SubscribeArrow

Happy Jobs Report Day! Estimates are the U.S. economy added around 165,000 jobs last month. Was this email forwarded to you?

Sign up here. (Today's Smart Brevity count: 1,269 words, 4.7 minutes.)

1 big thing: How the coronavirus could shape the 2020 election

Illustration: Aïda Amer/Axios

The Wuhan coronavirus outbreak is already scuttling supply chains and wreaking havoc on companies from around the world that do business in China, but if analysts' projections are correct, the rebound from the virus could help propel the U.S. economy to new heights right around the time of the 2020 presidential election.

What's happening: S&P Global expects the outbreak to "stabilize globally in April 2020, with virtually no new transmissions in May."

  • And most economists predict the world will get back to business as usual by the second quarter and will make up for lost time with accelerated economic growth in the third and fourth quarters.

What we're hearing: "We’re likely to return not just to normal but above normal because of the U.S.-China trade deal," Kristina Hooper, chief global market strategist at Invesco, tells Axios.

  • "We got this really nice boost of sentiment coming from that phase one deal and literally within a few days of that global media started reporting on coronavirus."
  • "Once contagion is under control and stabilized I think we’ll see a pop in consumer spending and corporate spending."

Plus, U.S. economic data had been strengthening ahead of the outbreak — last month the all-important services sector notched its best reading since September, a private payrolls survey showed the highest job growth in five years and consumer confidence held at historically high levels.

  • Representatives from the National Retail Federation and National Association of Manufacturers tell Axios they expect their industries — two of the economy's biggest laggards in 2019 — to see a return of job growth and investment this year.

But, but, but: The bullish expectations are based on the assumption that Trump won't ratchet up tensions with China again or launch a second trade spat with Europe.

  • The uncertainty of the trade war slowed global growth last year to its weakest since the financial crisis and led to reduced business investment for American companies in each of the last three quarters.
  • Further damage to business confidence could push investment even lower and curtail job growth.

The bottom line: With limited options to further juice the economy — as the Democrat-controlled House of Representatives would need to pass any new tax cuts or large-scale spending projects — Trump's best option for economic growth will likely be to do nothing.

  • And that's never really been his style.
Bonus: The Fed as an insurance policy

The U.S. economy may even have something of an insurance policy, in the form of the Federal Reserve.

  • Fed funds futures prices show traders believe that if growth does slow significantly, the Fed will lower interest rates as they did in 2019, giving another boost to the economy.
  • China's central bank already has cut rates and injected hundreds of billions of dollars into markets to help offset the negative economic impact, and its government on Thursday slashed retaliatory tariffs on some U.S. imports by half.

What it means: Danielle DiMartino Booth, CEO of Quill Intelligence and a former adviser to the Dallas Fed, tells Axios that she expects the Fed to "abide by what futures markets price in as it pertains to rate cuts."

  • Since the stock market's rise over the past week, traders have pushed expectations down from two rate cuts this year to one, but "Any hard data evidence that the coronavirus will have more than a fleeting first-quarter effect will put the second rate cut in 2020 fully back on the table," Booth adds.
  • "The same can be said for any evidence of any kind out of weakness out of any and all U.S. macro data."
2. Catch up quick

Intercontinental Exchange is abandoning its pursuit of eBay after its investors pushed back strongly against the move. (WSJ)

The U.S. and its allies should consider taking a "controlling stake" in Nokia and Ericsson to counter Huawei's dominance over 5G wireless technology, the White House said. (Reuters)

Elliott Management has built a stake of more than $2.5B (or 3%) in Softbank and is pushing the company to make changes to boost its share price (WSJ)

Net farm income is expected to fall by 11% this year, as President Trump's government aid programs decline, expenses rise and prices for corn and soybeans fall. (USDA)

3. S&P 500 earnings continue to look less bad

With more than half of the companies on the S&P 500 having reported earnings, the consensus estimate for fourth-quarter earnings is down just 0.1% from three weeks ago. That's well above the 1.3% average decline for the past five years, excluding 2018, which was boosted significantly by the Tax Cuts and Jobs Act.

