Senior U.S. Economist
BofA Global Research
Diminishing effects of COVID on activity
Virus cases and hospitalizations are on the rise as BA.2 and its sub variant BA.2.12.1 drive an uptick in infections. The CDC estimates that these two variants alone account for 97% of total COVID cases in the week ending May 7.1 The data on cases likely understate true infections due to the rise in at-home tests. Because of this we think it is more important to focus on the hospitalization data moving forward. In the week ending May 10, hospitalizations and new hospital admissions have increased by 13.3% and 17.5% over the week to an average of 14.8k and 2.8k respectively.1,2 These figures are however still relatively low compared to history and suggest the economic risks from the current increase in COVID infections remains modest.
Turning to consumer activity, demand for leisure services recovered further in April but got off to a slower start in May. High frequency data for the month of April point to increased real spending on hotels, air travel and dining out. That said, the OpenTable data and TSA data in the early parts of May point to some moderation in activity. In the week ending May 9, OpenTable seated diners were down an average of 5.6% form the same period in 2019 and TSA traffic was down an average of 11.4%.3 Both of these are weaker than the averages seen during April. While we continue to expect spending on services to recover moving forward, the early data for May suggest the pace is at the very least slowing.
Initial jobless claims increased by 19k to 200k in the week ending April 30.4 This was the first reading of 200k or more in 11 weeks. Still claims remain at historically low levels signaling a tight labor market and low layoff rates. Similarly continuing claims fell to 1384k in the week ending April 23, below the pre-pandemic low and the lowest since 1969.4 Job postings on Indeed continue to drift slightly lower but remain 55.8% above February 1, 2020 levels suggesting strong labor demand.5 While postings on Indeed moved lower in March, the official job openings data from the Bureau of Labor Statistics showed an increase to a new record high. While the two series diverged in March they both continue to show robust demand for labor.
Going forward, given the rise in at home tests, we recommend paying more attention to hospitalization data. Meanwhile, data on consumer spending remain solid. The data on entertainment services improved in April suggesting we’ll see another increase in real spending on services. The data on jobless claims shows a slight increase for the month of April but remain at historically low levels. Overall, we think economic risks from the virus are modest. Better treatment and increased immunity have reduced the public health costs of the virus, and the effects of the virus on activity have diminished over time.
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- OpenTable Data through May 9, 2022; TSA, Data through April 25, 2022
- Department of Labor, Initial jobless claims data through April 30, 2022; Continued claims data through April 23, 2022
- Indeed, Data through April 29, 2022