with Brent D. Griffiths
Choose your news.
Monday was the day that:
A. The recession became official, as the longest U.S. economic expansion in records dating back to 1854 received its death warrant.
B. Stocks completed a rebound from their fastest-ever tumble into a bear market, as the S&P 500 entered positive territory for the year and the Nasdaq posted an all-time record high.
The answer is “C”: Both, in arguably the starkest display yet of our tale-of-two economies.
But with the fallout from the coronavirus pandemic wreaking ongoing economic havoc, voters are leaning on their partisan affiliations to inform their views of what’s unfolding around them.
Indeed, while 87 percent of Democrats recently polled by Gallup correctly assessed that the economy is, at best, in a recession – less than half of Republicans reached the same conclusion. That’s a nearly 40-point gap:
The stock market’s relative resilience may explain why President Trump is keeping his polling advantage on economic matters.
Trump’s “approval rating has fallen to negative 12.7 percentage points among registered or likely voters, down from negative 6.7 points on April 15, according to FiveThirtyEight estimates,” the New York Times’s Nate Cohn writes. “And now a wave of new polls shows [former vice president] Joe Biden with a significant national lead, placing him in a stronger position to oust an incumbent president than any challenger since Bill Clinton in the summer of 1992.”
Yet Trump bests Biden, 48 percent to 35 percent, on who would do better cutting the unemployment rate in the latest Wall Street Journal-NBC News poll. And he claims a similar edge, 48 percent to 37 percent, on the more generic question of dealing with the economy. That margin remains virtually unchanged since April.
Differences in how Republicans and Democrats experience the economy itself don’t explain their divergent evaluations of it. They are investors in roughly equal measure, for example, with 61 percent of Republicans reporting they own stock and 56 percent of Democrats saying the same, according to a recent Gallup poll.
Instead, as with other responses to the pandemic — like the advisability of wearing face masks in public; and how soon it’s safe to resume pre-pandemic activities — partisanship appears to be playing a role in Americans’ judgement.
Those sentiments are likely to become more entrenched as the economic recovery finds its footing. “Political affiliation skews the perception of economic activity, especially as we’re starting to observe strong growth figures as activity rebounds from depressed levels,” Oxford Economics chief U.S. economist Gregory Daco emails. “This will be open to political interpretation through the elections.”
What isn’t in dispute is the severity of the economic blow the pandemic delivered.
It put an emphatic punctuation mark on 128 months of growth that kicked off back in June 2009. The National Bureau of Economic Research’s Business Cycle Dating Committee — the body that makes official calls dating eras of expansion and contraction — typically takes nine months to a year to declare the beginning of a recession. The scale of collapse precipitated by the shutdown allowed the panel to move much faster.
The economy shed a staggering 20 million jobs in early spring and gained back roughly ten percent of them in May, according to the Bureau of Labor Statistics’s latest report. And while the S&P 500 now has recovered all of the 34 percent of the value it lost back in March — as investors, like most Trump-affiliated voters, look beyond the impact of the crisis — the broader economy still has a long way to go.
“The nonpartisan Congressional Budget Office expects the economic consequences of the novel coronavirus to exceed $8 trillion and suggests the economy will not fully recover until 2030,” Rachel Siegel reports. “It also expects unemployment to hover above 10 percent into 2021, meaning the nation could still have joblessness that is worse than the Great Recession for months.”
The disconnect between the real economy and the stock market could pose its own challenges. “Not only is there a significant risk of another market crash, but if equity markets continue to defy gravity without a meaningful recovery on Main Street, the legitimacy of the market and capitalism itself will come under further scrutiny,” Jospeh Brusuelas, chief economist for the consultancy RSM, argues. But as voters use partisan lenses to peer through the dust kicked up by the economic collapse, there is little evidence of that yet.
Stocks are on pace to post three straight months of gains.
They surged again Monday: “The S&P 500 finished at 3,232.39, up nearly 1.2 percent… The Dow Jones industrial average also had a big day, jumping 461 points, or 1.7 percent, to close at 27,572.44. The Dow is on a six-day winning streak, its best since September,” Thomas Heath and Taylor Telford report.
Nasdaq is nearing bull market territory: “According to a widely accepted definition, the tech-heavy index must officially end above its record high close at 9,817.18 on Feb. 19, before the spread of covid-19 closed economies across the globe, to designate that a new bull market began when it bottomed on March 23 to close at 6,860.674,” Alden Bentley and Noel Randewich report.
- Strategists are being left behind: “After three weeks of gains that are on the verge of erasing its loss for the year, the S&P 500 is approaching 3,200, sitting 9 percent above the projection of 2,933, the average level where strategists expect the index to finish 2020. That’s the widest gap in Bloomberg data going back in 1999,” Bloomberg’s Lu Wang reports.
- Mohamed El-Erian is nervous. “For me personally, it’s an uncomfortable bet to continue to bet on a huge recovery,” the Allianz chief economist told CNBC. “I don’t like doing this. But I respect and admire those who can.”
The corporate front:
- BP to cut 15 percent of workforce: “Chief Executive Bernard Looney told employees in a global online call that the London-based company will cut 10,000 jobs from the current 70,100,” Reuters’s Shadia Nasralla and Ron Bousso reports.
- Wall Street casts doubt on AstraZeneca, Gilead merger: It’s “unlikely due to significant political hurdles,” Reuters’s Manas Mishra reports.
- Dunkin’ franchisees to hire up to 25,000 workers: “Canton, Massachusetts-based Dunkin’, which has about 90 percent of its restaurants open, said new jobs include front-of-counter to managerial roles at restaurants and added that it was committed to diversity and inclusion,” Reuters’s Praveen Paramasivam reports.
