Monday, May 11, 2020

Treasury Secretary Steven Mnuchin Discusses Re-Opening Society and Next Steps (May 11th, 2020)

Travel Retail and Labor took the highest hit in our economy. It is possible that there could be a 25% unemployment rate (when we include people who were not looking for work and any new numbers since April) but the economic fundamentals that caused the Great Depression are not present here. The economy was strong prior to this pandemic and those fundamentals have not changed. April numbers were around 14.7%. This will be our hardest hit time and then things should be getting better.

There will be an improving 3Q, 4Q and a really strong next year. No previous models predict what happens when you close down a large economy for medical reasons. Such models were looking for other predictors that are based in economic fundamentals. The pandemic doesn't fit within those models. Furthermore, the medical community is discussing possible vaccines that could also be a major a "game changer".

There is this balance between keeping things closed and opening up the economy. Permanent economic damage will occur if we don't start to reopen and that can impact people's lives. The Federal re-opening methodology offers opportunities to dial up and dial down depending on the risk factors. That will allow large areas to open and get the economy moving.

Taking a few weeks before the passed stimulus money will make its way through the system. We shouldn't rush to pump more money into the economy until we understand the impact of the previous stimulus packages. Government is pushing for a payroll tax cuts as a method of putting money in people's pockets. There isn't a lot of support for providing funds to states to pay for prior poor management versus COVID related issues.

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