Trump's vaporized economy

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Quick Fix

Trump’s vaporized economy — The March jobs report out this morning is not expected to show anything close to the full hit so far from the coronavirus. The survey covered the week of March 12, before many of the lockdown orders shuttered much of the U.S. economy. Consensus is for a loss of 100K, ending a record run of 113 straight months with job gains.


But we know the number of job losses is actually far more massive given we’ve seen 10 million jobless claims over just the last two weeks, obliterating previous records and suggesting the unemployment rate is already close to 10 percent, matching the highest point of the Great Recession. It will almost certainly go significantly higher, possibly above the 24.9 percent hit during the Great Depression.

Economic growth is also dropping off a cliff with estimates for a first quarter decline of around 4 percent and a second quarter plunge of 25 percent or more. Stocks have crashed around 30 percent since setting record highs in February. Oil prices are tanking, which means cheap gas but also a massive hit to the energy sector, slamming red states the hardest.

All of this means the fundamental pillars of Donald Trump’s presidency — a hot economy, strong job growth and a rocking stock market — have all been smashed to splinters by the coronavirus. The outbreak was obviously not Trump’s fault – though some criticize the speed of the administration’s response.

But that does not change the stark reality that all the job gains on Trump’s watch are now gone. The impact of his chief legislative achievement — a big tax cut bill focused on corporations — is now nonexistent.

And Trump will head into reelection as the economy struggles to dig out of a deep recession that some economists fear could become a depression. The pieces are in place for Trump to wind up like Herbert Hoover, who saw his presidency destroyed by the Depression and his response to it.

There are other possible outcomes, of course. If efforts to restrain the growth of the virus succeed and if an effective vaccine is discovered sooner than expected, then perhaps the economy can recover faster than many expect. The Trump administration, Congress and the Fed also moved relatively quickly to pump trillions of dollars into the economy to try and stem the flood of layoffs and push money into the pockets of millions of Americans.

The president is nothing if not a master of reframing the narrative in any way he deems helpful. And early positive poll numbers for his handling of the virus – though now fading – suggest there is at least the possibility that he could campaign as the president who beat back the virus and got the economy moving forward again after taking such a massive punch to the face. But that requires an awful lot of things to go remarkably — if not impossibly — right.

GOOD FRIDAY MORNING — Here’s hoping for some hopeful news today, though it won’t come with the jobs number. Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.

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Driving the Day

March jobs report at 8:30 a.m. expected to show a loss of 100,000 jobs and unemployment rising to 3.8% from 3.5%. Neither will really tell us anything about the real state of the jobs market … Trump meets with oil executives at the White House … House Speaker Nancy Pelosi joins Jim Cramer on CNBC’s Squawk on the Street at approximately 9:35 a.m.

KUDLOW AND MM LIVE ON TUESDAY — Please join me for an online interview with National Economic Council Director Larry Kudlow on Tuesday at 9:00 a.m. We’ll talk about the state of the economy and efforts to prevent even more damage from the coronavirus as well as get Kudlow’s latest thoughts on when parts of the country might be able to get back to something close to normal. You won’t want to miss it! Sign up here.

Moody’s Mark Zandi emails his jobs day predictions: “Employment fell by 50,000 jobs in March and unemployment increased to 3.8%, as Covid-19 first began to take its economic toll early in the month when the BLS conducted its survey.

“Given the close to 10 million initial claims for unemployment insurance since the BLS survey, the economy will lose closer to 15 million jobs in next month’s report for April. The economic damage is due to the business shutdowns across the country necessary to contain the virus. GDP is over one-fourth lower today as a result of the impact of the fallout.”

THE VIRUS AND THE DAMAGE DONE — Our Rebecca Rainey and Nolan D. McCaskill: “Unemployment claims soared to a record-smashing 6.6 million last week, the Labor Department reported, more than double the previous week, signaling more economic pain from the coronavirus pandemic.

“The rush to claim unemployment benefits occurred as the number of people testing positive for the coronavirus rose above 200,000 and government measures to contain the epidemic shut down increasing swaths of the U.S. economy, with residents in 37 states now ordered to stay at home.”

Our Playbook colleagues noted that some of the biggest hits represent the core of the electorate that will decide our next president: Pennsylvania, which has 362,012 new unemployment claims, and Ohio, with 189,263 new claims.

GOOGLE TELLS THE TALE — Via SEMrush, a data analytics company found that between February 20 and March 20, 2020 searches for “unemployment” grew by 400% and “recession” by 376%. … Since March 14, there has been a 900% increase in search volume for

“What do I do if I get fired”

HPS has a cool graphic showing why Friday’s jobs report won’t tell us that much.

Via ING: “US initial jobless claims have now risen nearly 10 million over the past two weeks. This is on its own could push the April unemployment rate up to 9.5%, but with more job losses likely in coming weeks, it will end up even higher”

Pantheon’s Ian Shepherdson on jobless claims: “In one line: No words for this.”

IHS Markit on growth: “Core orders and shipments were little revised through February, while inventories were somewhat weaker than expected through February. As a result, we lowered our tracking forecast of first-quarter GDP growth by 0.1 percentage point to -3.6%, while we left our tracking forecast of second-quarter GDP growth unchanged at -26.5%”

Coronavirus effects

BANKS WARN ON LENDING PROGRAM — Our Zachary Warmbrodt: “Banks are warning that a $350 billion lending program for struggling small businesses won't be ready when it launches Friday because the Trump administration has failed to provide them with the necessary guidelines and set requirements for the loans that are unworkable.

