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US jobless claims rise, layoffs rise; US jobless benefits expire at fast pace; US household debt shrinks; China says low rate policies not working; UST 10yr yield at 0.54%; oil unchanged, gold up again; NZ$1 = 66.8 USc; TWI-5 = 69.6

US jobless claims rise, layoffs rise; US jobless benefits expire at fast pace; US household debt shrinks; China says low rate policies not working; UST 10yr yield at 0.54%; oil unchanged, gold up again; NZ$1 = 66.8 USc; TWI-5 = 69.6

Here's our summary of key economic events overnight that affect New Zealand, with news American jobless benefits are expiring at a fast rising pace.

In the US, initial jobless claims rose by almost +1.2 mln last week, but that was a smaller gain than was expected. Still, there are now 16.1 mln people on these state benefits and that was -844,000 less in a week as benefit qualifications start expiring. This will be an accelerating trend from here on, and cause substantial social pressure. It is already getting desperate for millions.

Meanwhile, Congress can't pass any extension because Republicans are blocking them. And States have run out of funding capacity.

Things aren't getting better on the jobs front. Job cuts announced by US-based employers jumped in July to 263,000, the third-largest monthly total ever, bringing the total so far this year to 1.85 mln and three times the level for the same period in 2019.

The New York Fed is reporting that total household debt shrank in Q2-2020 for the first time since 2014. Overall it fell -US$34 bln, but it was the -US$76 bln drop in credit card balances that drove the contraction. Only a rise in mortgage debt limited the shrinkage. Americans now owe US$10.2 tln in housing debt and US$820 bln in credit card debt, and along with other types of debt (like student loans at US$1.3 tln and car loans at US$1.3 tln), they owe a total of US$14.3 tln in debt. That is over 77% of annual GDP, and up from under 76% in the same quarter a year ago as economic activity shrank. It is the first time this metric has risen since 2009.

The central bank of China has criticised the low interest rate policies of its Western counterparts, saying these policies have not had the intended benefits and the spillover effects on the developing world are not positive.

The Philippines is the latest Asian nation to report a sharp recession in Q2-2020. After a small but unusual fall in Q1, it has reported a -16% further fall in Q2.

In Australia, the economic costs of Victorian pandemic outbreak are being felt everywhere, including for the Canberra budget. And in Melbourne, the big end of town has pressured the state government into a raft of restriction backdowns.

On Wall Street today, the S&P500 is up +0.6% so far in afternoon trade and rising. No-one there is worried about the jobs situation although European markets were spooked by the situation and fell almost -1% on the implications. Yesterday, Shanghai ended up less than +0.3%, Hong Kong was down -0.7%, giving up all of the prior day's gain. And Tokyo was down -0.4%. The ASX200 rose +0.7%, making back the prior day's drop. The NZX50 Capital Index ended unchanged yesterday.

The latest global compilation of COVID-19 data is here. The global tally is 18,876,000 and that is up +267,000 since this time yesterday. Global deaths reported now exceed 709,000 (+7,000).

A quarter of all reported cases globally are in the US, which is up +61,700 from this time yesterday to 4,999,700. US deaths are now just over 162,100 and a death rate of 490/mln (+4/mln). And the net number of people actively infected in the US rose overnight to 2,286,000, so still more infections than recoveries.

In Australia, there have now been 19,862 COVID-19 cases reported, another 418 overnight, and still very much concentrated in Victoria. There were another +12 in Sydney however and it is a worry that this growth is still there. Their death count is up to 255 (+8). Their recovery rate is now just under 56%. There are now 8495 active cases in Australia (+233) and almost all are community transfer.

The UST 10yr yield is unchanged at 0.54%. Their 2-10 curve is unchanged at +42 bps. And their 1-5 curve is similar at +9 bps, while their 3m-10yr curve is also unchanged at +46 bps. The Aussie Govt 10yr yield is unchanged as well at 0.85%. The China Govt 10yr is holding at 2.99%. And the NZ Govt 10 yr yield is firmer at just over 0.78%, a +3 bps gain.

The gold price is higher yet again today, up +US$21 to US$2061/oz and a new record high. At one point it reached US$2071/oz overnight trading. The silver price is up proportionately more, up +6.4% overnight.

Oil prices are still stable today. They are now just on US$42/bbl in the US and the international price is now just on US$45/bbl.

And the Kiwi dollar has firmed against the US currency and is now at 66.8 USc. Against the Australian dollar we are lower at 92.3 AUc. Against the euro we are down at 56.1 euro cents. That means our TWI-5 is now a little firmer at 69.6 but this is broadly where we were at a week ago.

