31 March 2020

1) Oil prices have crashed to an eighteen year low as coronavirus lockdowns cascaded through the world economies, which have drastically cut oil demand. The surplus in oil stocks is ballooning amid the Saudi Arabia and Russia’s dispute over struggle for oil control. The slump in petroleum based products has shut down refineries around the world. Prices are on track for the worst quarter on record. There are no signs of Saudi Arabia and Russia’s dispute being resolved as Saudi Arabia increases its production to further increase surpluses of oil thereby dropping oil prices more.

2) The coronavirus pandemic is expected to drive March auto sales off a cliff, from consumer confidence dropping and shuttered dealerships across much of the country. It’s expected that April may be as bad as or worst than March. Sales forecast for March has dropped 37% and April could be off between 50% and 60%. States under ‘stay at home’ orders have seen an 80% drop in auto sales.

3) With millions of Americans already laid off, fears among experts that job losses could be as high as 47 million to give an unemployment rate of 32%. The loses are a result of government induced economic freeze to contain the spread of the virus. A record 3.3 million Americans have filed initial jobless claims for the week ending 21 March of this year, with an estimated 66.8 million workers consider to be in jobs at high risk for layoff. With a loss of 47 million jobs, the unemployment rolls would rise to 52.8 million, or more than three times the peak number of unemployment in the 2008 Great Recession.

4) Stock market closings for – 30 MAR 20:

Dow 22,327.48 up 690.70
Nasdaq 7,774.15 up 271.77
S&P 500 2,626.65 up 85.18

10 Year Yield: down at 0.67%

Oil: down at $20.28

30 March 2020

1) A second virus shock wave is already hitting China’s factories as European factories are delaying orders and asking for delays in payments as the coronavirus sweeps across Europe closing their factories. These are cutting off orders to Chinese factories just as they were beginning to come back to life, a double hammer blow to China’s economy. Estimated April to May sales are expected to be down as much as 40% from last year. This is raising grave doubts about the world’s second largest economy being able to repair damage and return to its pre-virus station.

2) The Index of Consumer Sentiment dropped to 89.1 in March, the lowest level since October 2016, a three year low. It is the fourth largest in nearly 50 years. Further declines is dependent on the success of curtailing the spread of the virus and how soon households receive funds from the government stimulus. To date, there are 540,000 cases of coronavirus with America overtaking China and Italy with the most cases having a total of 85,000.

3) The Department of Justice is investigating the credit scoring firm FICO for possible antitrust violations. There are three other major credit companies: Equifax, Experian and TransUnion. FICO is the only scoring model accredited by mortgage loan companies Fannie Mae and Freddie Mac. The DOJ investigation comes after TransUnion’s antitrust countercase against FICO. The lenders determine which credit scoring system is utilized on a loan application, not the consumer or loan applicant.

4) Stock market closings for – 27 MAR 20:

Dow 21,636.78 down 915.39
Nasdaq 7,502.38 down 295.16
S&P 500 2,541.47 down 88.60

10 Year Yield: down at 0.75%

Oil: down at $21.84

Coronavirus – Recession: Jobs Lost to Machines!

A recession will bring another round of technology displacement with job loses for Millennials and Generation-Z.

James Lyman BSAE, BSEE, MSSM

It’s now a considered fact that the U.S. will experience a recession resulting from the coronavirus threat across the world. It stands to reason, as first whole cities in China, then areas and finally whole countries like Italy and Spain, are sheltering in place with nations shutting down and effectively exiting the world economy. Even if America wasn’t taking isolation steps, the rest of the slowing world economy would certainly drag America’s economy down. A recession always means the lost of jobs from layoffs as business strives to save money and stay in business.

But another overlooked aspect of employment in a recession is the ‘fertile fields’ created within an economy for new technologies to sprout and grow, and therefore propagate as labor saving devices. New technologies that businesses can use to save money, in particular to save money by reducing labor cost.

Machines to replace people.

