Sep 2, 2020

Axios AM

By Mike Allen
Mike Allen

Happy Wednesday!

🖥️ Situational awareness: Stephanie Winston Wolkoff, out with a new book about working with her former friend Melania Trump, tells the Washington Post that the first lady regularly used private email in the White House, including accounts from the Trump Organization and MelaniaTrump.com, plus iMessage and Signal.

1 big thing: Here comes the real recession

Illustration: Sarah Grillo/Axios

Economists are warning that the downturn caused by the pandemic is now creating another recession: mass job losses, business failures and declines in spending even in industries not directly hit by the virus, Axios Markets editor Dion Rabouin writes.

  • Why it matters: The looming recession — a possible recession within a recession is less severe than the coronavirus-driven downturn. But it's more likely to permanently push millions out of the labor force, lower wages and leave long-lasting scars on the economy.
  • Darius Dale, managing director at Hedgeye Risk Management, tells Axios: "Our view is that the U.S. economy is transitioning from a depression to a recession and not a recovery."

The warning signs seen by Ernie Tedeschi, a managing director and policy economist for Evercore ISI, and others:

  • The increasing number of layoffs that have gone from classified as temporary to permanent.
  • The increasing number of men who have lost jobs in recent months — a traditional recession dynamic and reversal of the trend that saw more women being laid off in early months.
  • The rising rate of long-term unemployment, an unfortunate hallmark of the Great Recession.

What to watch: It'll be hard to see the recession in most data, because third-quarter economic growth will be compared to the second quarter, which was the worst downturn in history.

  • Absent another wave of lockdowns, Q3 GDP growth should be the highest ever — but largely because of pent-up demand and the simple fact that most U.S. businesses are allowed to operate.

The historically right-leaning National Association for Business Economics recently released a poll of its members that found two-thirds believe the economy is still in a recession.

  • More than a third (37%) see a one-in-two chance of a double-dip recession — an occurrence that Hunter notes is "extremely rare."

The bottom line: The recession within a recession is giving economists flashbacks of 2008 and the long recovery needed to get many of the country's lower-income citizens back on their feet.

  • The difference this time is that it follows an economic shock that caused at least three times the number of job losses as 2008, and has put four times as many people on government unemployment insurance.

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2. Gallup: U.S. perceptions of race relations hit low
Graphic: Gallup

Americans' view of relations between races is now the most negative of any year since Gallup started asking the question in 2001.

  • "Most Americans were upbeat about white-Black relations from 2001 through 2013. ... The sharp decline ... in 2015 followed numerous high-profile incidents in the prior year of unarmed Black citizens being killed by white police officers," Gallup reports.
3. Child care industry's plight

Illustration: Annelise Capossela/Axios

The child care industry is collapsing under the strain of the pandemic, Axios' Erica Pandey reports.

  • Without financial help, 50% of day care centers will go out of business, erasing some 4.5 million slots for young kids, the Center for American Progress projects.
  • Day care centers got $3.5 billion in aid under the CARES Act, but economists say the industry needs around $10 billion per month to make it through the crisis.

Why it matters: With parents making up a third of the U.S. workforce, the fate of schools and day care centers and the strength of the economy are inextricably linked — given that the hit to closed schools could be an estimated 3.5% of GDP.

4. D.C. task force targets monuments

People watch fireworks near the Washington Monument at the close of the Republican National Convention. Photo: Andrew Harnik/AP

The Washington Monument and Jefferson Memorial are among the targets of a task force D.C. Mayor Muriel Bowser named this summer amid nationwide protests, AP's Ashraf Khalil reports.

  • The committee yesterday recommended changes for dozens of monuments, schools, parks and buildings because of their namesakes' association with slavery or racial oppression.
  • Bowser was advised to ask the federal government to "remove, relocate, or contextualize" the Washington Monument, Jefferson Memorial and the statue of Christopher Columbus outside Union Station.

Some of the proposals from DCFACES (District of Columbia Facilities and Commemorative Expressions) are non-starters: Many of the most prominent monuments and statues stand on federal land, outside D.C. control.