The bitcoin price is up another +1.6% today at US$11,856. And that is a 6.6% rise in a week. The bitcoin rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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76 Comments

17
up

Human behaviour is amazing isn't it? DC in his reporting "the big end of town has pressured the state government into a raft of restriction backdowns." (not a criticism David) highlights that no matter what happens there is a sector of society who believe that they are or will be immune from nature. That somehow this virus will bypass them because their bank account is large or their power and influence is.VERY evident in the US too, as well as a few here. Money before life. I wonder what their version of redemption looks like?

I don't think they have thought that far ahead.....

Perhaps they understand risk management better than most, they had to take risks to get where they are ( well not the inherited money). Viruses are a matter of personal risk management, Covid-19 is infecting those that have failed. Now those that have failed want everyone else to pay. These same people decry the socialising of risk elsewhere, so it is a tremendous inconsistency in thinking. Some don't care about civil rights, but they they decide they care when it is civil rights for blacks, again inconsistency.

I've said here from early on that any science, or policy, that ignores the host is junk. Heck even the conservative wikipedia gets that a weakening of the host is part of the problem. What do we do? Keep the weak ones alive and further weaken the species. Next virus will hit harder and faster because of this.

"Epidemics of infectious disease are generally caused by several factors including a change in the ecology of the host population (e.g., increased stress or increase in the density of a vector species), a genetic change in the pathogen reservoir or the introduction of an emerging pathogen to a host population (by movement of pathogen or host). Generally, an epidemic occurs when host immunity to either an established pathogen or newly emerging novel pathogen is suddenly reduced below that found in the endemic equilibrium and the transmission threshold is exceeded."

https://en.wikipedia.org/wiki/Epidemic

I agree in principle Scarfie, but the question is what happens when those capable of surviving the virus (if no action is taken to limit it) are only say 5% of the population? That even if you survive the initial infection, the damage left behind means you will not survive a re-infection or catching some other illness that would not normally be fatal? Who, other than nature, gets to decide for all of us that this event is the one that resets the human species? Are we not bound to fight for all, not just some?

If it was so bad that only 5% would survive then it is bad enough that no intervention is going to stop it. I just don't think any virus in history has been anywhere near that bad. The circumstances in a society for it to get that bad would be pretty grim already, probably widespread malnutrition, so probably in a famine situation yes. Malnutrition causes all sorts of knock on ill effects, just like the virus. Children died in England in WWII as they were malnourished, and the Dutch did a long term study because a part of their country was starved by the Germans.

All we can do mate is look after ourselves. Get off the processed foods (including flour in New Zealand, it is known to cause problems) get some exercise. You can do more than that, but just those two alone would save most of the lives being lose to Covid.

The most dangerous strains of Ebola are nearly that bad (up to 90% infection fatality rate).

You forgot to add the without access to first-world medical care. The fatality rate of western health workers contracting Ebola that receive good medical care is 10 times less than the locals rate with basic facilities. Have a read of Factfulness by Hans Rosling.

Fair enough, although isn't the context here a mix of both infection and fatality rates? Healthy immune systems knock any virus on the head at the innate stages. The nasty effects come in later at the adaptive stage.

Years & years

The Government is hiring communications staff for two-year contracts with the coronavirus managed isolation and quarantine team, suggesting it believes borders could be shut for a long while.

https://i.stuff.co.nz/national/politics/300075633/coronavirus-government...

Managed Isolation and Quarantine Minister Megan Woods was coy when asked about the length of contracts on Wednesday, saying most of those working in the managed hotels were Defence Force staff who would go back to their old jobs once isolation finished up.

On Thursday she said contract terms were not in her purview as minister but two years seemed reasonable.

Jobs for journalist friends and the sing song reporters pool.

Remember the operations heavy lifting is to be done by existing agencies that, that have their own existing inhouse communications teams at the ready.

Someone alert the public health field, you've cracked it. Or is it libertarian claptrap as usual....

I'd suspect they have taken all possible mitigation steps for themselves and are at very low risk of contracting it. Those who work for their businesses may not be quite so fortunate.

It is more the economic fall out now that is the major issue now. A good portion of the population thinks that it won't be that bad and the Govt will save them.
Red, Blue, Black, Green or Yellow won't be able to do much at all.

Update from the Paddocks?

18
up

Still dry, no creeks flowing. Talked to a friend in the hills south of me, the main creek through there has stopped flowing, that's unusual I was born on the farm beside him, used to eel and duck shoot in the stream and it only ever went dry mid summer and only for a few weeks.