“The lenders complain that Treasury Secretary Steven Mnuchin boxed them in with an unrealistic deadline and that the ground rules they've been given for the program, which is intended to deliver rapid aid to a huge number of ailing businesses, could delay the assistance for weeks or longer.”

MM SIDEBAR — Trump as his presser promised the Paycheck Protection Program would be open for business today. We’ll see. Treasury Secretary Mnuchin said the government would bump the interest rate to 1.0% (paid by the government) rather than 0.5% to make it more economically feasible for banks to service the federally guaranteed loans.

Mnuchin also announced that Wall Street firms PJT Partners would work on the passenger airline rescue, Moelis & Co. the cargo planes and contractors and Perella Weinberg the national security portion.

Here is more from Zach on Trump’s promises even as banks like JPMorganChase said they likely won’t be prepared to offer the loans by tomorrow. And more from Zach on “new guidelines [the administration] said … will streamline loan processing requirements for banks.”

HOW BAILOUT CASH COULD GET (MIS)USED — Our Michael Grunwald: “Most big companies that take advantage of the $500 billion corporate bailout in last week’s coronavirus relief bill are unlikely to face restrictions against firing workers or giving bonuses to executives, according to officials familiar with the program.

“[T]e bipartisan legislation that President Trump signed Friday did attach tight strings to the $46 billion the Treasury Department will dispense to airlines and firms it deems vital to national security. But the other $454 billion in the law for larger firms will flow through Federal Reserve lending programs, and people close to the Fed say its top officials don’t think they’re required to force companies that get the money to keep workers on their payrolls, limit executive compensation or forgo stock buybacks or dividends.”

TRUMP TAKES A HIT? — Forbes “reports … that President’s Trump’s net worth has plunged $1 billion in less than a month. As of March 1, Forbes valued President Donald Trump’s net worth at $3.1 billion. The markets took a turn and reporters went back to work to approximate how much the coronavirus affected the president’s fortune. Trump’s newly estimated fortune is now $2.1 billion.”

HURRY UP AND WAIT — Our Aaron Lorenzo: “The IRS expects to start sending an initial wave of economic stimulus payments, worth up to $1,200 apiece, to some 60 million Americans the week of April 13, Treasury Department and IRS officials have told the House Ways and Means Committee. But it could take as many as five weeks for the payments to land in the mailboxes of people who have to be paid by check.”

Markets

WALL STREET RISES FOR FIRST TIME IN THREE DAYS — AP’s Stan Choe, Damian Troise and Alex Veiga: “Wall Street rallied Thursday for its first gain in three days after a sudden surge in oil prices revived beaten-down energy stocks. But, as has so often been the case in this year’s market sell-off, it took a few U-turns to get there.

PREDICTIONS FOR THE CORONAVIRUS STOCK MARKET — NYT’s Robert J. Shiller: “One prediction seems solid: The coronavirus epidemic will get much worse in the United States in coming weeks. But where the stock market is heading is much less certain.”

S&P 500 DIVIDED CUTS ADDING UP FASTER THAN ANY OTHER TIME SINCE 2009 — Bloomberg’s Andres Guerra Luz: “U.S. companies are expected to slash dividends at a rate not seen since the global financial crisis.”

Fly Around

TRUMP CALLS ON RUSSIA/SAUDI TO CUT OIL PRODUCTION — Our Ben Lefebvre: “Trump tweeted on Thursday that Saudi Arabia and Russia appeared to be close to curbing their oil production, a potential lifeline for the U.S. oil sector that has been buffeted by plummeting energy demand from the coronavirus and a flood of crude exports from the two countries. …

“Trump’s statement extended a rally in oil prices Thursday morning, adding about $5 to the earlier gains and lifting prices on the U.S. futures market briefly above $27 a barrel. Saudi Arabia, in its own message, was more circumspect, only saying it sought a meeting of OPEC and other countries to discuss ‘a desired balance to the oil market.’”

FED’S KAPLAN: MORE FISCAL STIMULUS APPEARS NECESSARY — WSJ’s Michael S. Derby: “While acknowledging that ultimately it wasn’t the central bank’s call, Dallas Fed leader Robert Kaplan said Thursday elected leaders probably would need to provide more stimulus to the economy to help it navigate the coronavirus crisis.

MORTGAGE DEFAULTS COULD PILE UP IN A BIG WAY — Bloomberg’s Prashant Gopal and John Gittelsohn: “Mortgage lenders are preparing for the biggest wave of delinquencies in history. If the plan to buy time works, they may avert an even worse crisis: Mass foreclosures and mortgage market mayhem.”

JPMORGAN CEO BACK TO WORK AFTER SURGERY — WSJ’s David Benoit: “JPMorgan Chase & Co. Chief Executive James Dimon returned to work this week, a month after undergoing emergency heart surgery.

“In a memo to employees, Mr. Dimon thanked Co-Presidents Daniel Pinto and Gordon Smith for running the bank in his absence. He is working remotely, along with most of the bank’s executives, as the coronavirus pandemic sweeps through New York City. ‘I have been recuperating well and getting stronger every day,’ he said.”

TRANSITION — Brian McGuire is returning to Brownstein Hyatt Farber Schreck after a stint as the top legislative affairs official at Treasury.

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