The Economy During and After COVID 19...Added to its Portfolio of Notes and Bonds $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 s Bills Notes and Bonds Inflation-Indexed Securities

The Economy During and After

COVID 19

William F. Fox, Director

July 23, 2020

US and Tennessee Unemployment

Rates are Historically High

TNJune-20

9.7

U.S.June-20

11.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Un

em

plo

ym

en

t ra

te (

%)

Tennessee U.S.

William F. Fox • http://cber.haslam.utk.eduJuly, 2020

Tennessee Employment Has Fallen Across

the Board(Quarter Ending June, year-over-year)

-35.0% -30.0% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0%

Leisure & Hospitality

Durable Goods Mfg

Other Services

U.S. Total Private

Total Private

Nondurable Goods Mfg

Professional & Business Services

Information

Education & Health Services

Mining, Logging, Construction

Trade, Transportation, Utilities

Financial Activities

Growth Rate

July, 2020William F. Fox • Boyd Center for Business & Economic Research •

cber.haslam.utk.edu

William F. Fox • http://cber.haslam.utk.eduMarch, 2020Source: Tennessee Department of Labor and Workforce Development

Financial Activities3% Other Services

4%Transportation & Utilities

5%

Other7%

Manufacturing12%

Education & Health

Services12%

Trade15%


18%

Leisure & Hospitality24%

Continued Claims Heaviest in Leisure &

Hospitality, but all Industries Affected

July, 2020William F. Fox • http://cber.haslam.utk.edu

Employment in Most Sectors Remains

Above Pre-Great Recession Levels(Tennessee, June 2020 as a Share of December 2007)

82.9%

85.6%

94.2%

103.0%

104.6%

104.8%

105.7%

108.2%

116.1%

120.7%

122.0%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0%

Information

Manufacturing

Mining, Logging, Construction

Trade, Transportation, Utilities

Leisure & Hospitality

Government

Total Nonfarm

Other Services

Financial Activities


Education & Health Services

William F. Fox • http://cber.haslam.utk.edu

Source: Bureau of Labor Statistics.

July, 2020

Employment Losses Differ Across Metro Areas(Quarter Ending June, year-over-year)

-12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0%

Jackson, TN

Nashville-Murfreesboro-Franklin, TN

Kingsport-Bristol, TN-VA

Memphis, TN-MS-AR

Statewide

Johnson City, TN

Knoxville, TN

Clarksville, TN-KY

Cleveland, TN

Chattanooga, TN-GA

Growth Rate


cber.haslam.utk.edu

Southern and Western Tennessee Have Had

the Most UI Claims

July 2020 William F. Fox • http://cber.haslam.utk.edu

Job Postings have Plummeted during the

Pandemic


September11,

2018

July, 2020

A College Education Offers Protection

Against Unemployment, though All

Groups have been Affected

0

5

10

15

20

25

Jan-20 Feb-20 Mar-20 Apr-20 May-20

Pe

rce

nt

un

em

plo

yed

Did not Finish High School High School Diploma

Some college or Associate Degree Bachelor's Degree or Higher


cber.haslam.utk.edu

Job Market Effects of Covid 19

• Initial job losses came from the shutdown

• More recent losses are from lower demand – the

economy has not rebounded fast enough to permit

employers to maintain jobs


Trends Accelerated by Covid 19

• Many retail and restaurant job losses are

permanent as business right size themselves

• Retail space falls and fulfillment space grows as

online purchasing doesn’t retreat

• Firms are learning new ways to use technology

• Teleoffice and telemedicine

• Replacing workers with technology – remote cleaning

and disinfecting, drones,

• Says fewer low skill jobs left in the economy after

the pandemic, exacerbating the labor market

problems

Jult 2020 William F. Fox • http://cber.haslam.utk.edu

The Yield Curve is Upsloping but Rates are

Historically Low Across the Spectrum


0.13

0.14

0.15 0.150.27

0.60

2.09

2.081.95

1.8 1.8

2.05

0

0.5

1

1.5

2

2.5

3

3.5

3-Months 6-Months 1-Year 2-Years 5-Years 10-Years

Inte

rest

Rat

e, i

n P

erc

en

t

July 21, 2020 July 22, 2019

July, 2020

The Federal Reserve has Significantly

Added to its Portfolio of Notes and Bonds

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Bill

ion

s o

f D

olla

rs

Bills Notes and Bonds Inflation-Indexed Securities

Note: Grey shaded areas represent economic recessions.


