Friday, December 31, 2021

Hopeful New Year


 - by New Deal democrat

In view of the continued conflagration of the COVID pandemic, I am eschewing the traditional “Happy New Year!” salutation as we end 2021 and begin 2022 in favor of the above “Hopeful New Year.” I always try to stick with the data - one of the favorite things anyone has ever said about my writing is that I appear to be “praeternaturally detached” - and that almost always staying away from the “We’re DOOOMED!!!” references, because there is always some sort of reason for hope out there, even in the darkest times.

Pandemics do not go on forever. Even before vaccinations, eventually sicknesses got around to infecting everybody who was susceptible, and ran out of quick kills. This one will be no different. As I wrote the other day, my best guess is that about 40% of the unvaccinated have already been infected. Omicron is almost certainly going to be awful in January, but on the other side, a lot more of the unvaccinated are going to have some resistance. More people will get vaccinated; better treatments will be found; and even more thorough and lasting vaccinations are likely to be ready. So I remain hopeful that 2022 will see the pandemic beginning to fade, maybe as early as this spring.

The economy is humming along nicely. We have a competent President, who displays empathy and common decency. 

So there is every reason to hope. And that is my getting: Hopeful New Year!

P.S. On a more prosaic note, my “Weekly Indicators” post will probably go up tomorrow, and my report card for my 2021 forecasts at some point by next week.  See you then.

Thursday, December 30, 2021

The labor market closes out 2021 on the best note yet


 - by New Deal democrat

The final economic data in 2021 was this morning’s report on initial and continued jobless claims. And the good news for workers continued.

New claims declined back under 200,000 to 198,000, the best pandemic showing except for November 20’s 194,000, and December 4’s 188,000. The 4 week average of new claims declined to 199,250:

This is the best showing for the 4 week average in over 50 years, since the end of 1969:

Continuing claims for jobless benefits also declined to a new pandemic low of 1,716,000:

Except for 2018-19, this is also the lowest showing since 1974:

This is essentially the tightest market for employees in nearly 50 years. It is no surprise that wages have been rising sharply. We can expect this situation to continue so long as the pandemic keeps many potential workers (on the order of 4,000,000 or so) on the sidelines.

In the next few days, I’ll post my retrospective report card on my 2021 forecasts from 6 and 12 months ago. Then next week I’ll be back at it again for 2022.

Wednesday, December 29, 2021

Coronavirus dashboard for year-end 2021: the Graph of the Year, where we are now, and where we are probably going


 - by New Deal democrat

At the end of the 2nd year of the pandemic, a little self-assessment of what I got right and wrong, where we are and where we are probably going.

The one thing I got wrong in a big way is explained by this Coronavirus Graph of the Year:

I thought sure that once the effectiveness of the vaccines was widely known, opposition and reluctance to taking them would sharply decline. I did not expect the volume and intensity and orchestration of the anti-science, anti-vax campaign by Fox News and RW nutjobs. As a result, since mid-April the number of people getting vaccinated steadily declined from 2 million per day in early April until by July it was only about 250,000 per day. Just stunning. And it never picked up meaningfully since, only hitting about 500,000 per day several times when new age groups were approved for the jab.

And as a result, when Delta and now Omicron appeared, they still had fertile ground in which to grow rampantly.

By contrast, our neighbor Canada started later, but much more quickly got to 2/3’s and then 3/4’s of their entire population being fully vaccinated. As a result, they had a much milder Delta wave:

With Omicron, unfortunately, it would probably take something like 90% of the population being fully vaccinated to keep it from taking off. Canada may get there, but the sad truth is, the US *never* will.

By contrast, I just about nailed the trajectory of the Delta wave, using India, Israel, and the UK as my “leading indicators.” In all three, it appeared that Delta took 1.5-2 months to crest, and another 1.5-2 months to retreat. I used that as a template for what would happen in the US, and indeed in the US the Delta wave crested a little under 2 months after it started, and retreated for about 1.5 months thereafter. I was also in the ballpark very early about the number of daily cases and deaths at peak.

Now we are dealing with Omicron. I am hopeful (in a least-worst sort of way) that Omicron will do what Delta didn’t quite accomplish: infecting so many of the unvaccinated that a critical mass of the population builds up significant resistance to virulent repeat infections.

Here’s what the Omicron trajectory looks like in South Africa:

and here is London in the UK:

And here is Denmark, another early country where Omicron took off:

And finally, here is Puerto Rico, where over 80% of the population was fully vaccinated before Omicron:

Puerto Rico, like Canada, shows that even 75% or 80% of a population fully vaccinated wasn’t enough to stop Omicron. But Puerto Rico, like South Africa, like London, and like Denmark, appears to show that Omicron rushes in like SuperDelta, peaking only 30-40 days after the initial cases. While it’s too soon to say for Canada or Puerto Rico, in the case of South Africa, and probably London and Denmark as well, there has been an order of magnitude fewer deaths than with prior similar waves of infection. The jury is still out on this, but as “leading indicators” these places give ample room for hope.

If the US as a whole follows South Africa and others, then Omicron will peak by early to mid-January, probably at 400,000 or more cases per day. But we might get lucky and never exceed the roughly 2200 mark of deaths daily set at the peak of Delta.

What then? The idea of eradication is long gone, not only because of how poorly so many humans have behaved in the US and elsewhere, but ultimately because the disease has ample additional animal reservoirs, such as deer and even house cats. Covid is going to become endemic. But as more and more people get infected with various strains, and more and more people are also vaccinated against those strains, it will find a smaller pool of people able to be infected. In other words, I expect successive waves to become smaller and smaller until ultimately COVID, while a big problem for people with poor immune systems, becomes part of the background noise of health.

Here again is the graph of the % of people fully vaccinated in the US, plus the total number of cases in the US, both on the same scale:

Since we know that about half of all COVID cases are asymptomatic, the likelihood is that 1/3rd or more of all Americans have been infected. And since the middle of the year, probably about 90% of those infected are among the unvaccinated.

On June 30, about 50% of people were fully vaccinated, and about 10% of the population had confirmed infections. Double that % of infections, and adjust for the fact that about 50% of prior infections were to people subsequently vaccinated, and you wind up with about 50%+10%, or 60% of the US population probably having some resistance. Fast forward to now, with about 62% of the population vaccinated, and another 6% of the population having subsequently been confirmed as infected, probably 90% of whom were unvaccinated, and you get 62% + 10% + (.9*2*6)% = 62%+10%+11%, or 83% of the US population with some resistance to COVID. 

I think by the end of winter that last number could approach 90%. We may also get the last batch of young children approved for vaccination. In short, in other words, I am not fatalistic, and remain hopeful that by spring, the reservoir of easy pickings for COVID in the US will have shrunk enough that subsequent waves will be progressively smaller, and progressively less fatal.

Tuesday, December 28, 2021

House price increases continue to show strong market at the end


 - by New Deal democrat

The last housing market data for 2021, the FHFA and Case Shiller house price indexes, were reported this morning. Both showed a very slight deceleration in the soaring prices that have marked this year.

The FHFA purchase only index rose 1.1% for October. The YoY% increase was 17.4%, down from the 19.3% YoY peak in July. Meanwhile the Case Shiller national index rose 0.8% m/m, and is up 19.1% YoY, vs. its peak of 19.8% in August. This is similar to what we have already seen with the median prices of new houses for sale (gold):

As I always note, prices follow sales. Below are new home sales and single family housing permits (red, /2 for scale) vs. the FHFA index as above:

As expensive as houses are, they have not yet reached a crisis point as they did in 2006. This is because, although both average hourly wages and house price have increased roughly 60% since that time, mortgage rates, are just over 3% vs. 6.5% or higher back then. In other words, the amount of disposable income it takes the average household to service their mortgage and other debts in 2021 is only about 2/3’s of what it was at the peak of the housing bubble in 2006:

So while both single family housing permits and new home sales have been down as much as 30% this year from their peak at the end of last year, they remain even with their best performance in the entire decade leading up to the pandemic:

This is not a housing market that is in any serious trouble. While the downturn in housing activity this year will create a drag on the economy next year, it is very unlikely to put the economy as a whole into a recession. 

Sunday, December 26, 2021

Weekly Indicators for December 20 - 24 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Surprisingly, so far the Omicron variant has had no deleterious effect on any of the data, and in particular, on restaurant reservations.

As usual, clicking over and reading will bring you up to the economic moment, and bring me a little late Christmas cash in my stocking.

Also - Programming Note: This week will also be very light on data, with two house price indexes on Tuesday, and jobless claims on Thursday. While I suspect there will be the need for a coronavirus update < sigh >, don’t be surprised if I play hookie one or two days again.