with Brent D. Griffiths
By Heather Long and Andrew Van Dam
The K-shaped recovery looks like it’s getting worse.
This Thanksgiving week is serving up yet another prime example of America’s “K-shaped” recovery that has so divided the haves and have-nots.
The Dow topped 30,000 for the first time ever Tuesday, closing at 30,046 and capping off a whopping 62 percent surge since its March 23 nadir. Optimism abounds on Wall Street — about multiple vaccines, about Treasury Secretary nominee Janet Yellen, and generally about 2021. Many forecasters are raising their predictions for next year’s growth and stock performance, betting the work-from-home crowd who has managed to save $1 trillion during the pandemic will be eager to spend it as vaccines become widely available and their long hibernation ends.
But as analysts grow more optimistic about the summer of 2021, they are also getting more pessimistic about this winter. There are alarming signs that life is getting worse for America’s unemployed and small- business owners. And hopes of Congress delivering a holiday miracle stimulus before year’s end are fading. Tuesday marked the deadliest day for Americans during the coronavirus pandemic, with 2,100 people losing their lives because of the virus in the highest number since March. Jobless claims also rose over the last two weeks.
Haunting images of hundreds — even thousands — of cars lined up at food banks across America this week are a reminder that for much of the bottom half, this economy is far from recovered. The Dallas Morning News shocked Texas with this image:
Photographer Meredith Kohut, who normally covers poverty and violence in Latin America, traveled to Houston to document hunger there for Time.
The Providence Journal reported that one in four Rhode Island families doesn’t have enough to eat.
New data reveal just how bad this crisis is becoming nationwide.
“More Americans are going hungry now than at any point during the deadly covid-19 pandemic,” my Washington Post colleagues Todd Frankel, Brittney Martin, Andrew Van Dam and Alyssa Fowers write. “One in eight Americans reported they sometimes or often didn’t have enough food to eat in the past week, hitting nearly 26 million Americans, a threefold increase from the most comparable pre-pandemic figure, according to census survey data collected in late October and early November. That number climbed to more than one in six people in households with children.”
This is a humanitarian crisis in America. It’s also an alarm bell. People cut back on groceries when they run out of money and savings. Economists have been predicting this cash crunch for weeks after the extra $600-a-week unemployment enhancements expired at the end of July and the $1,200 stimulus checks were mostly spent. Now it’s showing up in the “food insecurity” data — and the long lines at food banks.
There’s no sign of relief on the way soon.
Congress remains gridlocked on more aid. Covid cases continue to rise, causing consumers to be more cautious about venturing out and spending and some states to impose restrictions on businesses. And food prices are about 4 percent higher than a year ago, making it even harder to stretch modest incomes.
Economists predict the recovery will stall – or even backslide – this winter. There are mounting predictions of job losses in December.
“I’m pessimistic about the economy’s prospects in the next few months. Job growth is going to come to a standstill in November and there’s a good probability it will fall in December and January,” said Mark Zandi, chief economist at Moody’s Analytics.
There are about 6.4 million job openings and more than 20 million people on unemployment aid. Northwestern University economist Diane Whitmore Schanzenbach points out that Congress gave about two years of unemployment payments during the Great Recession to help families get by until more jobs became available. Right now, unemployment help for millions of Americans will stop at the end of this year, meaning they will get less than a year’s worth of aid in this downturn.
“Some of us are worried if we can see our relatives safely, but for millions of people just making sure they have a place to live and food to put on the table is a very real and pressing concern,“ said Joseph Llobrera, director of research on food assistance at the Center on Budget and Policy Priorities. The think tank has a sobering covid-19 “Hardship Tracker” that also breaks the data down by race and families with kids.
Right now, it appears that Wall Street is dreaming of Thanksgiving 2021, while Main Street is stuck in 2020 with a bad Zoom connection.
PROGRAMMING NOTE: We won’t be publishing tomorrow and Friday in honor of Thanksgiving. Have a safe and happy holiday and we’ll be back in your inboxes on Monday.
