Retail sales growth for August came in a bit below expectations (+0.6% month-to-month), but was still positive.

This advance data will be revised next month, possibly significantly.

But this nevertheless supports the interpretation that much of the FPUC was saved. /1
This is interesting given that some data was showing a marked slowdown in spending growth among UI recipients in August. /2
If we assume a marginal propensity to consume out of UI of 0.73, that suggests that UI recipients would have to draw on around $50 billion of savings a month to maintain their pre-August consumption. /3
If all non-consumed UI benefits between April and July had been saved, that would imply around $100 billion in savings, or two months of reserves to draw on to maintain consumption. However... /4
...almost certainly not all non-consumed benefits were saved. Some went to pay down debt / catch up with old bills. So the "reserve" here is likely less than 2 months.

On the other hand, the $300/week Lost Wages Assistance program at $44 billion will probably add a month. /5
So even if the savings hypothesis is true, UI workers can't keep drawing on savings forever. LWA might provide a cushion through Sept (once they actually start hitting worker wallets) but afterward that probably only leaves 1 more month of savings without another fiscal deal. /6
Hard to say when you'd start to see evidence in the data of exhausted savings. The LWA has been paying out in fits and starts so there might be some weaknesses in September, followed by rebounds as LWA checks hit pocketbooks. That should all be complete by October though. /FIN
(Source for that recent 0.73 MPC estimate:…)

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More from @ernietedeschi

21 Sep
Thirty-year projections are fraught with extensive uncertainty. That said, @USCBO now sees noninterest deficits 30 years from now as 1.5pp of GDP larger than they did pre-COVID. 2/3 of that is due to persistently lower revenues.…
Meanwhile, here are CBO's latest long-term 10-year Treasury yield projections. Note that according to the yield curve decomposition of Gurkaynak, Sack, & Wright, the market-based 10-year rate 10 years forward from today is 1.82%, more than a full point below CBO's projections.
Here's both the current 10Y rate (blue) and the GSW 10Y rate 10Y forward (red). In essence, the GSW model is telling us that what's market-consistent with the different tenors is a 10Y yield rising by ~+115bp over the next 10 years, whereas CBO is assuming double that, +230bp.
Read 5 tweets
17 Sep
An improvement in both regular state and PUA claims, down to a total of 1.4 million NSA, around -300K down from last week. Image
But last week's fall comes after a month of slight growth. Regular + PUA initial claims have essentially been in a holding pattern since August. Image
Meanwhile California gives back some of the extraordinary PUA growth seen in the last few weeks -- continuing PUA claims there decline by -592K Image
Read 4 tweets
16 Sep
Powell replying to @jeannasmialek: Monetary policy is not a first line of defense for financial stability.
@steveliesman asks Powell about the new SEP that, even post-AIT, still doesn't show inflation getting above 2%.

I read Powell as answering essentially that it will take beyond 2023 to get above 2%.
Powell to @rachsieg: "More fiscal support is likely to be needed." WELP.
Read 5 tweets
16 Sep
This crisis has convinced me, among other things, that we should federalize UI and take its burden off the states.
Run it out of SSA, which knows something about cutting checks to people in a timely manner.
The marginal benefits of giving states flexibility in setting UI benefits and tax rates are now being swamped by the downsides of inconsistent processing times & infrastructure, difficulties in federal-state coordination, and residual state fiscal burdens during downturns.
Read 4 tweets
10 Sep
And with the August 22 data, the PUA program--which didn't exist at all before the CARES Act in March--is now officially larger than regular state unemployment insurance. Image
(Given the extraordinary growth in California over the last two weeks I'm still taking the precise PUA number with a grain of salt, but it's undoubtedly large)
My attempt to correct for past PUA data errors by using cumulative PUA initial claims, rather than continuing PUA claims, suggests lower PUA take up but still shows a flattening in the decline in UI claims. Image
Read 4 tweets
9 Sep
A few interesting nuggets.

Wage growth is difficult to get a handle on right now, since official data uses averages that have been skewed by low wage job losses. ECI, a measure that corrects for this, only comes out quarterly. /1
The CPS also allows us to correct for these compositional effects by looking at the same worker over 12 months.

What it shows is that among workers employed 12M apart, firms typically haven't been responding w/ wage cuts, but there's evidence they *have* been reducing hours. /2
Read 9 tweets

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