FOR IMMEDIATE RELEASE
June 15, 2020
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
In the May 4th MMQ we stated, “This is what the Founding Fathers were referring to when they called America ’13 Laboratories’. Except now it’s ’50 Laboratories’. As the country starts to open back up, ….we will see what works”
It’s been almost six weeks and I believe that we have learned enough to make some helpful changes at the margin. Let’s look at the data.
Daily deaths in Arizona are down. And the demographic of who is vulnerable in general hasn’t changed. Even though the 20-44 year-old age group accounts for 47% of COVID-19 cases in Maricopa County, they account for only 2% of deaths. On the other hand, those 65 and older account for 15% of known cases but 84% of deaths (also, the majority of COVID-19 deaths in Maricopa County have occurred among long term care facility residents). In fact, 94% of those who have died from COVID-19 are either 65+ or have one or more chronic medical conditions. Overall, the older one gets, the higher the risks of hospitalization, being admitted to the ICU and dying become. If a person is under 55 and doesn’t have a chronic medical condition, that person can feel pretty safe. On the other hand, being 65+ and/or having a chronic medical condition is still risky.
When the state started to open on May 16, the objective was for everyone to follow procedures that keep risks lower (wear masks, stay away from crowds, social distance, wash hands and, in general, act like everyone else has it and you don’t want to get it). It is a social contract that will help those who are at high risk. That high-risk group could include your parents and/or grandparents, coworkers, your aunt or uncle or friends. And it has been my observation that this social contract is not being honored.
There seems to be more scientific evidence that masks help slow the spread of COVID-19. But, it is difficult for many to understand the risks since the enemy is invisible. Many that are 44 and younger are acting like the war is over. It is not. And risky behaviors are becoming more common. I am not suggesting the opening of the economy be slowed or reversed. Far from it. That ship has sailed. And the damage the closure caused is almost incalculable in terms of financial, physical and psychological harm. But, it seems given what has occurred and more evidence of the effectiveness of wearing masks and staying away from crowds, it might be time to enforce some part of that social contract as the economy continues to reopen. Perhaps mask wearing should be mandatory when out in public(obviously take it off to eat). How about social distancing? And crowds?
In addition to the basic need to help those who are at risk, there is a need to accelerate the restart of the economy. That can only fully occur when there is a vaccine or a treatment that will mitigate the effects of the disease. But things that will help us move in that direction until we get the ultimate solution (vaccine) are very much worth a shot. It is about creating an environment where people feel comfortable about going out again. When they do, they will spend. That will result in more jobs, more income and a more positive result for Arizona. And things that result in a better economic result at a minimum risk to life may be easy to implement.
It could be time for some fine tuning at the Arizona Laboratory.
Consider the following two paragraphs a personal rant. It is frustrating to read how Arizona is spiking in terms of COVID-19 activity when the data on the Arizona DHS website tells a different story. Of course, the number of cases are going up. There is more testing at the same time as many are ignoring procedures that keep COVID-19 from spreading. And if it was a meaningful statistic, why are daily hospitalizations and deaths down so much? Now everyone who walks into an emergency room or hospital for something other than COVID-19 (including a treatment or surgery that was postponed during the lockdown) gets tested. And there is a big difference between the direction of cases and the direction of daily hospitalizations for COVID-19 and deaths. And the percent of those tested who were positive is up only modestly. But this raises questions. If the virus was as deadly as it was when the outbreak started, why hasn’t the increase in cases resulted in more hospitalizations and deaths?
Since the number of daily cases is not a consistent time series due to the lack of early testing, it can’t be used as a time series. Even the percentage of those who test positive is suspect given the other, more pertinent data. There is also a big difference between those who died from COVID-19 and those who die with COVID-19. The latter group was asymptomatic or had very mild symptoms. They came into a hospital for other reasons. If there is an issue with hospital beds and ICU staffing, it is because of reasons other than just COVID-19. It could be the natural outcome of people who postponed treatment during the lockdown. We will see if current trends continue. But it is certainly too early to panic or do make dire predictions based on data that can be explained by many possible alternatives that take into account the entire picture. This does not, though, change the need for masks and social distancing and staying away from crowds.
As for the most recent data, let’s start with some weekly information. Again, for more detail on the weekly data, go to https://forecast.eller.arizona.edu/content/director-blog. It’s the weekly blog of George Hammond of the University of Arizona Forecasting Project. Both national and local initial claims for unemployment insurance, while way down from peak weeks, still increased by about 600% from a year ago for the national numbers and over 421% from a year ago for the Arizona numbers. National hotel occupancy rates were 39.3% for the week of June 6th. That’s 39.1% below year earlier levels. For the week of May 30th, occupancy rates were 48.6% below year ago numbers. So, while the levels are low, some progress is being made. The same can be said for the number of air travelers as measured by TSA weekly traveler throughput. For the week of June 6th, there were 2,442,959 air travelers that went through TSA check points. That’s down 85.2% from a year ago. At the low point (the week of April 18th), there were only 669,718 travelers. That was 95.9% below a year earlier.
As for seated diners, Arizona made little progress in the week of June 6th as the number was down 54.3% from a year ago compared to 54.6% the week earlier. In Maricopa County, seated diners were down 58.3% from a year ago compared to a year over year decline of 64.2% the previous week. Again, some progress. But, slow. As for the Mobility Index for travel to the workplace, the amount of travel was down 30.0% in Maricopa County and 29.3% in Pima County. This compares to 46.9 and 45.7 in Maricopa County and Pima County for the week of April 11th (the low point in travel to the workplace). In terms of travel to retail and recreation places last week, Maricopa County was down 21.6% from a year ago and Pima county was down 22.7%. The good news was that the number of business applications increased last week and was 16.7% above a year ago.
- Initial claims for unemployment insurance benefits fell by 35,000 to 1,542,000 last week. While that is the lowest number of claims made since the lockdown started in March, it is still 601% above a year ago. Since the week of March 21st, more than 44 million people have filed for unemployment.
- According to the latest Blue Chip Economic forecast, real GDP will drop by almost 36% this quarter and will be down 6.1% for 2020 as a whole. Next year, though, real GDP is expected to increase by 4.0%. It should be pointed out that these forecasts have a large standard deviation since there is not sufficient historic data (fortunately) to properly judge what will occur. In addition, there are many assumptions made, including a follow up to the CARES Act (called the HEROES Act) that will keep income flowing to those who remain out of work.
- The Federal Open Market Committee kept the target range for the fed funds rate unchanged and isn’t going to discuss raising rates any time soon (at least through 2022). The FED will maintain its dovish attitude for as long as it takes to get the economy on a more normal footing.
- The University of Michigan consumer sentiment index posted its second monthly gain in early June. Renewed gains in employment caused the index to jump to 78.9 in June compared to 72.3 in May and 98.2 a year ago.
- The job openings and labor turnover report indicated that the largest number of job losses occurred in March though losses were still substantial in April with hiring declining steeply. Still, the number of job openings surprisingly remained twice as high as during the bottom of the last recession. Job openings, while down from 7.2 million a year ago, are still just over 5 million. This suggests underlying strength in the employment outlook.
- The consumer price index unexpectedly fell in May. The CPI-U fell 0.1% from May following a 0.8% drop in April. The index is 0.2% above a year ago. All items less food and energy was also down 0.1% for the month but was up 1.2% from a year ago. The FED’s target rate for inflation is 2.0%.
- Initial claims for unemployment insurance benefits in the state increased by 24,367 for the week of June 6th. This is up from 22,012 the week of May 30th. Since March 21st, more than 654,000 Arizonans have filed. That is 21.9% of total employment in March.
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