The Monday Morning Quarterback 10-26

The Monday Morning Quarterback

Everyone knew that this winter would be a mess. They were correct. The number of COVID-19 cases around the world is spiking again. This should not come as a real surprise given the cycle of COVID cases we described last week. Partying like a rock star (or just going back to the habits you had pre-COVID) is bound to have a bad result until we have better and faster testing, a viable vaccine, and more therapeutics. When you add that bad behavior to the annual flu season, a period when people could easily mistake annual winter flu or cold symptoms for COVID-19, it could get ugly very fast.

Did I say could? Maybe I should say has. The number of cases in Europe, where officials thought they had things under control, is now setting new highs. And in the U.S., cases are also going up rapidly again. And it’s not even November yet!

Some are even suggesting that the economy should be shut down again. That’s a colossally bad idea. As we have also discussed before, the negative effects of such actions would clearly be worse than the cure in terms of life years lost compared to life years saved. But, that doesn’t mean there is nothing to do. Enforcing masks, social distancing, size of crowds, stay away from people who may be exposed to COVID if you are over 55 and/or have some comorbidities such as diabetes, heart problems, asthma, and or weight issues and other common sense items should be the order of the day.

It’s also important to note that while cases have shot up, deaths from COVID-19, while up modestly, are way below what they were in the first round of COVID-19. So, it appears that certain demographics have figured it out. It is the demographics that haven’t rather than the general population that politicians should focus on. And better testing that could prevent the medical system from being overwhelmed is still critical.

None of this is new. Nor should it surprise anyone. But it is the election season, so what you are hearing is meant to sensationalize. And it has. Time to actually use some good judgement.

Speaking of common sense, apparently certain members of congress who have the power to control things (you can fill in the blanks) continue to favor political gain over helping the people who are most affected by the COVID-19 induced layoffs. It’s ……, well, this is another blank for you to fill in. At least the good news is that the election is next week. Amazingly, a deal for a follow up to the Cares Act will shortly follow. It can’t correct some of the real issues already in place. The lack of a follow up has gone for too long. But, the new act will be a big help even with the inevitable tons of pork that will be attached.

Not much significant economic news last week. Initial unemployment claims data are still worthless because of California’s decision not to add people for a couple of weeks. The quality of that data will improve shortly. Leading indicators were up modestly. The fact that leading indicators were up at all given the slowing of the economy due to the lack of a follow up to the Cares Act is actually impressive. Residential construction, especially single family construction, remains very strong. Thus, home builders are optimistic. Existing home sales are up as well. And in Arizona, initial claims for unemployment remain on a plateau. But single family housing continues to boom in Greater Phoenix and in Greater Tucson.

As for weekly data, hotel occupancy was at 50.1%. This is down 27.8% from a year ago. That level of decline from a year ago is actually worse than it was a month ago. Weekly traveler throughput at airports was down 62.3% compared to a year ago. A month ago, it was down 64.9%. So, little progress in that category. Seated diners in Greater Phoenix were down 47.7% from a year ago. A month ago, it was down 51.6%. And mobility to work was down 31.6% from a year ago. This is the general level it has been at for several weeks.

On the other hand, mobility to retail and recreation, while down 20.9% in Greater Phoenix is showing modest improvement over the past few weeks.

U.S. Snapshot:

• Leading indicators were up a modest 0.7% to 107.2 in September. This is a slower rate of growth from the last two months. This warrants extra attention. If the trend continues, it could signal slower growth for GDP in the last quarter of 2020.

• Single family starts and permits increased in September. Starts were up 8.5% for the month and 22.3% from a year ago. Permits were up 7.8% and 24.3% for the same time periods.

• Existing single family home sales continue to grow in a post-COVID rebound. Annualized sales were up 21.8% from a year ago while the median sale price was up 15.2% to $316,200.

• The NAHB Housing market Index reached a new record in October as the index increased by 2 to 85. New homes are the beneficiary of low mortgages rates and low existing inventory for sale.

Arizona Snapshot:

• Initial claims increased to 9,056 for the week ending October 17th. This is up 158% from a year ago.

• Large increases in permit activity for both Greater Phoenix and Greater Tucson according to R.L. Brown. The Phoenix metro saw an increase of 52.2% from a year ago to 2,993 in September. The Tucson metro had a 30.5% increase for the same period.