By the numbers: So far, 22% of S&P companies have revised first-quarter profit targets higher, the highest percentage since Q2 2018 and third-highest since 2012, Bloomberg data show.

  • And, Bloomberg notes, "sell-side EPS estimate revisions are tracking at 47%, an improvement from readings in the 30%-range this time last year."

Yes, but: The coronavirus outbreak may lower 2020 earnings, Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, told Bloomberg. She expects downside effects from the virus could pull growth figures down by about 4%.

4. Americans want to buy homes, but they're disappearing
Expand chart

Reproduced from Fannie Mae; Chart: Axios Visuals

The steady decline in U.S. interest rates helped the housing sector recover from its malaise in early 2019, and the momentum is continuing so far in 2020.

  • But prospective homeowners are finding it increasingly difficult to find a home as the lower rates have brought on increased selling prices and fewer available homes.

Driving the news: National housing inventory fell by nearly 14% in January — the steepest year-over-year decline in more than four years, according to a survey released this morning from Realtor.com.

  • The supply of homes for sale in the U.S. is now at its lowest level since Realtor.com started tracking the data in 2012.
  • The company also notes that there is a supply shortage at every price tier, but especially in entry-level homes. The number of properties priced under $200,000 fell by 19% year over year.

What's happening: As mortgage rates decline, applications are spiking and so are prices.

  • The 30-year fixed rate for a mortgage fell to an average of 3.71% this week, its lowest level since October, the Mortgage Bankers Association reported Wednesday.
  • The refinance rate jumped by 15% to the highest level since June 2013, MBA said. Compared with a year earlier, it was up 183%.
  • Conversely, MBA's purchase index fell by 10% because of the challenge buyers had finding homes they could afford.
  • National home prices increased 4% year over year in December and are forecast to increase by 5.2% from December 2019 to December 2020, according to the latest report from CoreLogic released Tuesday.

What they're saying: “With fewer homes coming up for sale, we’ve hit another new low of for sale-listings in January,” Realtor.com chief economist Danielle Hale said.

  • “This is a challenging sign for the large numbers of millennial and Gen Z buyers coming into the housing market.”
5. Malls drag commercial property prices lower
Expand chart
Data: Green Street Advisors; Chart: Axios Visuals

The latest reading of the Green Street Commercial Property Price Index fell in January for the first time since March 2019. Prices had held steady over the previous three months and have risen just 2.1% in the last 12 months.

Why it matters: The data suggest price increases in commercial real estate have hit a standstill.

What it means: The index measures pricing of U.S. commercial properties at the current negotiated and contracted prices. January's 0.5% fall was driven by lower mall values. Pricing of other property types was unchanged, Green Street said in a release.

  • Mall pricing declined 5% from December and has fallen by 15% over the past 12 months, dragging the overall index.

The big picture: Increases in other segments of the market also have been unimpressive. With the exception of apartment (6%), industrial (13%), and manufactured home park (16%) — which collectively make up just 17.5% of the total index — no category of commercial real estate has seen even a 5% price increase over the last 12 months, Green Street's data show.

Flashback: Last month, Fed data showed U.S. commercial and industrial loans had the largest drop in nearly three years, and the total amount of C&I loans declined to levels last seen in May.

  • That data sparked worries that the woes in the manufacturing sector could be hurting the broader market.

Shirley Jackson is the president of RPI (Troy, New York's Rensselaer Polytechnic Institute) whose experiments with theoretical physics paved the way for the touch-tone telephone, portable fax, caller ID, call waiting and the fiber-optic cable.

  • Jackson earned a doctorate in nuclear physics at MIT, graduating with her Ph.D. in 1973 as the first African-American woman awarded a doctorate from the university in any field.
  • From 2009 to 2014, Jackson served on the President's Council of Advisors on Science and Technology and was co-chair of the President's Innovation and Technology Advisory Committee.