Recessions spur technology displacement of people by eliminating their jobs . . . permanently! Once lost to machines, those jobs never come back. We saw many examples of that in the 2008 Great Recession where high price corporate executives were laid off. There were a number of news reports about those professionals, who previously could find a new job in just days to weeks, but after being laid off, had gone first months, then years with nothing. And they just couldn’t understand why suddenly . . . no one wanted them any more! Turns out the answer was simple. While times had been good, computer and telecommunications technologies had developed, but laid relatively dormant in the background. Then came the financial crisis and resulting downturn for business. Corporations needed to reduce cost to preserve themselves, and they found that by using those new technologies they could reorganize themselves and eliminated much of their high priced executive talent . . . you know . . . cost savings. As a few companies did this and reduced their operating cost, the strategy of using technology and reorganization quickly spread to other corporations, so suddenly, there was a massive surplus in this career field- with no jobs to be had.

Recessions replace people with machines.

And this holds true across the spectrum of American career fields. Today, in America, no one is immune from job displacement by technology. But this time, things will be much worst. Since the ‘08 recession, the technologies of AI (Artificial Intelligence) and artificial vision have made huge advancements. These technologies allows more to be done in designing machines to do the jobs which people are now doing. So, we can expect deep inroads to be made in automation and robotic systems, therefore a recession will purge the economy of people having limited abilities in a technologically advanced society.

As the shutdown continues, with people working at home, businesses will find ways to do the work with fewer people and they will mostly do this by using new technologies. They will reorganize, simplify and streamline their operations to save money. They will do their work with fewer people needing fewer skills and less education, and therefore with a lower labor cost.

In the ‘79 recession, which resulted from the second oil crisis, there were 11 million people who lost their jobs, but only about 7 million of those jobs ever came back. This happened just as microprocessor-computers were coming into their own. With the advancements made in microprocessors and computer technology since then, automation has become much easier to do and therefore has proliferated. The specter of unemployment is the alarming numbers of joblessness: but the real question is ‘How many of those jobs will ever come back?’ Judging from past recent recessions, we can expect that a significant number wont come back. The work force will again contract, able to do the same work and at a lower cost.

I remember a visit to my sister-in-law several years ago, and we were watching the evening news with an announcement that a large technology company was laying off 15,000 people. My sister-in-law, who was a technology challenged person, exclaimed: “Why do they do that? Who’s going to do the work? They will just have to hire them back because they can’t do the work without them!” I then explained to her that with new computers and telecommunication systems, not only will they be able to do the work without them, but most likely they would do it cheaper, faster and more accurate than when using humans. Those jobs were gone for good! And while the company, as so often the case, eliminated the jobs by retirements and natural attrition to minimize the impact on people, nevertheless those jobs were gone. For the young people coming up, those positions were now gone, leaving them with fewer opportunities.

This is a natural process that has been going on since the mid-twentieth century or earlier, both during boom times and bust. The thing is, a recession greatly accelerates the process of automation over a broader spectrum of career fields. It’s just this time it will be deeper and more pervasive, leaving many at the bottom of the heap . . . those living in tents we now see on so many American city streets.

The impact of the oil supplies will be the ‘joker in the deck’.

OVER 3 MILLION AMERICANS ARE UNEMPLOYED BECAUSE OF THE CORONAVIRUS PANDEMIC!!!!!!!!!

image: nytimes.com

By: Economic & Finance Report

Over 3.3 million Americans have claimed unemployment benefits because of the coronavirus, the U.S. Labor Dept has indicated this past week. The virus has taken a toll on businesses, income wages and society’s everyday way of living.

These numbers reflect a growing number of Americans who are currently unemployed and are seeking financial relief; because of what the COVID-19 virus has done to their working wages. Many people have insisted that the impact has burdened them into massive financial debt.

It also has to be noted, that the United States has now surpassed all other countries with the most infected individuals who have tested positive for COVID-19. Over 85,000 people in the USA have the coronavirus, as presented by data by John Hopkins University on March 26, 2020 (US infections 85,840). SB

Sources: US Labor Dept; John Hopkins University Covid-19 Data

27 March 2020

1) The $2 trillion dollar coronavirus relief bill has been passed and Treasury Secretary Steven Mnuchin said the people should receive cash payments within three weeks. The IRS has been tasked with distributing the monies, but the agency is hobbled by obsolete technologies such as 1960’s era computers, limited staff and a small budget. So there are questions if the agency can get the job done in a timely manner, let alone in three weeks. Experts say its more like a matter of months rather than weeks for Americans to receive their check.

