- Congressional support for a new stimulus bill is gathering momentum
- Markets fear U.S. labor market is slipping
- Nov U.S. trade deficit expected to remain very wide
Congressional support for a new stimulus bill is gathering momentum — Support for a new stimulus bill is gathering momentum as Democratic and Republican leaders seem willing to compromise on a deal. Meanwhile, President Trump yesterday said that he would sign a stimulus bill.
A range of Republican Senators on Thursday voiced support for the $908 billion stimulus bill proposed by a bipartisan group of Senators earlier this week, including Senators Romney and Manchin. One of the co-sponsors of the bill, Senator Bill Cassidy of Louisiana, said Thursday that there is “gathering momentum” for the bill and that there are more Republican Senators that accept the price tag than are opposed.
Senator Graham said that he told President Trump that the $908 billion stimulus bill has bipartisan support, and that “If the President came out for it, you’d have a large number of Republicans and Democrats vote for it.” Senate Majority Leader McConnell has not voiced support for the $908 billion compromise bill, but he did raise his offer to $600 billion on Thursday from his recent level of $500 billion.
The bipartisan Senate proposal of $908 billion includes about $300 billion for new PPP support and about $180 billion for a 4-month extension of unemployment benefits at $300 per week, among many other aid measures. There are no provisions in the bill for a second round of stimulus checks for citizens. An extension of unemployment benefits is a key issue since pandemic-related unemployment benefits expire on December 31, even as there are still some 10 million people without a job due to the pandemic.
Meanwhile, Mr. McConnell and Speaker Pelosi held a phone call on Thursday to discuss both the stimulus bill and the spending bill that must be passed by next Friday.
Budget negotiators are trying to reach a deal on a spending bill by this weekend, which would give the House and Senate enough time to vote on the bill next week before Friday’s expiration of the continuing resolution (CR) and a partial government shutdown on Saturday. Congress is trying to pass an omnibus spending bill that will fund the government through the end of the current fiscal year on Sep 30, 2021. If there are any snags in the omnibus spending bill, however, then Congress will be forced to pass another short-term CR and punt a spending bill into early next year.
The markets continue to nervously watch the pandemic statistics to see if there will be a surge following the Thanksgiving holiday. If there is a new surge, more restrictions may be needed to keep U.S. hospitals from becoming overwhelmed. California yesterday said it will start announcing stay-at-home orders in any areas where there is a critical shortage of ICU hospital beds.
On Wednesday, there were 195,695 new U.S. covid cases, a record high of 100,226 persons hospitalized for Covid, and a record 2,733 deaths, according to the Covid Tracking Project. During the pandemic, the U.S. has now seen a total of 13.7 million cases of Covid and 264,522 deaths.
Markets fear U.S. labor market is slipping — The markets are concerned that the labor market is losing momentum due to the pandemic surge and increased restrictions in many areas. Also, today’s payroll report will see a big drop-off in temporary jobs from census workers. Wednesday’s Nov ADP report of +307,000 was weaker than expectations of +430,000 and was the smallest increase in four months.
The consensus is for today’s payroll report to show an increase of +486,000, fading a bit from October’s increase of +638,000. Payroll jobs have so far recovered only 54% of the plunge seen earlier this year in March-April. Payroll jobs have risen by +12.070 million jobs from April’s pandemic low, but would have to rise by another +10.090 million to match February’s pre-pandemic record high.
The consensus is for today’s Nov unemployment rate to fall by -0.1 point to 6.8%, adding to October’s sharp -1.0 point drop to 6.9% from November’s 7.9%. The unemployment rate has fallen by more than half to 6.9% from the record high of 14.7% seen in April, but is still nearly double the post-pandemic record low of 3.5%.
Nov U.S. trade deficit expected to remain very wide — The consensus is for today’s Oct trade deficit report to widen slightly to -$64.8 billion from -$63.9 billion in September. The U.S. trade deficit widened to a 14-year high of -$67.036 in August before falling back a bit in September.
The U.S. trade deficit remains at extremely high levels mainly because the pandemic has hit exports harder than imports. U.S. exports in September were down -15.7% y/y, while imports were down by a smaller -6.5% y/y.
Meanwhile, the dollar yesterday fell to a new 2-1/2 year low. The wide U.S. trade deficit is greasing the skids for the dollar since so many net trade dollars are flowing out of the U.S. Overseas recipients of those trade dollars sell them back into the FX market to the extent they do not wish to hold them in dollar-denominated investments.
However, the main reason for the dollar’s weakness is reduced safe-haven demand for the dollar with expectations that the U.S. economy will start returning to normal by mid-2021 or so. Also, the Fed is insisting it will keep interest rates low for several years and that it has no intention of tapering its QE program. Nevertheless, the dollar could start to see better support next year if the pandemic slowly dissipates and the markets start to discount a Fed rate hike, possibly as early as 2022 if the U.S. economy comes roaring back.
