Despite the surge in COVID cases, the economy continues to move along without missing a beat.
Initial U.S. unemployment claims for the second week in November increased by 31,000, to 742,000. This was still close to 50,000 fewer than the previous month.
The insured unemployment rate for the first week of November fell to 4.3 percent, down from 5.7 percent the previous month. The number of people receiving unemployment insurance payments fell to 6.4 million, down from 8.4 million a month ago.
Other news was also positive. The Fed’s manufacturing index increased by 1 percent in October, bringing it to 95 percent of its prior peak. Retail sales for October were 5 percent above their prior peak. The Homebuilders’ Index for November hit a record high of 90. Finally, the Meyer’s Report shows U.S. commercial traffic was 6 percent above last year in the four weeks ending in mid-November, but overall traffic is down by 25 percent from last year’s number.
People are staying home, but the economy is still growing.
What to Expect This Week
Monday’s Markit survey of business activity for early November should show another strong month for the economy. Reports showing strong new orders in October combined with the improvement in weekly employment numbers point to another good month for business. I expect readings near the mid-50s.
On Wednesday, reports on October consumer spending, wages, and salaries will provide more complete details on the strength of the recovery. I estimate the overall economy in October was back to 98 percent of its peak of last February. The report on income and wages should help to confirm this estimate.
US COVID Cases Soar, Deaths Still Contained
Statistics show the daily number of new COVID cases continues to soar to new highs. Even though the number of virus cases is now five times more than in April, daily deaths remain below the April peak. This is a credit to the doctors and medical staff who have kept daily death rates well below predicted levels.
If reports on a highly effective vaccine being on the way are accurate, what we are seeing represents the last gasp of life for COVID-19.
Market Outlook
Stocks were mostly higher last week. The biggest gains were small-cap exchange-traded funds. The IWM and IJR funds increased by 6 percent to 7 percent, and the S&P and Dow increased by 2 percent to 4 percent. The Nasdaq and QQQs were essentially unchanged.
President Donald Trump’s lawyers produced allegations of widespread fraud. Fraud would explain how Trump lost the election even as swing states and districts voted overwhelmingly for him. Another anomaly is that Biden’s vote was less than Hillary Clinton’s 2016 totals except in four swing-state cities: Detroit, Philadelphia, Milwaukee, and Atlanta.
To overturn the election, Trump’s lawyers would have to prove their allegations. They have not been successful so far.
As a result, the best hope of avoiding destructive tax hikes rests with Republicans winning the Senate elections in Georgia. With Republican control of the Senate, most of Trump’s pro-growth policies will remain intact.