Bright lights shine in the night this month, as we approach the shortest day of the year and the holidays give us a change of pace. Cinnabon sound good this time of year? They are doing fine, order online! More on that story below. Lots of interesting economic news this week, so let’s start with the newly reopened stimulus discussions, what this news may mean to each of us and how it might show up.
Stimulus news: We watch this closely, because federal stimulus provides a short-term boost to the economy and the markets. Congress created a bipartisan plan for about $900 billion. Mitch McConnell has his own plan for $510 billion, now commonly referred to as the “McConnell Plan.” The biggest differences are that the McConnell Plan leaves out $35 billion for hospital aid, $25 billion for renter's assistance, and $160 billion for state and local government aid that the bipartisan plan proposed. (How Stimulus Stacks Up)
What happens when state and local governments cut costs? So far, an overwhelming majority of local governmental job cuts have been in education, and that will continue: 45% of mayors forecast “dramatic” cuts for their school budgets. Cuts to police, fire, schools, parks, emergency medical personnel will happen with the new year. Less obviously, states will cut court budgets. We are all likely to experience the other budget cuts at a local level beginning in January, and most of state and local budgets are devoted to employee costs, so layoffs will ripple through the economy.
Which states need aid the most? Probably not the ones you think. People in states that rely on oil revenues or tourism are struggling the most. In rank order (shown on map below): Louisiana, Nevada, Indiana, Oklahoma, Florida, Texas and South Carolina residents are experiencing the most financial distress, both in personal incomes and then tax revenue.
There’s heavy overlap between these states and those experiencing high levels of Covid-19. Five states have the highest volumes of Covid-19 per 1 million residents and the most financial distress among residents: Florida, Louisiana, South Carolina, Nevada, and Texas.
Small business support: Both the bipartisan plan and the McConnell plan contain support for small business, which is much-needed, according to the poll results below. Travel companies, gyms, salons, retail and restaurants all reported high risk of closing for good if they don’t get assistance through the pandemic.
Mortgage rates fell to another record low this week. The 30-year fixed rate mortgage averaged 2.71% this week, down a small amount from last week. It remains a good time to consider refinancing, but prepare for a longer process than usual.
Hospitalizations continue to grow and hit new records, reaching a milestone of 100,000 this week. There is simply no way to sugarcoat this graph of the growth in Covid-19 hospitalizations.
Cinnabon shows how small companies adapt: Cinnabon was always in high traffic shopping centers, but as soon as Covid-19 hit back in March, they quickly worked with franchisees to bring their products to at-home consumers, directly and through outlets, resulting in no loss of volume at all. (Yahoo Finance) After some of us read this story, we ordered online for a sweet and warm holiday treat! (Harry & David Cinnabon)
Stay warm, bake something delicious, and please, please stay safe and take care of each other.