases recently.|
|Vaccinations per 100 people||The U.S. has had faster vaccine rollouts than any other country in Europe, except the U.K.|
|Google mobility||Mobility data overall has improved amid the faster vaccine rollout. For instance, Texas and Florida mobility data has reached close to pre-COVID-19 levels.|
|Consumer loans: credit cards||Consumers appear to be more cautious as consumer credit card loan numbers have continued to show a downward trend. Deleveraging has helped household balance sheets, on aggregate.|
|Low-income versus high-income household spending||Low-income household spending is holding up well, partly boosted by fiscal stimulus and recovery in the labor market in March 2021.|
|Consumer sentiment||Consumer confidence has improved from last month but at a slower pace, despite strong labor market data and a faster vaccine rollout. The smaller confidence gain in March was perhaps due to a recent spike in new cases and in other advance countries.|
|Open Table||Overall seated diners at restaurants continue to improve because of the lifting of restrictions and reached close to their pre-pandemic level. As of April 6, restaurants in Florida are operating at 19% above their 2019 levels.|
|Air traffic||While many other countries still have stringent travel restrictions in place, air traffic in the U.S. shows steady improvement.|
|Current and future activity|
|Raw steel capacity utilization||Raw steel capacity utilization continues to show steady recovery, now just below 2.8% from its 2019 average. This reflects a rebound in industrial activities in the U.S.|
|Rail traffic||Rail traffic maintains its solid recovery and has reached very close to its pre-pandemic level.|
|New business applications||New business applications held steady in recent weeks.|
|Home mortgage applications||Mortgage applications have decreased for the fourth week in a row as 30-year mortgage rates have picked up from 2.65% on Jan. 7 to about 3.13% on April 8.|
|Lumber futures||Lumber prices surged due to high housing demand.|
|Industrial Metal Price Index||Industrial metal prices continued to trend higher and stayed above the 2019 average on the back of steady recovery in both domestic and external industrial activities.|
|Initial jobless claims/continuing claims||Initial jobless claims reached 744,000 with an addition of 16,000 new claims in the week ended April 3. Continuing claims for ongoing state benefits fell to a one-year low of 3.73 million in the week ended March 27.|
|Indeed job postings||Indeed job postings have recovered sharply and have shown their highest growth since February 2020.|
Since our last real-time economic data report (see "U.S. Real-Time Data: A Weaker February Likely Offset A Better-Than-Expected January," published Feb. 26), coronavirus cases continued to fall midway through March and have since edged up again, albeit slightly (see chart 1). On the other hand, the pace of COVID-19 vaccines administered has picked up remarkably--to near 3.0 million average vaccinations per day, compared with 1.3 million the third week of February. The current pace of vaccinations is likely to help the U.S. get to the so-called "herd immunity," or estimated 75% of the population vaccinated, sometime in June. As of April 9, 34% of the population received at least one dose of the vaccine (see chart 2).
Thanks to improved vaccination rollouts, reduction of restrictions, and the large fiscal stimulus (the third over the past year), we expect to see marked improvement on all fronts of the economy in the spring. This should set the stage for second-quarter GDP to register double-digit annualized growth of 11.3%, following 6.4% first-quarter growth (see more in "Economic Outlook U.S. Q2 2021: Let The Good Times Roll," March 24).
All 50 states have eased business restrictions to varying degrees as reopening is gaining traction. According to The New York Times, businesses in an increasing number of states remain "largely open" (as of April 8), with Oregon, California, Arizona, New Mexico, and Colorado the only states where opening status remains "mixed." Mobility measures across the nation had slipped following the spike in coronavirus cases during the December and January holidays, but have since improved significantly (chart 3). Google mobility levels in the U.S. on April 3 were only 6% below precrisis levels, their lowest since last March when the virus was first recognized in some pockets of the nation.
Perhaps owing to general upbeat news on vaccines, folks are getting more comfortable flying. The number of passengers traveling through American airports, although still subpar relative to 2019, has started to improve faster (see chart 4). Yet, consumer sentiments haven't quite improved the way we would have anticipated. Both the University of Michigan's Consumer Sentiment Index and the Rasmussen Consumer Index remain weak (see chart 5). In tandem, overall consumer credit with commercial banks hasn't picked up yet (see chart 6), likely a combination of households reducing their credit card debt significantly since March 2020 and precaution more than offsetting auto loans that continue to rise.