2) Almost 3.3 million Americans have applied for unemployment benefits this last week, more than quadruple the previous record set in 1982. This is a result of the wide spread economic shutdown from the coronavirus pandemic. This rate of layoffs is expected to accelerate as the U.S. economy sinks into a recession with the collapse of revenues for a wide range of businesses. Economist predict the nation’s unemployment rate could approach 13% by May.

3) Gold has traditionally been a panic investment which people and nations buy to protect the value of their money. The worldwide panic over the coronavirus coupled with a flood of stimulus by central banks has ignited demand for gold to store wealth. But the gold market is running into difficulties in buying. Stored in high security vaults, government mandated shut downs have left access iffy. Also, refiners of gold have been forced to close because of the virus. Transporting gold is done via airlines, but the sharp drop in air service has also made transport of the metal difficult. All these factors have put a squeeze on gold futures.

4) Stock market closings for – 26 MAR 20:

Dow 22,552.17 up 1351.62
Nasdaq 7,797.54 up 413.24
S&P 500 2,630.07 up 154.51

10 Year Yield: down at 0.81%

Oil: down at $23.18

#THECASTPOD EP. #12 LOL FEAT. @COMEDIANJLAND @YOUTUBE

The Cast Podcast Ep. #12 LOL feat. Jonathan Land Youtube Ed.

26 March 2020

1) The coronavirus crisis has also crippled the sales of automobiles with March sales down by an expected 35.5% and 15.3% decline expected for 2020. The decline poses the largest threat to the auto industry since the Great Recession which resulted in the bankruptcy of General Motors and Chrysler. Globally, auto sales are expected to drop by 12%, which is greater than the 8% of the Great Recession. Most dealers are keeping their doors open, although some are only allowed to keep their service centers open during the shutdown order.

2) The coronavirus crisis has brought negative rates to the U.S., the first time for negative yields on government debt. The yields on both one-month and three-month Treasury bills have dipped below zero on Wednesday. Negative yields have been a part of European markets for months now, with many expecting the same to come to America.

3) Many entertainment facilities and events have been canceled because of the coronavirus pandemic with the closing of Disneyland and Disney World being the first world renowned closures. A long list of political events, theme parks, sporting events and leagues, cultural and concerns closures has been joined by the announcement that the 2020 Olympics in Tokyo has been postpone for a year. The economic losses, both direct and indirect, are near incalculable to make. This will add to the total economic downturn of the world with innumerable support and supply businesses suffering.

4) Stock market closings for – 25 MAR 20:

Dow 21,200.55 up 495.64
Nasdaq 7,384.30 down 33.56
S&P 500 2,475.56 up 28.23

10 Year Yield: up at 0.86%

Oil: up at $24.31

25 March 2020

1) President Trump has proposed easing restrictions after the 15 day shutdown ends next week, to restart the devastated U.S. economy. But many states protest this as too soon, that the spread of the coronavirus will just resume with the efforts thus far wasted. The apex of the outbreak could still be 14 to 21 days away. So far, more than 42,000 Americans have contracted COVID-19 with about 620 having died. The World Health Organization warned that the United States could possible become the next epicenter of the pandemic. The virus has shuttered thousands of businesses, throwing millions out of work with state governors ordering about 100 million people (one third of the nation’s population) to stay at home. Economic activity has ground to a halt in major cities.

2) First economic data coming in shows the U.S. is now in a recession, with the biggest economic slump on record for March. Various metrics and indexes of economic activity show the same thing, as the economies (both U.S. and global) grind to a halt. Some consider that once the ‘shelter in place’ and ‘none essential business close’ orders are lifted, that world business will just spring back into action as if nothing had happened. But many economist consider the recession will just deepen with jobs already being slashed at a pace not witnessed since the 2009 global financial crisis. Small businesses don’t have the cash to weather even a short shutdown, and many will fail, which in turn will drag other larger businesses down too.

