- House expected to turn its attention to state-local government relief after approving PPP bill today
- Unemployment claims expected to remain at extremely high levels
- U.S. PMI business sentiment reports are expected to plunge
- March U.S. new home sales will not yet show full pandemic impact
- EIA report shows how U.S. storage is filling up
House expected to turn its attention to state-local government relief after approving PPP bill today — The House today is expected to approve the $484 billion rescue bill with increased PPP funding that the Senate already passed on Tuesday by unanimous consent. House members had to be called back to Washington for today’s floor vote because of objections to a unanimous consent motion. The $484 billion bill has about $320 billion for the PPP program, $60 billion for the separate Economic Injury Disaster Loan Program, $75 billion for hospitals, and $25 billion for virus testing.
After today’s vote, Speaker Pelosi will turn her attention to the next rescue bill, which will center on aid to state and local governments. That topic is expected to be contentious since Senate Republican Leader McConnell already blocked that funding in today’s bill.
Mr. McConnell created a stir yesterday by saying that he favors bankruptcy for states that are hard-hit by the pandemic. He said he doesn’t plan to provide aid to any states that were already in financial trouble before the pandemic due to public pension obligations or other reasons. That statement by itself had the potential to drive up state bond yields due to market concern that state bonds could be repudiated in bankruptcy. Yet Mr. McConnell may still be forced into providing some relief for state and local governments since President Trump says he favors that funding.
Meanwhile, House Speaker Pelosi decided to back off her move to have House members today approve a new rule that would allow members to vote remotely via proxy. There was Republican opposition to the plan, which goes against long-standing tradition in the House. In addition, some Republicans may have wanted to make it harder for Ms. Pelosi to push new legislation through the House during the pandemic when members are not in Washington. Ms. Pelosi instead named a bipartisan task force to study the issue of voting remotely by proxy.
Unemployment claims expected to remain at extremely high levels — The consensus is for today’s weekly initial unemployment claims report to show another huge figure of 4.5 million, although that would at least be down from last week’s report of 5.0245 million and $6+ million reports in the two previous weeks. Initial claims in the past five reporting weeks have surged by an extraordinary 22.3 million, indicating how many millions of people have been laid off in recent weeks.
Today’s claims report will be particularly important since it is for the April unemployment report’s survey week. The consensus is for April payrolls to plunge by -19 million jobs, which would take out nearly all of the 22.8 million jobs that were created during the 2009/2020 economic expansion.
The only good news is that many jobs should return once the economy reopens. Still, many jobs will likely be lost for a long time as key sectors take months or even years to come fully back to life, such as restaurants, entertainment, and travel.
The unemployment rate in April and May is expected to jump into the teens, easily taking out the current post-war record of 10.8% posted in 1982. The unemployment rate will hopefully remain below the current record high of 24.9% posted in 1933 during the Great Depression.
U.S. PMI business sentiment reports are expected to plunge — The markets will be carefully watching today’s Markit PMI reports for the first indications of how far business sentiment plunged in April, which was the first full month of state-wide economic shutdowns. The consensus is for today’s preliminary-April Markit U.S. manufacturing PMI to plunge by -13.5 points to 35.0, after March’s relatively small -2.2 point decline to 48.5. Today’s Apr Markit U.S. services PMI is expected to fall -9.8 points to an even weaker figure of 30.0, adding to March’s -9.6 point decline to 39.8.
As a frame of reference, China’s national PMIs in February bottomed out at 35.7 for the manufacturing PMI and at 29.6 for the services PMI. China’s PMIs then rebounded sharply higher in March as China reopened its economy. However, the U.S. PMIs are likely to take longer to recover because the overall U.S. shutdown is likely to last longer than China’s more focused shutdown.
March U.S. new home sales will not yet show full pandemic impact — The consensus is for today’s March new home sales report to plunge by -16.1% to a 10-month low of 642,000, adding to Feb’s -4.4% fall. Next month’s report for April is likely to show an even steeper decline since April was the first full month of state-wide shutdowns. March existing home sales fell by only -8.5% to an 11-month low of 5.27 mln units, illustrating that the pandemic had not yet fully hit the housing market in March.
EIA report shows how U.S. storage is filling up — Yesterday’s weekly EIA report confirmed that U.S. oil and product inventories are soaring and that storage is filling up. U.S. oil inventories in the week ended last Friday rose by another 15.0 mln bbl to a 2-3/4 year high of 518.640 mln bbl, bringing the 4-week rise to a total of +63.3 mln bbl (+14%). U.S. oil inventories are now at 79.4% of total U.S. storage capacity of 653 mln bbl. Meanwhile, oil inventories at the Cushing hub in Oklahoma, the delivery point for WTI futures, rose +4.78 million bbl to a 2-1/4 year high of 59.74 mln bbl, which represents 78.6% of the hub’s estimated capacity of 76 mln bbl. If U.S. and Cushing inventories hit their capacity, then oil prices will likely see a renewed plunge. In some supportive news, U.S. oil production last week fell by -0.8% w/w to an 8-month low of 12.2 mln bpd, and is down by a total of -6.9% from Feb’s record high of 13.1 mln bpd.
