Displaying items by tag: economy
The markets are not reflecting it, but sometimes it feels as though the writing is on the wall. The economy is bound to get worse before it gets better. We have been locked down long enough now that consumer habits are shifting and the spending patterns that prolong recessions are taking hold. Total US credit card debt has fallen 5% in five weeks—the fastest fall since the Great Recession. Auto loans are the same. On the whole, the more data comes out, the worse the picture gets.
FINSUM: Job losses have not yet peaked, so we are not even close to being on the road to recovery. We suspect it is going to take a long time to get back to where we were in February. We expect this will be a very wide U-shaped recovery.
If you have been confused about the exhaustion of the Paycheck Protection Program in the context of hearing so many stories that people have not received money, you are not alone. There has been a huge public outcry about the program. It is not just that so many big companies got the money, it is that so FEW others did. Less than 7% of businesses got approval.
At COVID Loan Tracker, we have been watching actual loan disbursements, not just approvals, by relying on fellow small business owners. The results have been stark. Thus far, only 8.1% of business report receiving any money. 28% say that they have received “approval” but have not gotten money yet. COVID Loan Tracker has had around 20,000 company submissions that track around $7 bn in PPP applications. See full stats here.
Here are the stats as of 6 am this morning (4/21/20):
PPP application approval rate: 28%
Percent of PPP applications actually received money: 8.1%
Median successful PPP application: 120,000
Median employees: 15
Percent of EIDL advance applications received money: 8.0%
Median money received: $5,000
Median employees: 5
COVID Loan Tracker was started by small business owners Duncan and Rita MacDonald-Korth to help their fellow small business owners understand when PPP and EIDL advance money starts flowing. The site works by crowdsourcing knowledge on applications and loan disbursements. Our goal is to help the small business community and empower journalists with the data they need to keep the government accountable.
New data emerging today is for the first time showing the scale of the devastation that has occurred to the US economy. Industrial production fell 5.4% in March, the worst fall since 1946. Headline retails sales fell a whopping 8.7%. Both data points were worse than economists predicted.
FINSUM: What is really worrying here is that large parts of the US were not even shutdown until the very end of March. This means April’s numbers are likely to be a complete washout. Judging by indexes, this scared markets.
This is a dark day economically. New data is flowing in from many sources, and all of it is pointing to a severe decline in demand that seems ever more likely to push the US into a depression. Unemployment claims came in at another 6.6m this morning, meaning a total of 16.6m Americans have applied in the last three weeks. In other data, fuel and energy demand has fallen so far that it is now at 1960s level. Electricity usage has plummeted on the back of the sharp decline in industrial output.
FINSUM: Let’s do some rough calculations. The US workforce is about 164m people. We started this coronavirus lockdown with just under 4% unemployment, and have since added 16.6m people. By a rough calculation that means we likely have already hit 14% unemployment.
Goldman Sachs, who has been a leader in putting out new research n the economic effects of the current lockdown, has issued new guidance on this week’s pending jobless claims. The bank thinks jobless claims will increase to a whopping 6m this week. If that happens, it would mean this week’s figure would exceed the record that stood until last week by a whopping 9x. The coming release will cover the week from March 22-28th. “Jobless claims will be the timeliest hard data point for assessing the depth of the recession and catching the start of the recovery”, says Goldman.
FINSUM: The period the release covers is not even likely to be the worst. There is probably still a few weeks before the full scale of the layoffs becomes apparent and the numbers peak.