June Economic Review: Green shoots emerge in the darkest economic times
June 16, 2020
Economic Review: The COVID-19 recession is officially here, but signs of a recovery in May (Page 3)
A series of better than expected economic data suggests that the economy began its long road back in May – led by the biggest monthly gain in payrolls ever. While the recession was officially announced as having begun in February, its end may not be far away – although the deep hole that the economy is in means that it will be at least a couple of years before GDP and jobs recover to pre-downturn levels.
Financial Markets Review: Risk-on again (Page 4)
The risk-on rally fizzled early in May as uncertainty swirled about state/local government plans to re-open their economies, but late in the month brought building momentum with a number of states relaxing constraints. As a result, broad equity market indices have risen sharply to the highest levels since shortly after the recession began.
The Outlook: Low inflation gives the Fed a green light (Page 5)
Prior to the onset of the COVID-19 recession in February, there were steady, if subtle, signs of a pickup in inflation. But not only has the CPI been negative in each of the past three months, core inflation has fallen in the first year of each of the past seven economic recoveries. This will give the Fed room to keep a very expansionary monetary policy in place even as the economy recovers.