  • Also included are proposals to rename schools named for Thomas Jefferson, Benjamin Franklin and "Star-Spangled Banner" composer Francis Scott Key.

Read the 24-page report.

5. Axios-Ipsos poll: Big gap in what experts, voters expect Nov. 3
Data: Axios/Ipsos survey of 1,100 U.S. adults, Aug. 28-31. Chart: Axios Visuals

Despite possible chaos in this year's vote count (see our "Red Mirage" scenario from "Axios on HBO"), one in three Americans still thinks we'll know who won the presidential election on the night of Nov. 3, a new Axios-Ipsos poll finds.

  • Six in 10 expect the winner to be announced within a couple of days.

Why it matters: The gap between public expectations and what experts are warning — that it may take weeks — shows the risk of a national crisis over trust and acceptance of this year's results, whether President Trump wins a second term or Joe Biden unseats him, Axios White House editor Margaret Talev writes.

  • The count is expected to take longer than normal in part because of the massive increase in demand for mail-in ballots as a result of the coronavirus.
  • Legal challenges, including attempts to have ballots rejected or restored, could add to delays.

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6. Analyst sees rising chance of Trump win
President Trump talks to business owners in Kenosha yesterday. Photo: Evan Vucci/AP

JPMorgan quant analyst Marko Kolanovic told investors to position for rising odds of President Trump winning, per Bloomberg.

  • The context: Betting odds, which earlier had Trump well behind Joe Biden, are now nearly even, which the strategist said is partly due to the impact of violent protests on public opinion.

🚨 Based on past research, polls could shift five to 10 points from Biden to Trump if the perception of protests shifts more from justice to violence, Kolanovic said.

7. A first: A Kennedy loses in Massachusetts

Sen. Ed Markey celebrates with his wife, Dr. Susan Blumenthal, after speaking last night at a public library in Malden, Mass. Photo: Allison Dinner/Getty Images

Sen. Edward J. Markey, 74, who rebranded himself from career politician to progressive warrior, won the Massachusetts Democratic Senate primary, beating 39-year-old Rep. Joseph P. Kennedy III by 11 points, the Boston Globe reports.

  • Markey, endorsed by Rep. Alexandria Ocasio-Cortez, "rode to victory on a wave of enthusiasm from young progressive activists inspired by his environmental work."
U.S. Rep. Joe Kennedy III speaks outside his campaign headquarters in Watertown, Mass., after conceding defeat. Photo: Charles Krupa/AP
8. Virus changes weather reporting

Executives at weather news companies say that the pandemic has forever changed the way they operate Axios' Sara Fischer reports.

  • The use of drones has increased at The Weather Channel as a way to do more on-the-ground storytelling while maintaining social distance.
  • Warning businesses about severe weather has also become an investment focus for AccuWeather, especially for places that have moved some virus-linked operations outdoors.

The bottom line: "Weather and storms are the great equalizer. They don't have an agenda when it comes to race, religion, creed, or socio-economic status," The Weather Channel's Nora Zimmett told Axios.

9. 75 years ago today: Japan surrenders
Photo: AP

In this photo from Sept. 2, 1945, servicemen, reporters and photographers perch on the USS Missouri for the onboard ceremony in which Japan surrendered, ending World War II.

  • The two sides signed documents officially ending years of bloody fighting in a ceremony aboard the USS Missouri in Tokyo Bay, with an armada of American warships and planes hovering nearby. Go deeper.
10. 1 fun thing: Trading cards top S&P
Screenshot: PWCC Market Indices

Sports trading cards are enjoying something of a renaissance, fetching greater value than ever before and engendering excitement not seen since their last golden age in the 1990s, Axios Sports reporter Jeff Tracy writes.

  • A Mike Trout rookie card sold for $3.9 million last week, breaking the all-time record set in 2016 by the famous T206 Honus Wagner ($3.12 million).

Why it matters: The PWCC 500 Index, which is essentially the S&P 500 for trading cards, has reported a 12-year ROI of 175% compared to just 102% for the S&P.

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Mike Allen

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