Common Cents & Numbness on April 17, 2020

“Can you stand up? I do believe its working, good.” 

David Gilmore


A few weeks ago, I started warning folks the economic data was going to start looking really weird. Obviously, it would be bad, but we had a sneaky hunch it would be so bad as to be surreal. It would compute. The numbers would be hard to comprehend. You would have to put everything into some kind of understandable context, and peel back the layers of the proverbial onion until there is nothing left.

This week’s Initial Jobless Claims is a perfect example of this.

Yesterday, the 16th, the Department of Labor announced 5.245 million Americans filed their initial jobless claim. The median estimate of the 48 participants in the Bloomberg survey for the release was 5.500 million. As such, I saw a couple of headlines which proclaimed something along the lines of “initial claims better than expected.” That sort of thing, and there is absolutely nothing inaccurate about it. The actual number WAS less than the median estimate! By about 250K to boot! That HAS to be good, right?

Well, consider the range of estimates was 1.400 million to 8.000 million, a difference of 6.600 million. The standard deviation of the estimates was an eye-popping 1.308 million. As such, there was a 68.2% probability (presumably) the survey would fall between 4.192 million and 6.808 million. That is kind of a wide berth, huge even. All the more so when you realize the previous weekly high before the recent unpleasantness (according to the Bloomberg going back to January 1967) was 695K for the week ending 10/1/1982.

5.245 million US workers filing a jobless claim in one week. To put that into perspective, according the Census Bureau’s estimate for 2019, there are 5,148,714 people living in the entire state of South Carolina. That means every last man, woman, child, or whatever the preferred nomenclature is these days. Everybody. All of them. South Carolina was thrown out of work last week. The week prior to that, Indiana was given a pink slip, just like all the folks in Tennessee got theirs the week before that. You know, it had started out so nicely (ha!) for the week which ended on 3/20/2020 when only Utah was shown the door.

When you add the last four weeks up, a total of 22.034 million filed a jobless claim for the first time. 22.304 million! That is only a little less than the entire population of Taiwan, out of a job and on the dole…if only for a short while. That is weird. That is surreal. More than that, it is nightmarish.

Then there are numbers like the Conference Boards US Leading Indicator Index which fell 6.7% during March, the worst monthly reading since, oh, February 1958 or inception. You choose which you prefer. Then there is the 8.7% decline in Advance Retail Sales for March, which is/was the worst monthly observation since at least February 1992, as that is all the further the Bloomberg goes back. While admittedly a somewhat tertiary report, the Empire State Manufacturing Survey (tracking production output in NY) posted a -78.2 reading last month. More than double the prior worst month. The hits just keep on coming. Industrial Production for March declined 5.40% for the month, reflecting the worst monthly output since at least December 1949. Private Housing Starts swooned a jaw-dropping 22.3% last month which, unbelievably, wasn’t the worst ever…only second worst from what I can tell.

As bad as all of that is or was, consider that last paragraph was pretty much for the month of March. The whole country wasn’t quite on full lock down yet. Heck, if I am not mistaken, Gov. Cuomo didn’t shut down New York, the so-called hot spot, until March 20 (going into effect on the 22nd). As such, while the country was indeed slowing and shutting down up to the third week of last month, the official closings didn’t start in force until the end of the month.

So, just how bad will April’s economic data after a full month of mandated, mostly, ‘stay at home’ orders from various governors, mayors, and other local mandarins? I would be prevaricating if I answered any way other than: no one knows for certain, as is evidenced by the spitball forecasts for initial jobless claims which were all over the chalkboard. No one has been around to see this type of data, no one.

Interestingly, and that is a very apt descriptor, the stock markets aren’t paying much attention to the economic data/releases. Heck, they don’t seem to notice somewhat dire economic and earnings outlooks from the banking industry either. It is bizarre, truly. The information, what we have in hand, is mind-numbingly awful; however, as I type here on 1:11 pm CDT on April 17, 2020, the S&P 500 is up over 10% for the month thus far.  You read that correctly, over 10%…in the face of the worse economic downturn since the Great Depression, seriously.

What gives?

As I wrote last week, liquidity is what gives. Investors are still on a cash-induced high which has more than soothed last month’s frayed nerves, it has completely numbed them. Hmm. I feel a song coming on, so please indulge: “When I was a child I had a fever / My hands felt just like two balloons / Nor I’ve got that feeling once again / I can’t explain you would not understand / This in not how I am / I have become comfortably numb.” If you know those lyrics, you know a pretty good song, and it will probably be stuck in your head for a good portion of the remainder of the day.

Another thing which gives, or could explain the markets’ behavior, is some sort of emotional detachment. After all, everyone knows the data is going to awful. Everyone knows earnings are going to stink. Everyone secretly knows we aren’t going to have rubber-band type of  snap back recovery (or should). Everyone knows things aren’t going as smoothly as anyone would like. Everyone knows there will probably be hell to pay when the general public finds out who got money and who didn’t. Everyone knows there is no way to put a true valuation on the stock market right now. Everyone…everyone…knows it doesn’t get much worse than it is right now. Whew.

You know what, just like the headlines about this week’s initial jobless claims, they wouldn’t be wrong.

So, do we retest the lows? Personally, it is hard for me to think this recent euphoria is going to last and we will keep going up, up, up and away from here. However, given where we probably are in the process, how much money the powers that be are throwing at the situation, and investors’ apparent willingness to overlook or ignore some dreadful numbers, you know, it is hard for me to imagine the same level of panic we had at the beginning of last month.

Now, what the new normal is for the economy and the markets is still anyone’s best guess. However, it is a beautiful day here in Birmingham, Alabama, it is about 3 hours until we turn off the lights for the week, and I am going to say I feel better about where we are now than where we were. In fact, you might say I am feeling comfortably numb…just not in the same way as David Gilmore.

I hope this finds you and your family safe and as happy as you can be.


John Norris

Chief Economist



As always, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as are those of our investment committee, are subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the reset of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.