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Real Time Economics
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Americans are traveling more, retail sales are expected to take a small step back in February and the housing market is on its biggest tear since the late days of the housing bubble. Jeff Sparshott here with the latest on the economy.
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Airports are the busiest they've been since March 2020, and airline executives say they are starting to see a path out of the coronavirus pandemic. Covid-19 brought travel to a near halt last spring. Travel restrictions and fear of infection kept people at home and out of airports for most of the year: U.S. airlines carried 60% fewer passengers in 2020 than in 2019, bringing passenger traffic to the lowest level since the mid-1980s, according to the Bureau of Transportation Statistics. Major U.S. airlines lost about $35 billion in 2020. But on Monday, United Airlines and Delta Air Lines said they could stop bleeding cash this month. Even with the nascent rebound, executives said they remain cautious. The Centers for Disease
Control and Prevention still advises against travel, and the number of people passing through U.S. airports is half—or less—of what it was for most days in 2019, Alison Sider reports.
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U.S. retail sales for February are expected to fall by 0.4% from the prior month. (8:30 a.m. ET)
U.S. import prices for February are expected to rise 1% from a month earlier. (8:30 a.m. ET)
U.S. industrial production for February is expected to rise 0.3% from the prior month. (9:15 a.m. ET)
U.S. business inventories for January are expected to rise 0.3% from a month earlier. (10 a.m. ET)
The National Association of Home Builders housing market index for March is expected to tick down to 83 from 84 the prior month. (10 a.m. ET)
The Federal Reserve begins a two-day policy meeting.
Japan's provisional trade figures for February are out at 7:50 p.m. ET.
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U.S. shoppers likely pulled back slightly on retail spending during February. Economists expect retail sales—a measure of purchases at stores, at restaurants and online—fell by 0.4% in February compared with the prior month. The decline would follow robust January sales, particularly on goods, that was propelled by stimulus payments to households from the December pandemic-relief package. February is typically a quiet month for retail sales, and severe winter weather in February might have held back sales across a large swath of the U.S. Economists expect a boost in retail spending in the coming months as additional government stimulus is distributed from the $1.9 trillion plan signed into law last week, Covid-19 vaccinations
lead to a decline in cases, and employment picks up as businesses open up more fully, Amara Omeokwe reports.
The Census Bureau releases the February retail sales report at 8:30 a.m. ET.
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...While Housing Stays Hot
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The residential real-estate market is on its biggest tear since 2006, just before the housing bubble burst and set off a global recession. Yet in nearly every meaningful way, today’s market is the inverse of the previous boom. In the mid-2000s, loose mortgage-lending standards enabled borrowers with poor credit histories to purchase homes beyond their means, sometimes with mortgages that required low payments in the early years of the loan. Too much new construction led to an oversupply of houses. Financial firms packaged these risky mortgages as securities and sold them to investors. When more homeowners started defaulting on their mortgages, lenders suffered large losses and the entire financial system froze up. Many
homeowners paid a big price. Between 2006 and 2014, about 9.3 million households went through foreclosure, gave up their home to a lender or sold in a distressed sale, Nicole Friedman reports.
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The current housing boom is far more stable than the last one and poses fewer systemic risks, economists say. A downside: There are more barriers to entry, and it’s more difficult for buyers who aren’t already homeowners to make that first purchase.
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Brighter Outlook, Steady on Rates
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Federal Reserve officials will likely note an improving economic outlook at their policy meeting this week, while also stressing that it is too early to change their plans for interest rates and bond purchases. Updated economic projections Fed officials will release Wednesday, after the conclusion of the policy meeting, should show they expect the labor market and inflation to rebound faster than they anticipated in December. But Fed officials don’t plan to signal a change to their easy-money policies until they see those projections coming true, Paul Kiernan reports.
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The badly battered lodging business is stirring to life, roused by hotel owners and investors betting that bookings will pick up when Covid-19 vaccines become widespread and more Americans itch to travel again. The past year was by many measures the industry’s worst, marked by employee furloughs, plummeting occupancy rates and the evaporation of most business travel. But this year has already offered glimmers of hope. Hotel share prices are rising, scores of properties are reopening and lodging companies are hiring again. Even so, few expect hotels to return to their pre-pandemic level of business for another two to three years. International travel to the U.S. collapsed in 2020, and hoteliers hold little hope it will
accelerate much this year. Demand for conventions and large meetings that have been a staple for many large hotels in downtowns and resorts also looks grim in 2021, Peter Grant reports.
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State funding mechanisms for unemployment programs discourage companies from hiring in the wake of a recession. "States raise tax rates on firms that lay off workers, a practice that serves the dual purpose of financing benefits and discouraging layoffs. Because tax rates are linked to layoffs, firms mechanically face higher payroll taxes when unemployment is high, and troubled firms bear the brunt of tax increases. ... UI taxes have substantial effects on firm labor demand. The large response appears to be driven by two primary factors. First, firms facing tax increases have recently had layoffs and thus are likely to be in distress, generating large employment responses. Second, UI taxes are effectively a head tax, increasing the labor demand elasticity substantially," UC Merced's Andrew Johnston writes in the American Economic Journal: Economic Policy.
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Real Time Economics offers a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here.
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