Is economic reality about to hit municipal employees?  According to Bloomberg, generally speaking state workers have not been fired.  Almost all have received some type of stimulus check and the vast majority—87%–are more concerned about reopening the economy too early rather than too late.

The governors of CA, NY and NJ are now releasing preliminary state budgets that will greatly impact its employees.  California is proposing a 10% cut in pay for many of its workers.  NJ said the state may have to fire 200,000 public workers.  NY public workers appear to be getting off easy as The Empire State is only proposing eliminating raises for its 85,000 union workers.

Many in media and government have branded those who wish to reopen as selfish Neanderthals, stating such demonstrators as uneducated that deny science.   As noted several times, 82% of small businesses, businesses that employ about 48% of society, wish to reopen at a quicker pace for the simple fact that they are facing economic catastrophe. The owners are at the vanguard of the economic carnage.

Some are suggesting municipal employee opinion about reopening is on the verge of a massive change under the simple guise that there is no interest like self-interest. I don’t know if I agree or disagree with this view but I do believe the vitriol and animosity around state cutbacks will be intense.

Friday’s data offered evidence as too why many are complacent about reopening.  Household outlays fell 13.6% from the prior month, the sharpest drop in Commerce Department records back to 1959.  Analysts were projecting a 12.8% decline.

Incomes on the other hand posted a record 10.5% increase, compared with estimates for a 5.9% decline, as stimulus payments were distributed.  As noted several times according to a Commerce Department working paper, 68% of fired workers are making 134% more collecting unemployment benefits as compared to working.  This helped drive the personal saving rate to a record 33% from 12.7%.

The rise in income temporarily masks the fact that people are in a fragile economic position thus suggesting the necessity to continue to reopen the economy.

With the above written, I do believe the economy will continue to reopen at a pace greater than most expect, perhaps in the face of government edicts, which will in turn positively impact the data.  I find it noteworthy the Citicorp “positive surprise” index is nearing a record high.

This should all be placed into the proper context.  Most are flying blind, many are paralyzed or depressed.  The data is still horrific but it is better than many had suggested.

What will happen this week?

Markets are nervously flat.  Cities across the US are reeling from civil unrest, the catalyst of which was the unfortunate death of George Floyd.  But Mr., Floyd’s death is much deeper than what it appears.  Society is on edge for so many different reasons, and his death might be remembered as the catalyst that could forever change American society.  It is an easy transition to go from Covid lockdown to indefinite curfews in many cities that some might soon be calling marital law.

On a positive note, SpaceX was an incredible success, an example of American courage, optimism and risk taking.

Last night the foreign markets were up.  London was up 1.28%, Paris up 1.30% and Frankfurt down 1.65%.  China was up 2.21%, Japan up 0.84% and Hang Sang up 3.36%.

As stated the futures are nervously flat.  Sino-American trade tensions are also a possible focus.  The 10-year is off 1/32 to yield 0.67%.


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