May 18, 2020

Axios Markets

Good morning! Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,299 words, 4.9 minutes.)

🎙 “I am just myself. But out of that comes something positive.” - See who said it and why it matters at the bottom.

1 big thing: "There's no limit"

Photo: Mark Makela/Getty Images

Ahead of his testimony before the Senate Banking Committee on Tuesday, Fed chair Jerome Powell previewed what Americans can expect in the coming months from policymakers: A whole lot more.

What it means: Powell has been adamant that the Fed has not run out of ammunition, even after adding more than $2.5 trillion to the central bank's balance sheet — more than half its pre-2020 total — in just the past two months.

What he said: "There's really no limit to what we can do with these lending programs that we have."

  • "So there's a lot more we can do to support the economy, and we're committed to doing everything we can as long as we need to."

Powell also called on Congress to do more, asserting again that it was necessary for fiscal spending to increase after a similarly straightforward call during an interview with the Peterson Institute for International Economics last week.

State of play: Powell, a Republican who has spoken out about the unsustainable nature of the U.S. national debt, also took aim at deficit hawks who have balked at the cost of more spending.

  • "The U.S. has been spending more than it's been taking in for some time. And that's something we're going to have to deal with. The time to deal with that ... is when the economy is strong."
  • "When unemployment is low, when economic activity is high, that's when you deal with that problem. This is not the time to prioritize that concern."

Why it matters: Powell's comments are the latest evidence that he expects the coronavirus pandemic to cause serious and potentially long-term damage to the U.S. economy and expects much more than $2.5 trillion from the Fed will be needed to hold up financial markets.

  • The audiences for his recent overtures — the politically well-connected PIIE and now the active voters who watch "60 Minutes" — suggest he is working to create a similar sentiment among policymakers in Washington.
2. Catch up quick

Lawmakers are expected to make changes to the Paycheck Protection Program, including giving businesses more flexibility and time to spend the money. (WSJ)

China threatened countermeasures for "unreasonable suppression" of Chinese companies like Huawei and could impose sanctions on companies like Qualcomm, Cisco and Apple. (Global Times)

3. JOLTS shows record jobless rate still understates true number

Data: Federal Reserve Bank of St. Louis; Chart: Naema Ahmed/Axios

The less-followed U.S. jobs report, the Job Openings and Labor Turnover Survey, released Friday showed there were more than 11 million layoffs in March, a record high.

Why it matters: March's nonfarm payrolls report found just 881,000 jobs lost, so the JOLTS report showed the damage that came in the second half of the month as a result of the coronavirus pandemic.

The intrigue: While March's JOLTS report showed a record 8.8 million more jobs lost than the March payrolls report, on a percentage basis the nearly 396% difference in layoffs was lower than the 397% difference between the two reports seen in September 2019.

  • Between December 2000, when the JOLTS report began, and March 2020, the average difference was less than a quarter of that — 94.7%.
  • 2019's layoffs averaged a 152% difference between the two reports, meaning the payrolls report missed a much larger number of layoffs than average.

Between the lines: The JOLTS report also showed that in addition to layoffs, job openings declined materially starting in August 2019.

  • That could mean the labor market was not as strong at the end of the year as the nonfarm payrolls report suggested.
  • Economists say unusually warm winter weather and enthusiasm about the U.S.-China trade deal had helped reverse that trend at the beginning of 2020.

How it works: The Labor Department's nonfarm payrolls report is more timely and closely followed but doesn't account for jobs lost after the typical second payroll period of the previous month (usually between the 12th and the 17th day), a Bureau of Labor Statistics representative tells Axios.

  • Even its revisions only account for data available during that period (the initial March payrolls report showed only 701,000 jobs lost in March).

On the other side: The JOLTS report normally begins collecting data on the last day of the month, BLS says.

