As India’s resurgent COVID-9 outbreak continues to spike, and the number of new cases jumps daily, the country received a boost this week when the Biden administration came out in favor of waiving patents for coronavirus vaccines.
The U.S. Trade Representative said in a statement that “this is a global health crisis, and the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures. The Administration believes strongly in intellectual property protections, but in service of ending this pandemic, supports the waiver of those protections for COVID-19 vaccines.” At time of writing, India’s Ministry of Health reported that the number of new COVID-19 cases jumped 17%, while fatalities increased by 1.1%.
Many have called for vaccine patents to be waived, arguing it impedes the efforts of developing countries to combat the pandemic. However, it would need to be rubber-stamped by the World Trade Organization, a process that would likely take months. If the WTO does approve the waiver, it might also take significant time for countries to get their vaccine production facilities up and running.
“As our vaccine supply for the American people is secured, the Administration will continue to ramp up its efforts — working with the private sector and all possible partners — to expand vaccine manufacturing and distribution,” the USTR said.
Shares of Moderna and Pfizer plunged in response to the announcement, as the companies have reported record first quarter profits on the back of their COVID-19 vaccine sales. Moderna also announced this week that initial data from its Phase 2 study showing that a booster shot given to already-vaccinated individuals increased protection against COVID-19 and the two mutations from Brazil and South Africa.
Meanwhile, the quality-control problems reported a few months ago at a Baltimore plant manufacturing Johnson & Johnson’s Covid-19 vaccines have led health officials for Canada, the European Union, and South Africa to pause the distribution of millions of J&J doses.
The regulators are working to ensure the doses are safe, performing additional quality assessments after the discovery in March that workers at the Baltimore plant accidentally contaminated a batch of Johnson & Johnson’s vaccine with the harmless virus used to manufacture AstraZeneca’s (produced at the same site).
In some positive news, the European Commission published proposals this week to ease restrictions on non-essential travel into the EU, boosting hopes of increased travel opportunities this summer.
The Commission is proposing permitting entry to the EU for those coming from countries where the coronavirus outbreak is under control, as well as for those people who have been vaccinated.
At the same time, the Commission is proposing an ‘emergency brake’ mechanism, to limit the risk of such variants entering the EU. “This will allow Member States to act quickly and temporarily limit to a strict minimum all travel from affected countries for the time needed to put in place appropriate sanitary measures,” it said.
This as the number of Americans getting inoculated against COVID-19 continues to trend downwards from the peak seen in early April.
The Center for Disease Control reported that as of May 6, 324,610,185 total doses of the COVID-19 vaccine have been distributed — compared to 305,478,495 by the same point last week. Of this week’s overall number, 251,973,752 shots have been administered — 149,462,265 Americans have received at least one dose (45% of the entire population), and 108,926,627 have been fully vaccinated (32.8%).
Worldwide, there have now been 1,215,571,386 vaccine doses administered, compared to 1,085,462,463 by the same point last week.
Globally, there have now been 156,077,747 confirmed cases of COVID-19, with 60,519,815 active cases and 3,256,034 fatalities. The U.S. now has 32,732,341 confirmed cases, and there have been 585,109 fatalities.
India continues to experience a significant surge in COVID-19 cases. Overall, the country now has 21,503,828 confirmed cases. Of that number, 3,662,847 are active and there have been 234,140 fatalities.
Brazil is in third place with 15,003,563 cases at time of writing — 1,057,042 active and 416,949 deaths. France remains in fourth place with 5,728,090 cases — 5,309,619 of that number are active, and there have been 105,850 fatalities.
Turkey, has moved up to fifth place even as the the number of new cases continues to trend downwards. The country has 4,977,982 cases, of that number 308,996 are active and 42,187 deaths.
Russia is now in sixth place with 4,863,514 confirmed cases — 270,532 active and 112,622 deaths.
The United Kingdom remains in seventh with 4,428,553 cases, and has had 127,583 fatalities. Italy is in eighth place with 4,082,198 cases — 402,802 active and 122,263 deaths. Spain is ninth with 3,559,222 confirmed cases, and 78,726 deaths.
Germany remains in tenth with 3,491,988 confirmed cases, 346,495 active and 84,410 fatalities.
Pace of U.S. Job Creation Slows Down In April, Jobless Claims Decline
The U.S. economy added 266,000 jobs last month, the Bureau of Labor Statistics reported this week, while the unemployment rate came in at 6.1%. The headline number was far below many economists’ predictions of a million or more jobs added.
