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
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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%
Professional & Business Services
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
Professional & Business Services
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
July, 2020William F. Fox • Boyd Center for Business & Economic Research •
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
William F. Fox • http://cber.haslam.utk.edu
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
July, 2020William F. Fox • Boyd Center for Business & Economic Research •
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
July 2020 William F. Fox • http://cber.haslam.utk.edu
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
William F. Fox • http://cber.haslam.utk.edu
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.
July, 2020William F. Fox • Boyd Center for Business & Economic Research •
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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1/2
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1/2
019
7/2
1/2
020
William F. Fox • http://cber.haslam.utk.eduJuly, 2020
Congress Enacts the CARES Act, and is
Considering Expanding it
William F. Fox • http://cber.haslam.utk.edu
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
William F. Fox • http://cber.haslam.utk.eduJuly, 2020
The Economy Cannot Grow Faster than
Consumer Demand
William F. Fox • http://cber.haslam.utk.edu
-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
0
Jul 2
1, 2
00
1
Jul 2
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00
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00
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Jul 2
1, 2
02
0
William F. Fox • http://cber.haslam.utk.eduJuly, 2020
Light Vehicle Sales Fell Dramatically and
Have Rebounded Some
William F. Fox • Boyd Center for Business & Economic Research •
cber.haslam.utk.edu
0.0
5.0
10.0
15.0
20.0
25.0
Jun
-98
Feb
-99
Oct
-99
Jun
-00
Feb
-01
Oct
-01
Jun
-02
Feb
-03
Oct
-03
Jun
-04
Feb
-05
Oct
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Jun
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Feb
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Jun
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Feb
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Oct
-09
Jun
-10
Feb
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Oct
-11
Jun
-12
Feb
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Oct
-13
Jun
-14
Feb
-15
Oct
-15
Jun
-16
Feb
-17
Oct
-17
Jun
-18
Feb
-19
Oct
-19
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
William F. Fox • Boyd Center for Business & Economic Research •
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
William F. Fox • http://cber.haslam.utk.edu
-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
July, 2020William F. Fox • Boyd Center for Business & Economic Research •
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
July 2020 William F. Fox • http://cber.haslam.utk.edu
Birth rates are Particularly low for Mothers Under 30 (Birth rates per thousand by mother age)
William F. Fox • http://cber.haslam.utk.edu
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
William F. Fox • http://cber.haslam.utk.eduJuly, 2020
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