This morning we got two reports that confirm the beginning of the Coronavirus Recession: initial jobless claims and the Philadelphia Fed manufacturing index.
Initial claims rose to 281,000 one week ago. They are now 15% higher than their low last April, as well as almost 15% higher preliminarily on a monthly basis than last March, and the 4 week moving average is just shy of 5% higher than one year ago. This meets two of my three “recession warning” triggers for this metric.
The Philadelphia Fed’s new orders subindex came in at -15.5, a big decline from last month’s +33.6, that clearly represented manufacturers’ trying to lock in new supplies. Together with the Empire State’s big decline to -9.3 earlier this week, the average of the new orders subindexes for the five regional Feds is -4.
Other high frequency indicators have also tightened or turned neutral this week: credit conditions from the Chicago Fed, the spread between Treasuries and corporate bonds, the Harpex shipping index, the US$, and of course the stock market, which has continued to crash.
I’ll have the full report up this Saturday, but the bottom line is that with this morning’s reports, it is clear in the data that the Coronavirus Recession has begun.
Two final notes:
1. When I checked a short time ago, reported cases of coronavirus in the US had jumped 45% in a single day to 9415. This is only -6% below Jim Bianco’s exponential forecast from one week ago. Yes, much of this increase can be put down to increased testing, but the point is, that increased testing keeps finding an increased number of infections. This pace of increase is likely to continue for at least one more week.
2. On the other hand, I will not leave you with DOOOM. I am working on a piece detailing what data to look for to know when we are turning the corner on this crisis.