Behind the new record.
The Dow is up 13 percent this month, which would be its biggest month since 1987: “Chevron rose 5 percent to lead the Dow higher. JPMorgan Chase and Goldman Sachs rose 4.6 percent and 3.8 percent, respectively,” CNBC’s Fred Imbert and Yun Li report.
“The Dow’s rally to record levels has been driven in part by investors increasing their exposure to beaten-down value names. On Tuesday, the iShares Russell 1000 Value ETF (IWD) gained 2.1 percent and outperformed its growth counterpart, which advanced 1 percent.”
- Who gets the credit?: Traders swooned after the Yellen announcement and the long awaited beginning to the transition. But ever the market watcher, Trump was quick to try to bask in the moment — even if some dubbed it the “back to normal” rally spurred by Biden.
Maybe leave it to the pros?: Trump projected the market would crash if Biden won. His dour outlook was all the more surprising (or maybe not?) since the president’s own opponents predicted a similar calamity would come in 2016 if he won. In both cases, the sky, or rather the Dow, did not fall.
Tesla hits $500 billion mark: “Shares of the electric vehicle company have soared this year, rising nearly 550 percent, with gains accelerating over the past week after S&P Dow Jones Indices last Monday said Tesla will be added to S&P 500,” Bloomberg News’s Esha Dey reports.
“Tesla shares rose as much as 4.1 percent in New York in early trading, touching an all-time high of $543.17, and pushing its market capitalization to over $506 billion.”
Cannabis stocks are soaring again: “The uptick is fueled by expectations that the incoming administration will loosen regulations, as well as more U.S. states legalizing sales of recreational marijuana,” CNN Business’s Jordan Valinsky reports.
“Canopy Growth rose 6 percent, Aurora Cannabis surged 25 percent and Tilray jumped 14 percent in early trading. Other cannabis stocks on the move include global cannabis leaders Curaleaf, Aphria and Cronos, which has a big investment from tobacco giant and Marlboro owner Altria.”
The transition blazes ahead.
Biden says his team is getting cooperation from the White House so far: “After weeks of delay, uncertainty and lawsuits, President-elect Joe Biden’s team plunged Tuesday into a formal transition, with Biden aides beginning to meet with agency officials in preparation for a head-snapping Trump-to-Biden shift throughout the vast federal bureaucracy,” Matt Viser reports.
“Following Monday night’s long-postponed decision by a key administration official to approve the transition, Biden aides held at least 20 meetings with Trump officials and were in active discussions with every federal agency, as well as the White House, preparing for the daunting task of taking over a crumbling economy and overseeing the distribution of a coronavirus vaccine.”
The best of the Yellen profiles.
What you should know about the possible first female treasury secretary: “Former colleagues often describe her as being like Mary Poppins: firm but kind, incredibly smart and always prepared. The question she asks often — of herself and her team — is: What are we missing? And what if we’re wrong?” Heather writes.
“Her constant questioning of whether economic models and forecasts are correct helped her become one of the first policymakers to foresee the 2008 financial crisis and the deep problems in the housing market. At the time she was serving as president of the Federal Reserve Bank of San Francisco.”
This is her most political role yet: “Her previous experiences with Washington politics were insulated by comparison with the task at hand. Compared with the Treasury Department, the Fed is a cloistered and academic institution. At Treasury, politics is often one of the first considerations,” the WSJ’s Jon Hilsenrath and Nick Timiraos report.
- Key quote: “The saying is that the Treasury moves 10 times faster than the Fed, and the White House moves 10 times faster than the Treasury,” said Nathan Sheets, a former Obama administration Treasury official and Fed economist
- She is a free trader at heart: “Like many on Biden’s team, Yellen appears to agree that many of the problems often ascribed to trade policy actually stem from the reluctance of American officials to use domestic policies to support workers experiencing the worst effects of globalization,” the New York Times’s Alan Rappeport, Ana Swanson, Jim Tankersley and Jeanna Smialek report.
