Economists at the University of Chicago estimate that more than two-thirds of the workers on unemployment insurance are making more in jobless benefits than they did at work. Some are even hauling in two to three times as much.
Fed Chair Powell Participates in Virtual Discussion * Powell says Fed ‘days away’ from Main Street lending * Negative not ‘appropriate’ for U.S., he says * A second virus wave would undermine confidence * Fed works in ‘strictly nonpolitical way’
The massive stimulus known as the CARE Act (and massive Fed stimulus) did not work as hoped. Consumer spending in April declined by 13.6% MoM.
Personal income rose 10.5% MoM as intended, but personal spending did not work as planned.
The Atlanta Fed GDPNow forecast for Q2 US GDP is now below 50% at -51.2%.
And speaking of Powell’s proclamation that negative rates are not appropriate for the US, the Rudebusch (SF Fed) specification of the Taylor Rule says that the Fed Funds target rate should be -13.52%.
Fed Chair Jerome Powell is adamant that the US will not go where other Central Banks have gone before … to negative rates.
Even though the Mankiw specification of the Taylor Rule model says that The Fed Funds Target rate should be -10.01% based on the surge in unemployment (14.70%) and the lack of core inflation (1.70%). The Fed Funds Target rate remains at 0.25%.
As unemployment surges (green line) with the lockdown, banks are expecting a tsunami of loan delinquencies and defaults. Hence, bank excess reserves have spiked as well (white line fever).
Hopefully with states opening up again, this is simply temporary.
March was truly a horrific month for employment and markets. But S&P 500 volatility is subsiding while the components of the S&P 500 remain at increased levels of implied correlation.
Not surprisingly, JPMChase and Blackrock are highly correlated.
The CBOE S&P 500 Implied Correlation Index measures the expected average correlation of price returns of S&P 500 Index components, implied through SPX option prices and prices of single- stock options on the 50 largest components of SPX.