Prospero
PROS-puh-roh
Someone who is capable of influencing others' behavior or
perceptions without their being aware of it.
After Prospero, the deposed Duke of Milan and a magician, in Shakespeare's The Tempest.
TIP OF THE WEEK
Wait, someone can influence us without us being aware of
it?
The economy had gone procumbent before the pandemic panic.
Like the slope of the yield curve, SBA 7(a) loan approval volume has been prospicient about the direction of the economy.
For the fiscal year ending September 30th, 2018 SBA 7(a) loan volume declined 0.3% while for the last fiscal year ending September 30th, 2019 it was off 9%.
Through February of 2020 it was 10% lower than the similar year ago period. Distracted by the promethean and profligate Paycheck Protection Program SBA 7(a) loan volume is now off 14% compared to a year ago.
Just for fun I calculated the correlation coefficient
between SBA 7(a) loan volume and GDP for over nine years using the Microsoft
CORREL function. It came out to a
statistically significant 0.86.
As SBA reiterated with SBA Policy Notice 5000-20011, if a potential 7(a) borrower is not operational, no disbursement on their loan can be made until they begin operating again.
According to economists at the National Bureau of Economic Research it was NOT government shutdowns and lockdowns that caused the COVID-19 pandemic panic. Instead the public’s fear of infection is a stronger influence.
These economists conclude that repealing restrictions is not a particularly powerful tool for restarting growth so long as individuals continue to fear infection.
If you would like a copy of the NBER working paper, FEAR, LOCKDOWN, AND DIVERSION: COMPARING DRIVERS OF PANDEMIC ECNOMIC DECLINE 2020, let me know.
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Indices:
PRIME RATE= 3.25%
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SBA 504 Loan Debenture Rate for August
For 20 year debentures, the debenture rate is only 0.90%
but note rate is 0.917% and the effective yield is 2.214%.
For 25 year debentures, the debenture rate is only 1.01%
but note rate is 1.025% and the effective yield is 2.269%.
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AHEAD OF THE YIELD CURVE
Another 1.763 million jobs were added back to the economy
for the month of July.
Or were they?
The mild improvement in hiring was a bit weaker than it
appeared. The government’s process of seasonal adjustments showed an
exaggerated increase in school employment.
Many school workers such as bus drivers and cafeteria
workers who would normally be laid off in July were sent home after schools
closed early in the spring. The government’s normal process of seasonal
adjustments made it look like hiring rose simply because those layoffs did not
take place in July as usual.
The seasonal adjustment is estimated with past data. The
problem is what happens when the seasonal pattern is thrown off by something
like, you know, a pandemic
This year the seasonal adjustment factor added 1.12
million jobs in July. These are not real
jobs but just on paper.
The true payroll number is much, much closer to zero.
For what it is worth, Here is a summary of net payroll
employment and this week’s interesting little table of data:
June 4,791,000
May 2,725,000
April -20,700,000
March -1,400,000
February 275,000
January 214,000
2019 2,108,000
2018 2,679,000
2017 2,110,000
2016 2,160,000
2015 2,740,000
2014 3,116,000
2013 2,074,000
2012 2,193,000
2011 2,103,000
2010 1,022,000
2009 -5,052,000
2008 -3,617,000
2007 1,115,000
2006 2,071,000
2005 2,484,000
2004 2,019,000
What does all this mean?
I don't know.
The number of employed, at 143.5 million, is still 15.3
million below February in what will be a widely cited assessment of this report
and the general status of recovery for the labor market.
The U.S. shed more than 22 million jobs during the height
of the pandemic. So far it’s only restored about 9.3 million, leaving more than
half of the Americans who lost their jobs in the lurch.
What’s more, an even larger 31 million people were
collecting unemployment benefits in mid-July based on the most recent numbers
available.
Keep your eyes and ears open for this week’s auction of
30 year treasury bonds.
The auction amount has increased over 30% to $26 billion
due to higher borrowing needs. At last
month’s auction, the high yield was awarded at 1.330 percent, down 12 basis points
from last month's auction rate and just a basis point above the record low set
in March.
Procellous proditmania proliferates.
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OFF BASE
While Prospero is the main character in Shakespeare’s The
Tempest, the play’s most famous quote is from his scheming brother Antonio when
he states: "What's past is prologue".
What’s past is prologue is the idea that history sets the
context for the present. The quotation is engraved on the National Archives
Building in Washington, DC.
Past is indeed prologue as pandemics and plagues have
raged throughout history. Shakespeare’s
greatest works happened as the plagues decimated London, Thucydides wrote the
Peloponnesian War during the Athenian Plague and Hemingway while quarantined
during the Great Influenza wrote The Sun Also Rises.
