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How are we doing on that recovery so far?

Welcome to this first Friday in February. Today we bring you a number of updates on stories and data we have been following these past few months, and a little treat for the soul to finish. 

First, we have described in the past what is required to have an economically robust year this year: 

  1. Vaccine rollout accelerates. 
  2. Another stimulus bill – or should it be called a ‘relief’ bill? Economists debate, more on this below.
  3. Strong corporate earnings and improving jobs data. 
  4. Schools reopen. 

How is each of these unfolding so far?

1) Vaccine rollout: U.S. science officials such as Anthony Fauci have suggested it will take 70-85% coverage of the population for things to return to normal.  

Graph

The U.S. is currently on track to get there just in time to ring in the 2022 new year. The vaccinations are happening more rapidly in richer Western countries than the rest of the globe. At the current pace, it will take the world seven years to achieve 75% vaccination. (Bloomberg)

The good news? Johnson & Johnson’s one-dose vaccine will go before the FDA on February 26 for approval.

 

2) Stimulus/relief bill: The Senate paved the way to pass the next coronavirus relief package, as bipartisan adjustments are made (e.g. the minimum wage increase may not be included and the total bill may be smaller). So, is this a relief bill or a stimulus bill?

University of Chicago Economics Professor Austan Goolsby explained that “Relief money is designed to keep someone’s utilities from being shut off, or keep a restaurant from declaring bankruptcy, but neither of these will jump start economic growth. Stimulus spending is designed to jump start growth in a broad economic downturn.”

This distinction is meaningful because if you are looking at jobs data (more on that below), you may side with the ‘wait and see’ opponents of the bill. If you are trying to prevent permanent damage of evictions and restaurants closing, you may think more about a relief bill.

Who needs the relief? The graphic below shows the people struggling most in January by industry (CNBC, light blue bars are jobs lost)
January jobs one-month net change graph

3) Corporate earnings and jobs data: Mixed results. The U.S. economy managed to squeak out job gains in January, but the chart below shows a labor market still struggling. December showed a net loss in jobs, and January nonfarm payroll employment rose by 49,000. Employment in food services and drinking places continued to trend down, according to the Labor Department. (CNBC)

Monthly job growth

Corporate earnings (other than the travel and entertainment industry) are coming in stronger than expected, with particularly strong results from the technology, materials and real estate earnings reports. The combination of very low interest rates and the strong earnings is pushing stocks to new highs.

 

4) Some schools reopen amid debate: Reopenings across the country have had mixed results, with some reopened schools repeatedly disrupted by community outbreaks. You can check your state’s schools’ data here: Education Week state dashboards.

The continued debate boils down to this: Is mitigating the academic, social and emotional harms of at-home learning worth the risk that the virus will spread in schools and the community? That hinges on how high the transmission risk really is, something scientists will probably be examining for a while to come. Until then, decisions are being made with the limited data at hand. (LA Times

 

Client corner 

 TD Ameritrade has started delivering your tax documents to you: 

  • IRA and Roth distribution reporting: 1099-R documents are complete and mailed to you. 
  • Taxable accounts: 1099-consolidated (for taxable accounts reporting dividends, interest and realized gain) will be issued by February 15. 

All forms will be mailed to you but you can access an electronic copy by logging in to www.advisorclient.com: Go to the Documents tab and select Tax Documents on the left toolbar.

 

Wintery morning light 

There’s a special quality to the morning light during winter that makes getting up for the sunrise feel special. We’ve heard from several clients who have picked up painting recently, and thought of you all after coming across this: An urban painter shares his tips for capturing this quality in oil paints.


Painting by Guillaume Menuel 

We hope you continue to enjoy the small things that make your daily life special.