Job Postings Keep Improving
In the week of November 6th, job postings were down 13% year over year as you can see from the chart below. Recovery hasn’t stopped despite COVID-19 hospitalizations passing the summer high. Interestingly, we’re starting to see news outlets call this the 2nd wave. If deaths materially get above the summer peak, we can say that. Every day, the likelihood of COVID-19 getting as bad as it was in the spring seems to increase.
It’s increasingly likely that the economy will have a weaker December and January, but we can only review the data we have. Therefore, we can say the data looks good. However, you can’t discount COVID-19 just because the economy kept churning in the summer. Restrictions are increasing and we are being told the situation is on the brink of being materially worse than July.
Since August, the improvement in the yearly growth rate has been 0.4% per week. That’s less than prior months, but not bad because the room for improvement is smaller. It’s actually hard to believe we are seeing any improvement because we are still a couple months away from firms gearing up for a recovery as the vaccines get sent out.
Within this Indeed report, hospitality and tourism had a 46.9% decline in yearly postings which was the worst decline. It had an additional 1.5% decline in yearly growth compared to October 23rd. There’s no question, this industry will have a rough final 6 weeks of the year, but the spring will show strong improvement.
It’s surprising to see software and development as one of the worst. It had a 25% decline from last week, but a 2.6% improvement from October 23rd. Banking and finance industry had a 3.8% improvement from October 23rd. Strongest yearly growth was in loading and stocking which had 26.5% improvement from last year and a 4 point gain from October 23rd. This will soon reverse when people normalize the amount of goods they order online. Y
ou will see this play out in real time with FedEx’s stock price. It is down 6.8% from October 20th. FedEx will have an amazing holiday season, but that was already priced in a few months ago. This stock is dead in the water in my opinion.
In terms of geographic areas, the worst hit cities have been Honolulu (-34.8%), San Francisco (-29.8%), and Seattle (29.1%). Worst city in the Midwest is Madison, Wisconsin which has had a 25.4% decline. That’s expected because Wisconsin was the first hotspot of the 3rd wave.
Yearly MBA Growth Settling Down
A thesis on the housing market is yearly growth will slow for 2 reasons. First is that demand was pushed from the spring to the summer. No one gave up on their desire to buy a house. They just did it a few months later. Since that spike is over, we will approach normal levels of growth. It’s impossible to sustain over 20% growth in MBA purchase applications.
Second reason is rates will rise. In the week of November 5th, the 30 year fixed rate fell to a record low of 2.78%. It will obviously increase this week, but that’s only the beginning of the increase. Since the 10 year yield may get to 1.5%, there will be less support from low rates to drive buying.
Furthermore, with the COVID-19 imminent, anyone buying a single family house to get out of the city will have 2nd thoughts. Finally, comps are about to get much tougher.
With that thesis in mind, let’s look at the data from the week of November 6th. MBA composite index fell 0.5% after rising 3.8%. Purchase index was down 3% after falling 1%. Yearly growth fell from 25% to 16%. We are unofficially done with over 20% growth.
Refinance growth was 1% which followed 6% weekly growth. Obviously, refinancing is the most sensitive to rates. Who will refinance at 3.5%, when there were months of rates below 3%? Refinancing activity will plummet.
Record Business Applications
As you can see from the chart below, new business applications have spiked to a record high. That’s because people were laid off and used the internet to start a new career. It's not saying this was the main example of business apps, but being a YouTuber doesn’t require you to leave your house.
We live in a new economy which means there is demand for different goods and services. Disruption creates opportunity. Obviously, this level of business applications can’t keep up. Investors are curious if most new businesses keep going or if they fold when the economy gets back to normal. It’ll likely be a mixture of both.
COVID-19 Crisis Gets Worse Again!
We are being told that COVID-19 crisis is almost guaranteed to be worse than the spike in the summer. As you can see from the chart below, there are now 65,368 people hospitalized. That’s still not higher than the peak in the spring when you account for the few states that didn’t report their data.
However, at this rate, it’s becoming more likely the spring total will be demolished. 7 day average of deaths is 1,034 which is extremely close to the summer peak. Some can’t imagine it not passing the summer peak because of the spike in cases and hospitalizations in the past week. Apparently, the 7 day average of deaths will get above 1,200. December is set to be the 3rd deadliest month of the pandemic.
Each day, the outlook for the economy seemingly gets worse. Many still don’t see the same level of lockdowns in the fall as we saw in the spring, but restrictions are growing. New York sets its policy based on the positive test rate. That means the state is set for more restrictions as the positivity rate is 2.93%.
That’s one of the lowest in the country, but even still NY is closing bars, restaurants, and gyms at 10PM starting on Friday. Plus, the indoor gathering limit is 10. It seems like people have COVID-19 fatigue which means the pandemic will get worse before it gets better this spring.