3) Due to the coronavirus, the revenues for the US Postal Service has drastically dropped off leaving the service short of cash needed for operations. There are warnings in Congress that the USPS may have to cease operations in June, forcing layoffs of thousands of postal employees. The service will require massive infusion of government funds to ensure continual operations necessary for American society. Additionally, postal workers are also falling victim to the infection with 13 already reported sick.

4) Stock market closings for – 24 MAR 20: The Dow had its single largest point gain in a single day.

Dow 20,704.91 up 2112.98
Nasdaq 7,417.86 up 557.18
S&P 500 2,447.33 up 209.93

10 Year Yield: up at 0.82%

Oil: up at $24.33

24 March 2020

1) The International Monetary Fund stated the global recession caused by the coronavirus pandemic could be worse than the global financial crisis of 2008-9. However, the world economic output should recover in 2021 because of the extraordinary fiscal actions already being taken by many countries and their central banks. But for a 2021 recovery, countries need to prioritize containment and strengthen health systems.

2) The U.S. is entering a recession, but the ultimate fear is a protracted malaise akin to a depression. Some prominent economy watchers are drawing comparisons to the Great Depression, although falling short of forecasting another one, based on the fact that the world has not seen a synchronized interruption in economic output in decades as was seen with the Great Depression. The U.S. will suffer a huge economic contraction as businesses close and Americans stay home, with some estimates that the economy will have the worst quarter since 1947.

3) Most U.S. small businesses have only days to stay afloat amid the coronavirus crisis. Only about half of the 30 million small businesses in America have a 15 day cash reserve needed to survive. The shelter in place orders have cut business revenues to near zero almost over night. Particularly hard hit is the service industries such as restaurants, landscaping, personal services and salons. These small businesses employ about 60 million people, or half of American’s work force. Many of the businesses were already operating on razor thin margins before the virus crisis. With so little cash reserves, they are forced to immediately reduce hours or layoff employees to survive.

4) Stock market closings for – 23 MAR 20:

Dow 18,591.93 down 582.05
Nasdaq 6,860.67 down 18.84
S&P 500 2,237.40 down 67.52

10 Year Yield: down at 0.76%

Oil: up at $24.24

23 March 2020

1) The shutting down of many of American service industries is having an effect on America’s hard pressed trucking industry. Suddenly, there are fewer hauling jobs, a result of the coronavirus control measures. There are 300,000 to 400,000 thousand truck drivers who own their trucks and don’t have much protection if rates or demand for their service falls. Trucking is often considered a leading economic indicator where the rest of the economy is heading, because 71% of the freight in America is moved by trucks. A downturn in freight being hauled indicates the economy is slumping.

2) President Trump says the U.S. may be headed for a recession for the first time in eleven years as the coronavirus cripples the world economies which in turn can pull the U.S. economy down despite it being strong. Experts anticipate America will enter a recession in the upcoming second quarter, from April through June, with a decline of 4% to 8% annual pace. The unemployment rate could zoom up to 6% from its current fifty year low of 3.5%, which would hinder a recovery. Typically, economic hard times opens the way for new technologies to displace workers as business strive for ways to reduce cost and remain profitable.

3) The Department of Labor reported a 30% increase in unemployment claims, which is one of the largest spikes in claims. This signals the start of feared layoffs in response to the coronavirus impact on the economy. As more businesses are vastly reducing or stopping operations, they have no real choice but to lay off workers in the hope of surviving the coming economic storm. America’s oil industry is facing massive layoffs with tens of thousands being laid off in the shale fields like the Permian Basin as oil prices drop to alarming lows. No longer profitable to pump out shale fields and strapped with high levels of debt, the oil companies are facing bankruptcy. Six years ago, a sharp price drop in oil cost 200,000 oil workers their jobs.

4) Stock market closings for – 20 MAR 20: The Dow had its worst month since 1931.

Dow 19,173.98 down 913.21
Nasdaq 6,879.52 down 271.06
S&P 500 2,304.92 down 104.47

10 Year Yield: down at 0.94%

Oil: down at $23.64