- 3M files against merchant selling masks on Amazon for 18 times list price: In a federal suit filed in California, “3M said Mao Yu and his affiliated companies sold what he described as 3M masks for an average price of $23.21 each on Amazon. 3M’s N95 masks, which can block 95% of very small particles including droplets containing the new coronavirus, have a list price of around $1.25,” WSJ’s Austen Hufford reports.
From the U.S.:
- The Fed eases terms for its Main Street Lending Program. The central bank announced it is lowering the minimum loan amount and hiking the maximum loan limit for its program aimed at propping up midsize businesses. “It also extended loan terms to five years from four years and will allow businesses to defer principal payments for the first two years of the loan, instead of the first year,” WSJ’s Nick Timiraos reports.
- Trump to resume staging MAGA rallies. The events will restart in the next two weeks, Politico’s Alex Isenstadt reports: “Trump’s advisers are still determining where the rallies will take place and what safety measures will be implemented, depending on the type of venue chosen. Campaign manager Brad Parscale is expected to present Trump with possibilities within the next few days.”
- States scramble to deal with possible spikes in unemployment fraud: “Senate Democrats are calling on the Trump administration to release more details about an alleged criminal operation designed to defraud state unemployment programs across the country, fearing these systems remain vulnerable to attack amid the worst economic crisis since the Great Depression,” Tony Romm reports.
- Lawmakers upset over delay in funding for food banks: “The Cares Act directed $850 million for food banks, but less than $300 million has been sent out so far, according to Democratic staff members on the Senate Appropriations Committee. That’s despite unprecedented demand, with the number of people served at food banks increasing by more than 50 percent from a year ago, according to a recent survey by the nonprofit group Feeding America,” Erica Werner reports.
- Airports scaling back renovation plans: “San Francisco International Airport is postponing by at least six months a $1 billion terminal renovation formerly slated to start in June. In Florida, Orlando’s airport authority scaled back an expansion to 15 gates from 19,” WSJ’s Mike Cherney reports.
HSBC breaks precedent and sides with China over Hong Kong.
Their decision has sparked firestorm: “At a plastic table outside of a Hong Kong metro station, the bank’s Asia chief, Peter Wong, recently signed a petition backing a security law China is preparing to impose on the city. Opponents say the law would undo the territory’s autonomy, threatening its Western-style pillars of free speech and independent courts. Beijing says the law is necessary to restore order after a year of protests,” WSJ’s Simon Clark, Jing Yang and Margot Patrick report.
“The support for China marked an unusual public foray into the politics of Hong Kong. Generally, the bank has stuck to a well-worn playbook for China and other sensitive countries such as Saudi Arabia, according to people familiar with the matter: say as little as possible publicly, while privately assuring governments of the bank’s interest in their economic success.”
Fiat, PSA merger hits roadblock: “Fiat Chrysler’s planned $50 billion merger with Peugeot maker PSA has hit a bump after EU regulators voiced concerns about the companies’ market share in small vans, indicating concessions may be required,” Reuters’s Foo Yun Chee reports.
“Fiat and PSA, which are seeking to create the world’s fourth biggest carmaker, were told of the European Commission’s concerns last week, according to the sources familiar with the matter. If the two companies fail to dispel those concerns in the next two days and then decline to offer concessions by Wednesday, the deadline for doing so, the deal would face a four-month investigation once the preliminary review ends.”
WeWork explores ending push into shared apartments: “The New York-based office-sharing company is working with an adviser and holding talks about handing over operations of its WeLive location in Crystal City, near Washington D.C. … It’s also deliberating options for its second location, on Wall Street in New York City,” Bloomberg’s Gillian Tan reports.
“Since its failed initial public offering and Neumann’s resignation last year, WeWork has pared its growth plans and focused on its core business of providing office space. Last October, it announced the closing of its elementary school WeGrow. It has also been selling non-core holdings including its stake in The Wing.”
Sen. Kamala Harris (D-Calif.) to raise $2 million for Biden.
The fundraising push comes as Biden eyes Harris for vice president. The virtual event, “scheduled to take place Tuesday, cleared the fundraising mark the day before the gathering is supposed to take place, according to people with direct knowledge of the matter,” CNBC’s Brian Schwartz reports.
“Harris is one of several women considered by party leaders as a leading contender to be Biden’s pick for vice president. The strong showing by Harris and her supporters highlights that her ability to successfully raise money, at small and big donor levels, could be an asset if Biden added her to his ticket.”
- The Senate Finance Committee holds a hearing on unemployment insurance during covid-19, Labor Secretary Eugene Scalia is set to testify
- The Senate Banking Committee holds a hearing on federal housing regulators, FHFA head Mark Calabria and HUD Secretary Ben Carson are expected to testify
- AMC Entertainment, Five Below, Movado and Chewy are among the notable companies reporting their earnings
- The Fed releases a policy statement and its latest economic forecast
- Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza are set to testify in front of the Senate Small Business Committee on the implementation of the Paycheck Protection Program.
- The House Small Business Committee holds a hearing on the Economic Injury Disaster Loan Program
- The House Financial Services Committee holds a hearing on the renting crisis during covid-19
- Red Robin Gourmet Burgers, Guess?, Chico’s and Daktronics are among the notable companies reporting their earnings
- The Labor Department releases the latest data on weekly jobless claims
- Lululemon Athletica, Adobe and Dave & Busters are among the notable companies reporting their earnings
- The University of Michigan releases preliminary numbers on consumer sentiment for June
- Party City is among the notable companies reporting its earnings
From The Post’s Ann Telnaes: