In Review: Week of April 13th, 2020. The continuing impact of the COVID-19 pandemic was evident across a wide-range of the U.S. economy in the latest week, as data for a variety of sectors was released.
Like the previous three weeks, Initial Jobless Claims once again climbed into the millions, as 5.25 million people filed for unemployment during the week ending April 11. This means the 4-week tally of claims has hit a nearly unfathomable 22 million people!
The housing sector did not fare much better as the NAHB Housing Market Index, which is a real-time read on builder confidence, saw its largest one-month drop ever. New home construction was practically stymied in March as well, with Housing Starts and Building Permits showing big declines.
March Retail Sales were also walloped, dropping 8.7% to the lowest read ever on record, while manufacturing in the New York and Philadelphia regions also plunged, with the Philadelphia Fed Index actually hitting its lowest level in 40 years.
Millions More Initial Jobless Claims Filed
Initial Jobless Claims totaled 5.25 million for the week ending April 11, down slightly from the 6.6 million claims filed during the prior week. These numbers are still alarming but off the peak seen in previous weeks.
Let’s take a moment to dive deeper into the numbers. There are 160 million people in the labor force and over the last four weeks, we have seen 22 million people file unemployment claims. Before the pandemic caused this spike in jobless claims, the unemployment rate was 3.5%, meaning that 5 million people were unemployed before the pandemic began.
So, when we factor in the number of people who were unemployed before the pandemic with the claims filed in the last four weeks, there are around 27 million people who are now unemployed. This equates to 17% unemployment, but the reality is this number is going to continue to rise. It’s likely unemployment may exceed 20%, which we would reach if 32 million people file jobless claims. Sadly, this seems very realistic now.
The Fed has done a good job of stabilizing the markets, as Mortgage Bonds continue to trade sideways in a wide range between support at the 25-day Moving Average and overhead resistance at 104.656, which is the all-time closing high for Mortgage Backed Securities. At the moment, MBS are only about 60bp from this level. The 10-year is trading at 0.60% and will likely move lower towards the all-time low of 0.31%.