Most Industrial Indicators Continue Their Solid Recovery
Except for the February hiccup from the deep freeze in Texas, demand for industrial supplies continues to recover, and factories are increasing their capacity to fulfill growing internal and external demand. Raw steel capacity utilization was less than 3 percentage points short of the 2019 average (see chart 7). Railway traffic, after the temporary freeze in Texas, returned to the 2019 average as the trade of goods has steadily recovered (see chart 8). Prices of industrial supplies have also increased (see chart 9). Oil prices are above $50/barrel (West Texas Intermediate oil), which could be a lifeline for the sector, where rig counts have started to increase but remain well under pre-pandemic levels (see chart 10).
Lumber prices in the futures market returned to a two-year high, creating higher input costs for homebuilders, which erodes profit margins (see chart 11). Mortgage applications have taken a breather, with purchase applications falling for a second straight week in the week ended April 2 and registering their largest decline since mid-February (see chart 12). Mortgage rates are now back up to 3.5%, their highest level since May 2020. Refinancing applications have declined for a fifth straight week, in tandem with interest rates edging up. The pace of demand outstripped supply in the second half of last year and through January, almost at an unsustainable pace. It appears we may start to see demand reverse to a more sustainable growth pace.
Jobless Claims Remain Historically High While Job Openings Pick Up
Unemployment claims data hasn't budged meaningfully in the past several weeks, which is at odds with the pickup in economic activity in March and improvement in net payroll jobs added (see chart 13). Initial jobless claims, a proxy for first-time layoffs, increased by a seasonally adjusted 16,000 to 744,000 in the week ended April 3. While claims have declined sharply since last April, they remain historically high. The high during the Great Recession was 665,000. Continued claims, a proxy for stock of claimants, were 18.2 million in the third week of March and have remained between 17.5 million and 20 million (averaging 18.7 million) in 2021.
Although the ranks of benefit claimants through regular state programs have continued to decline, the number of individuals under the Pandemic Emergency Unemployment Compensation (PEUC) program and the Pandemic Unemployment Assistance (PUA) program has risen since the beginning of the year when the programs were extended (see chart 14). (Under PEUC, those who have exhausted regular state benefits are eligible for up to 53 weeks of extended benefits.) The extension of unemployment benefits by the federal government has been very important in minimizing disruption in consumer spending, especially in lower-income households (see chart 15).
Three rounds of stimulus checks have also helped. By the end of last week, the U.S. Treasury Department had distributed nearly $400 billion of economic impact payments (third round) into households' bank accounts, adding to consumers' purchasing power heading into the second quarter. However, that doesn't mean there is going to be profligate consumer spending. If the New York Fed's latest survey of households' intentions is any indication, households expect to spend only a fraction of the latest payment--about 25%--and use the rest to pay down debt or further pad their savings. This is a bit lower than what was reported for the past two rounds of stimulus checks.
That said, real-time data on job openings indicates a surge in labor demand. Postings on Indeed, a job-search site, are now 16.4% (in early April) above where they were in February 2020. The pace of growth in job postings has accelerated in recent weeks and is now higher than the summer 2020 hiring rebound (see chart 16). Still, the distribution of employment gains since the start of the crisis remains skewed to high-earning workers (see chart 17). Employment for high-earning workers is now above precrisis levels (as of March 12), middle-wage earners are 6.5% below, and low-earning workers remain near 30% below, according to tracktherecovery.org.
A rapid bounce back in employment opportunities for low-income earners would be welcome more than anything else now. Even after the latest (March) job gains numbers that surprised consensus on the upside, over 8.5 million fewer people are working than before the pandemic (according to the Bureau of Labor Statistics' monthly jobs market survey estimate, which is different from the Department of Labor's unemployment claims statistics), and the job losses are concentrated in low-income groups.
The views expressed here are the independent opinions of S&P Global Ratings' economics group, which is separate from but provides forecasts and other input to S&P Global Ratings' analysts. S&P Global Ratings' analysts use these views in determining and assigning credit ratings in ratings committees, which exercise 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;|
|U.S. Senior Economist:||Satyam Panday, New York + 1 (212) 438 6009;|
|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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