  • From there, data collection continues for the next two weeks and is released a month later (e.g. March's report is released in May).
4. Trouble in CMBS market could reprise 2007 mortgage meltdown

Major banks including Wells Fargo, Deutsche Bank and others have engaged in a pattern of fraud in commercial mortgage-backed securities that is putting the whole market at risk, according to a whistleblower complaint submitted to the SEC, ProPublica reported Friday.

  • That report was published on the same day as the Fed's financial stability report, which warned the commercial real estate market could be among the hardest-hit industries from the coronavirus pandemic.

The big picture: Should there be a washout in the CMBS market it could have a major impact on the real economy, similar to what happened with mortgage-backed securities in the 2008 global financial crisis, ProPublica notes.

What they're saying: The Fed cited commercial real estate as being particularly susceptible to a major decline in asset prices because “prices were high relative to fundamentals before the pandemic,” and COVID-19 has caused major disruptions in the hospitality and retail industries, "putting the ability of these sectors to make timely mortgage and rental payments into question."

  • Those prices were artificially inflated by the banks, ProPublica reports, citing the SEC complaint, with lenders and securities issuers regularly marking up financial data for commercial properties by as much as 30% “without justification.”
  • The changes "make the properties appear more valuable, and borrowers more creditworthy, than they actually are."
  • "As a result, it alleges, borrowers have qualified for commercial loans they normally would not have, with the investors who bought securities birthed from those loans none the wiser."
5. Mark Cuban calls for Bernie Sanders-style federal job guarantee

Billionaire Mark Cuban called for the creation of what is essentially a federal jobs guarantee in a Twitter thread on Sunday to battle the economic impact of the coronavirus pandemic.

Why it matters: Cuban, long thought of as a libertarian who leans right-of-center, suggests a program that largely mirrors a tentpole proposal from Sen. Bernie Sanders that's been backed by Rep. Alexandria Ocasio-Cortez and top MMT advocate and economist Stephanie Kelton.

What he's saying: "It's time for trickle up economics. We need a transitional fed jobs program that trains and hires millions for a federal tracking/tracing/testing program as well as for support for at risk populations including long term care. We need to dent unemployment with stable jobs."

  • "It's time to face the fact that [the Paycheck Protection Program] didn't work. Great plan, difficult execution. No one's fault. The only thing that will save businesses is consumer demand."

Cuban also called for an interim stimulus program that would give every American household a $1,000 check every two weeks for the next two months that must be spent within 10 days of receipt or it expires.

6. Wix's "booming" stock shows how coronavirus has helped some firms
Data:; Chart: Axios Visuals

Website builder Wix saw its stock price jump by nearly 7% on Friday after reporting strong earnings, showing that the coronavirus pandemic is increasing demand for its products.

Why it matters: The earnings report shows you can add website building tools to the list of sectors that are seeing benefits from the virus and could indicate a new area of long-term growth.

What they're saying: "The current crisis has magnified the importance of having an online presence like never before," CEO Avishai Abrahami said in a statement.

  • He added that demand "boomed at the beginning of April" (after the quarter closed), with new registered users up 63% to a record 3.2 million during the month and total net premium subscription additions more than tripling.

By the numbers: The company’s stock has risen 65% year to date, outpacing the overall S&P 500's decline of 11.4% and the S&P tech sector's gains of 2%, according to Dow Jones.

  • Total revenue rose 24% year over year to $216 million, but Wix still reported a non-GAAP loss of 1 cent per share (beating Wall Street estimates of -2 cents per share).

What's next: Wix also offered rosy guidance for the second quarter, projecting revenue between $231 million-$233 million, ahead of Wall Street's forecast of $227.5 million, and expects growth in the second half of 2020 to be stronger than previously anticipated.

Thanks for reading!

Quote: “I am just myself. But out of that comes something positive.”

Why it matters: Nergis Mavalvala is a professor of astrophysics at MIT, and 2010 MacArthur Fellow, perhaps best known for being a part of the team that was the first to observe gravitational waves.

  • She is an American immigrant from Pakistan who describes herself as an “out, queer person of color,” according to a 2012 article in Science Magazine.