- What progressives are thinking: “In her next job, Yellen’s views on budget deficits may matter more than what she thinks about interest rates. She is a director of the Committee for a Responsible Federal Budget, a think-tank dedicated to warning about the risks of a rising national debt. She’s repeatedly argued that America’s public finances need to be put on a sustainable track,” Bloomberg News’s Matthew Boesler reports.
From the U.S.:
- U.S. reports highest daily death toll in more than six months: “The United States logged nearly 2,100 coronavirus-related fatalities on Tuesday, marking the deadliest day in more than six months. Record numbers of fatalities were also reported in nine states — Maine, Alaska, Missouri, North Dakota, Indiana, Wisconsin, Washington, Ohio and Oregon — according to data tracked by The Washington Post,” Antonia Noori Farzan reports.
- First 6.4 million doses of Pfizer’s vaccine could go out in mid-December: “The amount would cover only a portion of the nation’s 20 million health-care workers, let alone the U.S. population of 330 million. But Gen. Gustave Perna, who oversees logistics for Operation Warp Speed, said ‘a steady drumbeat’ of additional doses will be delivered as manufacturing capacity ramps up in each successive week,” Lena H. Sun reports.
From the corporate front:
- Airlines face pushback over claims that flying is safe: “Top U.S. infectious-disease experts say the findings underpinning the carriers’ safety claims aren’t that conclusive. Concerned about the “misinterpretation” of their findings, researchers on a Defense Department study that has been widely cited by the industry added a cautionary revision,” Bloomberg News’s Alan Levin reports.
- Best Buy continues gains but warns of what’s ahead: “The retailer booked strong sales in the early weeks of November, helped by orders of the new PlayStation and Xbox consoles, and from early Black Friday deals. But product shortages remain a challenge for the company in the face of high demand, particularly in categories such as large appliances and computing, executives said,” the WSJ’s Dave Sebastian reports.
- Dell beats revenue estimates: “Sales climbed 2.8 percent to $23.5 billion in the period that ended Oct. 30, the Round Rock, Texas-based company said,” Bloomberg News’s Nico Grant reports in a sign that robust demand remains for Dell’s computers.
Around the world:
- France and Britain to loosen lockdowns ahead of Christmas: “The decision to reopen shops, resume indoor entertainment and allow limited holiday gatherings appeared to rub up against a consensus among scientists … But many European leaders seem reluctant to keep their economies closed or to stand in the way of family members seeing each other after a year marked by long periods of strict confinement measures and social isolation,” James McAuley, Karla Adam and Michael Birnbaum report.
- Sweden’s top epidemiologist admits he was wrong: “The architect of Sweden’s controversial coronavirus strategy predicted in May that the country would have a high level of immunity by the fall and be protected against a second wave — something that has not come to pass, he admitted,” Antonia Farzan reports.
Steven Mnuchin plans to put $455 billion beyond Yellen’s reach.
The move concerns unspent Cares Act money: “The money will be placed in the agency’s General Fund, a Treasury Department spokesperson said Tuesday. Most of it had gone to support Federal Reserve emergency-lending facilities, and Mnuchin’s clawback would make it impossible for Yellen as Treasury secretary to restore for that purpose without lawmakers’ blessing,” Bloomberg News’s Saleha Mohsin reports of the treasury secretary’s action.
“Democrats swiftly criticized the move, with Bharat Ramamurti, a member of the congressionally appointed watchdog panel overseeing Fed and Treasury covid-19 relief funds, saying ‘the good news is that it’s illegal and can be reversed next year.’ A Treasury spokesperson rejected that analysis, saying Mnuchin’s move was legal under the Cares Act stimulus law that originally provided the funding.”
- The Fed’s FOMC releases minutes of its November meeting
- The Labor Department releases the latest weekly jobless claims
- Deere & Co. is among the notable companies expected to report its earnings
- The market is closed for the holiday. Happy Thanksgiving!