cber.haslam.utk.edu

Financial Markets Fell but are Currently

Positive for 2020 (S&P Index)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

7/2

1/2

000

7/2

1/2

001

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002

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011

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012

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016

7/2

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017

7/2

1/2

018

7/2

1/2

019

7/2

1/2

020


Congress Enacts the CARES Act, and is

Considering Expanding it


Federal Aid to Hospital & Healthcare Providers

8%

Expansion of Unemployment

Benefits14%

Direct Payments to Taxpayers

15%

Various Tax Incentives16%

Economic Support for Small Businesses

20%

Financial Assistance for Companies in Need

27%

Source: Peter G. Peterson Foundation

July, 2020

Federal Deficit Will Reach Extraordinary Levels, Pushing Debt to

100 Percent of GDP. The Alternative Scenario Shows that the

Deficit will Rise even Higher if Congress Passes Additional Relief


The Economy Cannot Grow Faster than

Consumer Demand


-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Per

cen

tage

ch

ange

(sa

me

qu

arte

r p

revi

ou

s ye

ar)

July, 2020

A Shift in Spending Habits has Mitigated much of the Damage as June

Sales Were Near Pre-Pandemic Levels (April-June Year over Year Change)

-57.3%

-38.8%

-34.2%

-30.0%

-29.7%

-19.9%

-9.0%

-8.7%

-8.1%

-8.1%

-1.2%

12.8%

13.1%

24.9%

-70.0% -60.0% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0%

Clothing and clothing access. stores

Food services and drinking places

Electronics and appliance stores

Gasoline stations

Furniture and home furnishings stores

Miscellaneous stores retailers

Sporting goods, hobby, musical instrument, and book stores

Motor vehicle & parts dealers

Total

Health and personal care stores

General merchandise stores

Building mat. and garden equip. and supplies dealers

Food and beverage stores

Nonstore retailers

Growth Rate

William F. Fox • Boyd Center for Business & Economic Research •

cber.haslam.utk.edu 18July, 2020

Oil Prices Have Recovered Some but Remain

Low as Production Fell (WTI Spot Price in U.S. Dollars Per Barrel)

-$50.00

$0.00

$50.00

$100.00

$150.00

$200.00

Jul 2

1, 2

00

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1, 2

02

0


Light Vehicle Sales Fell Dramatically and

Have Rebounded Some


cber.haslam.utk.edu

0.0

5.0

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20.0

25.0

Jun

-98

Feb

-99

Oct

-99

Jun

-00

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-19

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Jun

-20

Mill

ion

s o

f Li

ght

Ve

hic

les

July, 2020

Low interest Rates have Kept New Single

Family Home Sales from Dropping

Dramatically


cber.haslam.utk.edu

0

200

400

600

800

1000

1200

1400

1600

Ho

use

s So

ld (

Tho

usa

nd

s)

July, 2020

Forecasting in a Very Uncertain World –

GDP Expectations from one Forecaster


-50.0

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Gro

wth

Rat

e (

Sam

e Q

uar

ter

Pre

vio

us

Year

)

Optimistic Baseline Pessimistic

July, 2020

-10

-5

0

5

10

15

20

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Gro

wth

Rat

e

GDP Growth Sales Tax Growth

Tennessee Tax Revenues have Swung more Widely than the Economy during Past Recessions but Not this One – So Far


cber.haslam.utk.edu

Demographic Trends Move on Despite

Covid 19

• Birth rates are very low and falling

• The population is aging with the Baby Boomers

and those following


Birth rates are Particularly low for Mothers Under 30 (Birth rates per thousand by mother age)


Age Band 2007 Birth Rate Per

Thousand2017 Birth Rate Per

Thousand

15-19 42.5 18.8

18-19 73.9 35.1

20-24 106.3 71.0

25-29 117.5 98.0

30-34 99.9 100.3

35-39 47.5 52.3

40-44 9.5 11.6

March, 2020

William F. Fox, Director • cber.haslam.utk.edu 26May, 2019

Adoption Rates for New Technology are

Accelerating

Source: HDR CAV Services

January 22, 2020 William F. Fox • http://cber.haslam.utk.edu


Documents

The Economy During and After COVID 19...Added to its Portfolio of Notes and Bonds $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 s Bills Notes and Bonds Inflation-Indexed Securities