I have all the cattle I need on, paid about what the farmer selling, paid for them a year ago ( who would be a farmer). I find more and more, I can only make money if someone else isn't.
I put cattle behind a wire, I am break feeding for a month, trying to conserve feed, cattle are piling on weight eating mixed pasture, the sort of thing my father used to do when I was young, so we still go round in circles, i call them marketing circles.
I put a fertiliser mix on that Qlabs recommended after a soil test, those paddocks have bolted even in August, they don't sell fert only recommend, which I like, why have a fert or spray rep as your advisor? Only ever one result, I've done that with grapes, don't do that, teach yourself, don't rely on others.
Other than that life as usual, my wife thinks I'm turning into my mother, keeps telling me to 'cut it out', dog chewed up my boots and ate all the insoles in others, then puked up something disgusting on the lawn. No insoles, they must be still inside taking time to digest, Im refusing to take her to the vet.
Climbed a tree to do some pruning ended up with a black eye from a branch, getting used to electric fence, down to one good shock a day, tell my friends i'm on electric shock therapy, does give you a definite pick up. Stops repeat behaviour too.

Dr Christine Jones, second video down tells it as it is at 50 seconds in.

https://lachefnet.wordpress.com/2019/08/03/soil-carbon-saturation-myth-o...

Dry streams in HB at this time of year is a problem.

Andrew, please take your dog to the vet if she hasn't had a bowel motion recently. Those insoles are synthetic carbon infused material and won't break down. If she has a blockage in her digestive tract she will die a slow and painful death. A quick x ray will confirm or dispel any issues.

she's fine, just cleaned up a very old dead rabbit and everything is moving through, labradors can pretty much eat anything. She is also running around the farm with me, bright and happy, already been to the vet once with her for eating stuff she shouldn't.

Good to hear. Labradors are truly four legged waste disposal units, I've got a chocolate one that puts on weight just by looking at the Tux

Had a Lab years ago. Lovely, lovely dog. But I learnt their life philosophy is 'eat anything that moves, If it hasn't moved, nudge until it does, and then eat it!' Couldn't leave a damn thing lying around within reach. Pissed the wife of royally one day when she turned her back on a fresh cooked steak for a moment and he vacuumed it up! I just about split my sides laughing at that one, which pissed her off too! It's still funny!

The damn current Golden Lab, left a freshly baked banana cake a tad too close to the edge of the bench, went to my room for a sec and when i came back, poof, garbage disposal unit had disposed of it :P

Just received a photo of a weir in our wetland - almost dry - in August - unheard of. Who says Southland is wet and cold, not this winter. Ground temp is at 8deg already. It's turned around pretty quickly from what it was. I've probably jinxed it all now, but certainly have happy sharemilkers at the moment. :-)

mine is 12º ,last year it was only 7º . but for Southland that has to be an extreme weather event.

(From comments)

"Not to worry. The fine snake oil salesmen at the (Bureau of Labour and Statistics) will be reporting under 10% unemployment tomorrow on the monthly unemployment report, whether it is or not. Whatever it takes…By November 4th, DOW at 30k, Naz at 12k, S&P, 3500 – Unem under 10%
Best econ ever,… then Hell breaks loose…. esp when BA goes insolvent.

Andrew - That article is more interesting than whats happening in my paddocks.............

Surprising - though is discussed everyday manytimes but it is amazing that despite panademic and shutdowns, unemoyment, economy uncertainity and all - still stock and house price moving up and toucbing new heights.

Surreal but true and happening.

Is it just the result of cheap and easy money supported by unprecedented printing and distribution of money by each and everygovernment !

Or are the banks manipulating markets to protect their assets?

FHBs and others have swallowed the pill and accepted the high prices. They're not even concerned for what rates could look like in 10-15 years. They're more worried that houses will have tripled in value by then and they won't be on the gravy train to take part, let alone having the security of a roof over their head that they 'own' themselves.

In ETF's big outflows continue out of equities (SPY, QQQ, VOO) and inflows into gold and bonds. Adding to earlier reports of major funds going light on equities and mountains of cash sitting on sidelines. All of that used to drive price changes, but although big they are relatively few trades, especially now there's a new trading monster on the scene (& not just the Fed, which stopped adding to the balance sheet way back, 3 June). I'm no expert but are the millions of new Robinhood accounts since March, and their frenetic trading countless times/day, now driving US stock pricing?

Yep a huge crash is on the way and with the smart fund moving out early it will leave all the mum and dad along with the inexperienced taking the hit.

Will probably start with some high profile insolvencies, which is too late for the shareholders as they are the bottom of the list

I don’t think it’s even about money printing. It’s about interest rates and fear and uncertainty. Capital is rushing towards anything that feels safe, and profitability of the investment doesn’t really matter anymore. There’s a rush to big tech stocks because ‘safety in numbers’ - it’s hard to imagine their price cratering. It’s fear, but it has the same flocking effect as greed.

I tend to disagree, big tech doesnt pay dividends of any value to the share (for instance Google yeild per share is 0.07%), so it speculative. Who would thing big tech shares are safer than govt bonds, PMs or just a plain bank deposit???

everything is fun and games until someone loses an eye.
https://www.zerohedge.com/markets/rabo-everything-can-appear-hunky-doryu...

This video is a few years old but I started watching and found it interesting. You probably will also. He says the USA's and China's economies aren't as closely linked as most think. Chinese demographics mean their manufacturing is shrinking, while the USA is growing.

https://www.youtube.com/watch?v=XepCi0I_g6I&feature=youtu.be

I have a friend based overseas who is a professor in geopolitics, with an Asian focus.
He has some fascinating thoughts.

Basically, he thinks the CCP could see the big economic slowdown coming several years ago. Official GDP growth of 6%, was in reality 3-4%.
The populace have been used to 12% + growth, and would become restless when that massive growth stops.
Hence, a pivot by the CCP towards a more authoritarian stance and patriotism, to replace the materialistic sugar rush.

And lower growth in China is here to stay - which has implications for them, and the rest of the world.

He also has an interesting view on Iran in all of this. And where Iran might go. Hint - pivot more to India, and the west however the leadership is obviously a barrier.

China's ageing population is also going to hit them like a tonne of bricks at some point.

Yes, good point. And it's probably not far away, or maybe even here already.
Check out this cool age pyramid graphic, showing China and India over time:

https://www.visualcapitalist.com/populations-china-india-diverging-demog...

In my early time on this site stratfor.com hadn't been hacked and you could read George Friedmans pieces. I'd first heard of George because Leighton Smith used to interview him. George was a bit of a war monger, but he was saying something along the same lines. China would have trouble maintaining internal stability without 8% growth.

Why lack of growth would weaken their grasp if the declining popularity (assuming that the CCP is more popular in good times than bad times, which is big assumption) is replaced with ever greater oppression? in successfully oppressive regime, the real time of trouble usually comes in passing power from the established to the next person, and it does not look like China is facing that issue any time soon.
As long as CCP is willing and able to oppress its own people, using unrestricted violence and terror tactics to intimidate the unhappy on one hand and financially rewarding the loyals on the other hand, they will be able to hold on to power.

Yeah. they will hold on to power, for sure.
My main point was that in order to do so they have needed to become more authoritarian, which further dampens their economic growth.
Lower growth for them is here to stay, even more so if they continue to antagonise the west.
Their rise will flatten out, not surge forward as many suggest. At the same time the USA is past its peak.
So we will see two major powers ,both past their peak, managing their positions and playing geo-political games.

It takes resources to centralise power. Power is lost at the periphery first, where supply chains are longest.

10
up

"The central bank of China has criticised the low interest rate policies of its Western counterparts, saying these policies have not had the intended benefits and the spillover effects on the developing world are not positive."

Well I'll be... there's something I can actually agree with China on.

Are the jobless numbers seasonally adjusted?

"Markets" that never go down aren't markets, they're signalling mechanisms of the Powers That Be.
Markets are fundamentally clearinghouses of information on price, demand, sentiment, expectations and so on; factual data on supply and demand, shipping costs, cost of credit, etc, and reflections of trader and consumer emotions and psychology.
If markets are never allowed to go down, the information clearinghouse has been effectively shut down. Whatever information leaks out has been edited to fit the prevailing narrative, which at this moment is "central banks will never let markets go down ever again, so jump in and ride the guaranteed Bull to easy gains.
There's no reason to care until the fatal spiral downward surprises us all.
The reliance on "good news" narratives dooms our financial system and economy to a death spiral once reality breaks through the induced euphoria. Our last chances to clear the financial cancers eating away at our economy are slipping away, forever masked by the "market's" euphoria and supreme confidence in central-bank guaranteed gains."

(CH Smith)

The New York Fed is reporting that total household debt shrank in Q2-2020 for the first time since 2014.

