On July 24, 2020, Secretary of Administration Susanne Young released Vermont state revenue results for June 2020 and for the fiscal year 2020 overall. The Secretary noted that a more complete accounting of state revenue receipts would be forthcoming following the July 15th extended filing and payment deadlines for Personal Income Tax and Corporate Income Tax revenues. Even so, the Secretary noted that …”Thanks to a combination of strong public health actions to moderate the impact of COVID-19 in Vermont – and strong fiscal discipline from the Administration and the Legislature – the General Fund will likely end fiscal 2020 in solid financial shape after deferred fiscal 2020 tax receipts are recognized on a modified accrual basis. Vermont is also benefiting from the relative strength of our economy reflected in 2019 personal and corporate tax earnings…”.
Click on the .pdf below to download the Secretary’s comments concerning Vermont revenues.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in June on a seasonally adjusted basis after falling 0.1 percent in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.6 percent before seasonal adjustment.
The gasoline index rose sharply in June after recent declines and accounted for over half of the monthly increase in the seasonally adjusted all items index. The energy index increased 5.1 percent in June as the gasoline index rose 12.3 percent. The food index also rose in June, increasing 0.6 percent as the index for food at home continued to rise.
The index for all items less food and energy rose 0.2 percent in June, its first monthly increase since February. The index for motor vehicle insurance increased sharply in June after recent declines. The indexes for apparel, shelter, and medical care also increased in June, while the indexes for used cars and trucks, recreation, and communication all declined.
The all items index increased 0.6 percent for the 12 months ending June; this compares to a 0.1-percent increase for the 12 months ending May. The index for all items less food and energy increased 1.2 percent over the last 12 months. The food index increased 4.5 percent over the last 12 months, with the index for food at home rising 5.6 percent. Despite increasing in June, the energy index fell 12.6 percent over the last 12 months.
Next release is Wednesday, August 12, 2020, for the July 2020 Consumer Price Index.
Economy regains 4.8 million jobs in June and unemployment at 11.1 percent
Unemployment fell and the U.S. economy added back 4.8 million jobs in June, according to the latest Employment Situation report issued by the U.S. Bureau of Labor Statistics on July 2. This follows a gain of 2.7 million (revised up by 200,000) in May. U.S. employers have added back 7.5 million jobs of the 22.2 million jobs lost since the onset of the coronavirus pandemic in February, sparking hopes for a faster rebound in the labor market.
The unemployment rate fell to 11.1 percent from 13.3 percent in May; though this still understates the actual drop since the number of people misclassified as unemployed fell from 3.0 percent in May to 1.0 percent in June. More importantly, June figures were collected before a surge of coronavirus infections in several large states, including Florida, Texas, Arizona, and California, causing many officials to reimpose some restrictions introduced during initial lockdowns.
The job gains were primarily in sectors most affected by the lockdown. Leisure and hospitality jobs increased by 2.1 million, accounting for about two-fifths of the gain in total nonfarm employment. Restaurants and bars jobs rose by 1.5 million; despite these gains employment is down by 3.1 million since February. Jobs were also returning to amusements, gambling and recreation; and in accommodations. Employment in retail trade rose by 740,000 in June, after a gain of 372,000 in May; on net, the industry is 1.3 million lower than in February.
Employment gained across major services sectors including education and health services (568,000); other services (357,000); professional and business services (306,000), transportation and warehousing (99,000), wholesale trade (68,000); and financial activities (32,000).
On the goods producing side, manufacturing employment rose by 356,000 jobs in June; still down by 757,000 since February. Construction hired back 158,000 workers in June; following a gain of 453,000 jobs in May. These gains accounted for more than half of the decline of 1.1 million occurring in March and April. Mining continued to lose jobs (-10,000) in June; mining is down by 123,000 since its peak in January.
Government employment gains were modest (+33,000) in June; overall employment in government is 1.5 million below its February level. This figure may increase sharply as governments enter their new fiscal year with massive revenue-cost imbalances unless Congress appropriates direct assistance.
The diffusion index of employment—a measure of the dispersion of change—increased to 75.2. This broad-based index provides insight into the breadth of employment change across 258 different private sectors.
