- Pandemic stimulus bill eludes Washington as Speaker Pelosi holds out for more
- U.S. unemployment report expected to show slower improvement in the labor market
- U.S. consumer sentiment expected to hold early-Sep gain
- U.S. factory orders expected to improve
Pandemic stimulus bill eludes Washington as Speaker Pelosi holds out for more — House Speaker Pelosi and Treasury Secretary Mnuchin on Thursday continued to hold talks but were not able to reach an agreement on a pandemic stimulus bill as of early Thursday evening. The House on Thursday went ahead and approved Ms. Pelosi’s $2.2 trillion stimulus bill.
The White House on Thursday offered Speaker Pelosi a $1.6 trillion deal, which she said was still too small. There were questions as to whether Senate Majority Leader McConnell would even be willing to put a bill of that size before the Senate for a vote since that larger size is opposed by the majority of his caucus.
The House is scheduled to leave today for a recess that will last until after the November 3 election. House members could always be called back to Washington to vote on a stimulus bill if there is a sudden agreement. However, if the House leaves Washington today, the momentum for a deal will likely die.
The stock market will be unhappy if there is no pandemic stimulus bill today since the odds would be low for any deal until after the election. Even after the election, there is no assurance of a deal since political acrimony after the election could be even worse than it is now.
U.S. unemployment report expected to show slower improvement in the labor market — Today’s Sep unemployment report is expected to show that the U.S. labor market continued to improve in September but remained in very bad shape overall. Today’s unemployment report will be the last before the November 3 election.
The consensus is for today’s Sep payroll report to show an increase of +875,000, which would be the smallest payroll increase since the job recovery began in May and would indicate that job growth is slowing. Expectations for today’s payroll report were supported by Wednesday’s news that Sep ADP jobs rose by +749,000, stronger than expectations of +648,000.
Payroll jobs have so far recovered less than half of the losses seen this past spring during the pandemic shutdowns. Specifically, payrolls have recovered by +10.6 million jobs, but would have to climb by another 11.5 million to match February’s record high.
The U.S. economy cannot come close to recovering the remaining 11.5 million lost jobs until there is an effective and widely-available vaccine that allows the bar/restaurant, travel, and entertainment industries to recover fully. Even then, it will take a long time to fully recover all of the jobs lost during the pandemic because many businesses have been forced to close permanently.
The U.S. economy this week received bad labor market news as several large companies announced layoffs as they downshift to cut costs. This week, there were layoff announcements from Disney, American Airlines, United Airlines, Allstate, Goldman Sachs, and Shell. This week’s job cuts will not show up in the unemployment report until the October report is released next month.
Meanwhile, today’s Sep unemployment rate is expected to fall by -0.2 points to 8.2%. Yet, that would still be more than double the pre-pandemic level of 3.5% and only 2 points below the worst level of +10.0% seen during the Great Recession.
The Fed is forecasting that it will take until 2023 for the U.S. unemployment rate to fall to 4.0%, which essentially matches the Fed’s view of the long-term natural unemployment rate of 4.1%. The Fed is not expected to start raising interest rates until the unemployment rate has fallen nearly back to the full-employment level of 4.1%.
U.S. consumer sentiment expected to hold early-Sep gain — The consensus is for today’s final-Sep University of Michigan U.S. consumer sentiment index to be revised slightly higher by +0.1 point to 79.0, which would leave the index up by +4.9 points from August.
U.S. consumer sentiment improved in September as the stock market remained strong and as jobs slowly returned. However, overall consumer sentiment remains in dismal shape as the pandemic drags on and continues to hurt the economy.
Consumers are worried that the economic recovery is starting to fade, particularly since government stimulus is expiring. Consumer sentiment is also being dampened by the political acrimony ahead of the November 3 election, which could reach epic proportions if the election is contested.
U.S. factory orders expected to improve — The consensus is for today’s Aug factory orders report to show an increase of +0.9% and +1.1% ex-transportation, adding to July’s increase of +6.4% and +2.1% ex-transportation. U.S. factory orders have recovered more than half of this past spring’s pandemic losses, but nevertheless remain in weak shape and were still down -4.9% y/y in July.
However, confidence in the U.S. manufacturing sector has rebounded sharply, indicating that manufacturing executives are expecting better times ahead. Yesterday’s Sep ISM manufacturing index fell by -0.6 points but remained at the relatively strong level of 55.4. Also, the ISM manufacturing new-orders sub-index in September remained strong at 60.2.
