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Data: New York Fed; Chart: Axios Visuals

The New York Fed's Weekly Economic Index (WEI) is reversing course, showing real-time, high-frequency economic data is again turning negative after climbing back from April and May's coronavirus-driven swoon.

Why it matters: The index is one of many that show the economy is getting worse in a trend that could be picking up steam.

  • The WEI represents the common component of 10 different daily and weekly series covering consumer behavior, the labor market and production.
  • It is scaled to the four-quarter GDP growth rate and if it continues on its current trajectory would mean U.S. GDP is poised to sink by 7% in Q3 and decline year over year for the third straight quarter.

What's happening: In addition to the New York Fed's index, real-time data trackers from Goldman Sachs, Jefferies and Oxford Economics have all turned from stalling to falling.

  • The St. Louis Fed's coincident employment index has turned lower, showing jobs growth has reversed.
  • The number of employees returning to work at small- and medium-sized businesses declined by at least 5% from early June to mid-July, according to Homebase.
  • TSA data showed the first weekly decline in people passing through checkpoints since April.

What's next: "Economic data over the next few weeks will likely underscore the depth of the recession and provide a warning that a full recovery is still far from being achieved," David Kelly, chief global strategist at JPMorgan Asset Management, says in a note to clients.

Where it stands: While many investors are counting on stimulus from Congress as well as a renewed balance sheet expansion from the Fed if economic data continue to deteriorate, Kelly says this is akin to "pumping air into a leaky tire."

  • "Government spending will also likely drag on the economy as many state and local governments will be forced to cut payrolls to balance budgets in reaction to the deep recession and lack of sufficient federal government aid."
  • He anticipates real GDP will fall 7.5% year over year in the third quarter, with much slower future progress without the widespread distribution of a vaccine.

The bottom line: "To state the obvious, economic uncertainty is extraordinarily high right now, even eclipsing levels at the worst of the financial crisis," Kelly says.

  • "It is the pandemic, rather than any lack of stimulus, that is holding the economy back."
  • "[I]n a pandemic economy, stimulus alone cannot trigger a full recovery."

Go deeper

Felix Salmon, author of Capital
Updated Oct 29, 2020 - Economy & Business

How central banks can save the world

Illustration: Aïda Amer/Axios

The trillion-dollar gap between actual GDP and potential GDP is a gap made up of misery, unemployment, and unfulfilled promise. It's also a gap that can be eradicated — if central banks embrace unconventional monetary policy.

  • That's the message from Eric Lonergan and Megan Greene, two economists who reject the idea that central banks have hit a "lower bound" on interest rates. In fact, they reject the idea that "interest rates" are a singular thing at all, and they fullthroatedly reject the idea — most recently put forward by New York Fed president Bill Dudley — that the Fed is "out of firepower."

Why it matters: If Lonergan and Greene are right, then central banks have effectively unlimited ammunition in their fight to increase inflation and employment. They are limited only by political will.

Ina Fried, author of Login
Oct 29, 2020 - Economy & Business

Earnings reports to show if tech can keep growing in a pandemic

Illustration: Eniola Odetunde/Axios

Apple, Facebook, Google and Amazon are all slated to report earnings after the markets close today, and that should give us a much better sense of how the tech industry is faring through the pandemic.

Why it matters: The reports should offer a clue of how sustainable tech's "new normal" is. That's especially important given that experts predict another and stronger wave of coronavirus in the U.S. that could force continued reliance on remote work for office employees.

1 hour ago - World

Scoop: Iran preparing to enrich weapons-grade uranium, Israel warns U.S.

Iranian President Ebrahim Raisi holds a press conference. Photo: Presidency of Iran handout via Getty

Israel has shared intelligence over the past two weeks with the U.S. and several European allies suggesting that Iran is taking technical steps to prepare to enrich uranium to 90% purity — the level needed to produce a nuclear weapon, two U.S. sources briefed on the issue tell me.

Why it matters: Enriching to 90% would bring Iran closer than ever to the nuclear threshold. The Israeli warnings come as nuclear talks resume in Vienna, with Iran returning to the negotiating table on Monday after a five-month hiatus.