On the household side, the picture is reinforced by a strong but uneven rebound. People who were earlier on temporary layoff are getting their jobs back. In April, 18.6 million were furloughed; in June it is now down to 10.6 million; accounting for about three-fifths of all unemployed. In addition, the number of unemployed who are reentrants rose sharply from 1.5 million in April to 2.4 million in June. These represent significant positives in the labor market. However, more than 4.6 million people have dropped out of the labor force since February. About 1.9 million of those that left the labor market were under the age of 25 years. Nearly 1 million of those workers are prime-age (between 25-64 years) women. Another 900,000 workers over the age of 65 years left the work force.
The overall employment-to-population ratio (EPOP) is down by 6.5 percent since February. For minorities the decline is much greater; for Blacks it is down by 8.6 percent; for Hispanics, by 10.3 percent; and for Asians, the EPOP is down by 9.9 percent.
In sum, this is a mostly positive report, indicating that the economy is on the rebound; though there is a long path of recovery. With additional funding needed from Congress for the unemployed and for state and local government finances and the resurgent pandemic in several states, the recovery may stall.
The full BLS press release on the June 2020 employment situation can be accessed in the link below:
The next Employment Situation for July 2020 is scheduled to be released on Friday, August 7, 2020.
The latest Livingston Survey from the Federal Reserve Bank of Philadelphia shows sharply negative growth in real GDP and high unemployment for the first half of 2020 with the economy expected to start recovering in the second half of 2020. Participants in the June Livingston Survey—surveyed by the Philadelphia Federal Reserve Bank twice a year—predict that the nation’s output (real GDP) will fall at an annual rate of -20.2 percent during the first half of 2020 with a rebound with growth increasing to 9.6 percent in the second half of 2020. Growth is predicted to average an annual rate of 7.2 percent in the first half of 2021.
Forecasters predict that the unemployment rate will be 17.4 percent in June 2020, recovering to 10.6 percent in December 2020. The unemployment rate is expected to fall further to 8.3 percent by June 2021.
Forecasters also cut their projections for inflation in 2020 and 2021. Consumer price index (CPI) inflation was revised downward to 0.8 percent in 2020 and 1.6 percent in 2021. Producer price index (PPI) inflation for finished goods is expected to be -2.1 percent this year and rise to 2.2 percent in 2021.
The survey panelists lowered their forecasts for interest rates on the three month Treasury bills—by the end of June 2020; the T-bill interest rate is predicted to be 0.13 percent. The 10-year Treasury bond interest rate is predicted to reach 0.70 percent by the end of June 2020; and the T-bond interest rate to rise to 0.81 percent at the end of December 2020.
The Philadelphia Fed’s Livingston Survey is the oldest survey of economists’ expectations. The survey was started in 1946 by the late columnist Joseph A. Livingston. It summarizes the forecast of economists from industry, government, banking and academia. It is published twice a year, in June and December. One of the twenty forecasters in the survey is EPR’s Senior Economist, Robert Chase.
For the full survey report, please see pdf below.
Coronavirus (COVID-19) Impact on the First-Quarter 2020 GDP Estimate, BEA Technical Note:
The decline in first quarter GDP reflected the response to the spread of COVID-19, as governments issued "stay-at-home" orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.
Real gross domestic product (GDP) decreased at an annual rate of 5.0 percent in the first quarter of 2020, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1 percent.
The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the decrease in real GDP was also 5.0 percent. With the third estimate, an upward revision to nonresidential fixed investment was offset by downward revisions to private inventory investment, personal consumption expenditures (PCE), and exports.
The decrease in real GDP in the first quarter reflected negative contributions from PCE, private inventory investment, exports, and nonresidential fixed investment that were partly offset by positive contributions from residential fixed investment, federal government spending, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
The decrease in PCE reflected a decrease in services, led by health care as well as food services and accommodations. The decrease in private inventory investment was mainly in manufacturing, led by petroleum and coal products. The decrease in exports primarily reflected a decrease in services, led by travel. The decrease in nonresidential fixed investment primarily reflected a decrease in equipment, led by transportation equipment.
The BEA release can be found at the pdf below.