The Federal Reserve deployed historic supports to the economy during the coronavirus pandemic. This week it took major steps toward removing the stimulus by tapering asset purchases more quickly. Policymakers also moved forward interest-rate increases, signaling three hikes next year.
Today we’re examining some key charts for the U.S. economy. (All courtesy of the St. Louis Fed’s data tool known as “FRED.”) They cover a range of categories, mostly showing broad recovery from the crisis.
Jobless Claims: Total Recovery
Initial jobless claims are an important and fast-moving number because they’re reported weekly. Lower claims are “good” because they mean that fewer Americans are seeking unemployment benefits for the first time. (After the first week, people fall under “continuing” claims.)
Initial jobless claims were falling before coronavirus hit and flirted with multi-decade lows in 2019. They spiked to an all-time high of 6.1 million in the week ended April 4, 2020, and then proceeded to fall throughout the summer. By August 2020 they were back under 1 million. Initial claims dipped under 500,000 last May and never looked back. They hit 188,000 at the start of December, the lowest reading since May 1969.
Gross Domestic Product: Total Recovery
Early in the pandemic (June 1, 2020) the Congressional Budget Office predicted coronavirus would drag on the economy all the way until 2030. But that proved too pessimistic and the agency retracted its forecast in February, saying things would return to normal by the middle of this year.
As the chart below shows, gross domestic product (GDP) has more than fully recovered.
Employment: Still Needs Help
The next two charts show total non-farm payroll employment and unemployment. Neither have returned to pre-covid levels, however other numbers suggest the situation isn’t so bad. For example, job openings have risen about 40 percent from early 2020. Wages have also increased. Anecdotal evidence that people are choosing to remain out of the workforce for health or family reasons.
Housing Starts: Total Recovery
The housing market was improving before the pandemic. After a brief pause in early 2020, it’s back above pre-covid levels. This chart shows how monthly housing starts have spent most of this year above 1.5 million. In March, they hit the highest level (1.725 million) since July 2006.
Industrial Production: Mostly Recovered
Last year’s pandemic disrupted factories and transportation. This had ripple effects, with businesses running low on supplies and inventories — especially for semiconductors. Industrial production has mostly recovered, and last month hit readings last seen in September 2019.
Inventories: A Potential Tailwind
The widespread shortages of products throughout the economy has depleted business inventories. While many people overlook this number, it can help anticipate demand and orders. The Census Bureau tracks inventories as a percentage of sales. Lower readings mean there’s less available “stuff.” That has translated into record high-orders, which means that businesses enjoy healthy demand. This, combined with a stronger housing market, could provide an economic tailwind in coming quarters.
In conclusion, the economy has come a long way from the dark days of April 2020. Some segments, like housing, are stronger than before the pandemic. Others, like employment, are mixed. Still, forecasters have been raising their estimates for the last six weeks and now expect growth of nearly 6 percent in the fourth quarter (according to the Atlanta Fed). Even if inflation weren’t an issue, it isn’t a surprise that the Fed wants to normalize interest rates.
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