As my colleagues at Alhambra had pointed out to begin this week, the Federal Reserve’s very own Senior Loan Officer Opinion Survey (SLOOS) for the third quarter conducted during the month of July – July! – was on par with the fourth quarter of 2008. The very worst in the series’ history. Link

Just listened to Sam Morgan on rnz talking about his $100m covid card scheme. By his own reckoning it would need at least 70% of the active population to be voluntarily wearing it for it to be of any use.

Thumbs up if you would wear it.

15
up

And thumbs up if you wouldn't.

The early poll results on here don't look positive for the scheme if we are a representative sample of the population.

If I heard Sam correctly it would take 12 months to roll it out once the government committed to funding it.

Yes I'm a bit surprised. But I'm also certain that this site is nothing like a representative sample...

True that. I would assume the people on this forum think about the world a bit more than the average Joe. So I would be interested to know why people would be reluctant to wear one.

Even at 70% participation only half of direct contacts of an average infected person would be identified ie 70% x 70%. So really we would need over 90% wearing one to be properly useful. And that looks unlikely without a big marketing campaign or making it mandatory.

Up tick if you want to read the fine print before signing up.

For years conspiracy nuts have been saying that the deep state want to get us chipped. Looks like we will do it voluntarily.

Pretty stupid idea when it can just be a Bluetooth App running on your phone that pretty much everyone already has on them. Oh wait a minute there is no money in a free App so lets try and make $100 million off something thats not needed.

What's the downside of wearing it (if only the govt gets access to the info produced)? Seems like a very cheap and unobtrusive way to produce a good outcome

12
up

This year is pretty simple. The capitalists are going blue in the face trying to keep all the old bubbles, stocks property etc, inflated...the socialists/lefties/communists, are running around giggling with glee, seeing it as their big chance to re engineer the world in their image...what a freeking mess.

...and lots of humans in between just trying to stay healthy and earn some money (did you want to label them too)?

Yes!....i label them the "humans in between just trying to stay healthy and earn some money"...happy now ;)

Label maker doesn't print that big..can I borrow your one?

Then it will have to be done by tattoo gun.

Not really. Cash is dying and theres a lot of it around. It has to go somewhere.

You can make it about red vs blue but the reality is the 1% are slowly losing control.

Losing control or engineering the situation.
One or the other.
Either way we are screwed.

It will not be a capitalist vs socialist if things really turn bad as both would want a civil society. It will be the extremists and people on the fringes (both from the right and the left) who hate the civil society of today and want it to collapse who are expecting the turmoil with jubilation (and are hoping that they will come on top).

And the realists are trying to navigate a logical path through this non logical mess

Bit of a shame, seems to be an elementary error.

Who thought quarantine staff need not be tested, anyone?
Is it seems worse than having security sleeping while on roster.

https://i.stuff.co.nz/national/health/coronavirus/300075002/leaked-covid...

The report – titled ‘Minimising the risk of a Covid-19 outbreak from border arrivals’ – is being considered by the Ministry of Health. It includes a recommendation frontline staff undergo a swab test once a week to mitigate the risk they pose to the community.

This sounds like the Victoria State way of doing things.

"This sounds like the Victoria State way of doing things." Does it? Are you a professional pessimist, or is it just that you're addicted to hyperbole?

That is gold from you OB. I doubt that you have made one positive comment on this site.

Makes about as much sense as exempting air crew did - the cause of the southland wedding cluster.

Why BOE Rates Could Go Negative When Economy Turns Positive

The Bank of England has raised the prospect of cutting interest rates below zero -- after the coronavirus crisis has passed.

The idea that subzero rates might be more effective in a post-pandemic revival rather than the current slump is a counterintuitive one, but there is a precedent, in the view of BOE Governor Andrew Bailey. The European Central Bank implemented negative rates in June 2014, a year after the euro zone exited a double-dip recession.

When will society rid us of these charlatans?

Why do we continue to let central bankers evaluate their own job performance? It's letting putting the most dishonest and heinous criminal in the jury box alone by himself to inappropriately render what truly is a momentous, incredibly crucial verdict.
https://alhambrapartners.com/2020/08/03/acc
Link

Silver price is literally parabolic (insane moves last night) and gold's ascent looking as steep as it could possibly be. There is a real shortage of both and JP Morgan appears to have lost control. Truly historic.

Although I think he's a good commentator, I am not pleased that the Herald have reinstated Hooton as a writer.
I just don't think you can put him up this quickly after his involvement with Muller, and expect his to be objective. This lacks credibility.
I was going to cancel my Premium subscription anyway, this will just hasten it.

Days to the General Election: 24
See Party Policies here. Party Lists here.