12 Aug August 7, 2020
Week in Review
Employment
The U.S. economy added 1.76 million jobs in July, and the unemployment rate declined to 10.2%. Both of these gains were greater than expected and were driven largely by reopenings in the retail, hospitality, and healthcare sectors.
Our Take: The labor market continues to improve from extremely depressed levels, and this is encouraging given July’s resurgence in COVID-19 infections. The economy still has a long way to go to return to pre-pandemic employment levels, and the ending of the PPP loans and the federal supplement to unemployment insurance will likely be headwinds to a continued jobs recovery.
China
President Trump issued two executive orders prohibiting U.S. residents and firms under U.S. jurisdiction from conducting business with the owner of TikTok and with WeChat. Trump cited national security concerns about the personal data collected by these apps being made available to the Chinese government. Aside from cutting off access to U.S. users, these orders will also make it very difficult for these apps to be distributed globally because the orders will push the apps off of the Apple and Google app stores. Also, banning WeChat will substantially hinder the ability of U.S. and Chinese firms to communicate with each other.
Our Take: These orders represent a major re-escalation of the economic conflict between the U.S. and China. The orders could potentially cripple two tech companies that the Chinese government views as critical to their strategic plans. If implemented, these orders would reduce the integration of the Chinese and U.S. economies, and this would be a headwind to global growth.
Municipals
S&P Global Ratings indicated that certain privatized student housing projects could be downgraded. In addition, Fitch Ratings estimated that fall enrollment at colleges and universities could decline between 5% and 20%.
Our Take: Colleges and universities continue to struggle with the effects of the pandemic. In-person instruction at many colleges and universities remains uncertain. If classes are entirely virtual, it is likely that some students will choose not to live in student housing or to return to campus at all.
All expressions of opinions are subject to change without notice in reaction to shifting market conditions. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities and should not be relied on as financial advice.