In April, nonfarm employment was down by 8.2 million, or 5.4%, from its pre-pandemic level in February 2020.
The change in total nonfarm payroll employment for February was revised up by 68,000, from +468,000 to +536,000, and the change for March was revised down by 146,000, from +916,000 to +770,000. With these revisions, employment in February and March combined is 78,000 lower than previously reported.
The labor force participation rate was little changed at 61.7% in April and is 1.6 percentage points lower than in February 2020. The number of persons employed part time for economic reasons decreased by 583,000 to 5.2 million in April, 845,000 higher than in February 2020. The number of permanent job losers, at 3.5 million, was also little changed over the month but is 2.2 million higher than in February 2020.
This even as the National Federation for Independent Business released a report this week showing that 44% of all small business owners report having job openings they could not fill, 22 points higher than the 48-year historical average, and two points higher than the 42% figure from March. “April is the third consecutive month with a record-high reading of unfilled job openings among small businesses,” NFIB said.
Overall, 59% of small business owners reported hiring or trying to hire in April, up three points from March’s reading. Owners have plans to fill open positions with a seasonally adjusted net 21% planning to create new jobs in the next three months.
Not surprisingly, there were notable job gains in the leisure and hospitality sector. Employment in leisure and hospitality increased by 331,000, as lockdown measures continued to be rolled back. More than half of the increase was in food services and drinking places (+187,000). Job gains also occurred in amusements, gambling, and recreation (+73,000) and in accommodation (+54,000). Although leisure and hospitality has added 5.4 million jobs over the year, employment in the industry is still down by 2.8 million, or 16.8%, since February 2020.
This comes following the U.S. Labor Department’s report that last week first-time claims for state unemployment insurance was 498,000, a decrease of 92,000 from the previous week’s level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000. There were 101,214 initial claims for the federally-funded ‘Pandemic Unemployment Assistance’ program, a decline of 20,200 from the previous week.
The number of Americans who continue to receive state unemployment support during the week ending April 24 was 3,690,000, an increase of 37,000 from the previous week’s revised level. The previous week’s level was revised down by 7,000 from 3,660,000 to 3,653,000.
U.S. Treasury Department Issues Debt Ceiling Warning
The U.S. Treasury Department this week published its second quarter bond issuance plans, while also giving an early warning to Congress about the approaching debt limit.
The Treasury said it is offering $126 billion of U.S. government securities to refund approximately $47.7 billion of privately-held Treasury notes and bonds maturing on May 15, and raise approximately $78.3 billion in new cash.
The department also noted that “Treasury continues to face uncertain and sizable borrowing needs due to expenditures associated with the government’s response to COVID-19 as well as the impact of the pandemic on economic activity and government receipts.”
Furthermore, it reminded that the negotiated agreement to end the protracted government shutdown in 2019 — The Bipartisan Budget Act — suspended the debt limit through July 31, 2021. The Treasury warned that if lawmakers do not act to raise the debt ceiling before then, it will have to once again take certain extraordinary measures to continue to finance the government on a temporary basis.
However, “in light of the substantial COVID-related uncertainty about receipts and outlays in the coming months, it is very difficult to predict how long extraordinary measures might last,” the Treasury said, adding that it is “evaluating a range of potential scenarios, including some in which extraordinary measures could be exhausted much more quickly than in prior debt limit episodes.”
Bank of England Maintains Predicts Sharp Uptick In Q2 Economic Activity
The Bank of England’s Monetary Policy Committee met this week and announced no change in its low interest rate policy while also maintaining its pace of UK government and corporate bond purchases.
It did upgrade its outlook for the UK economy, now expecting economic activity to shrink less than expected in Q1 and rebound sharply in Q2 (although not quite back to Q4 2019 levels). “New Covid cases in the United Kingdom have continued to fall, the vaccination programme is proceeding apace, and restrictions on economic activity are easing,” the BoE said.
Assuming the UK government does not reimpose lockdown measures, the central bank predicted that GDP will “recover strongly” to pre-Covid levels over the remainder of 2021, before easing off in 2022. “Demand growth is further boosted by a decline in health risks and a fall in uncertainty, as well as announced fiscal and monetary stimulus,” it said.
It cautioned, however, that the outlook for the economy remains uncertain and continues to depend on the evolution of the pandemic, the government’s response, and how households, businesses and financial markets respond to these developments.
“The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably,” it said.
Central Bank Roundup: Australia, Brazil, Norway, U.S.
The Reserve Bank of Australia said this week following its monetary policy meeting that the economy remains short of full employment and wage growth is still below target. “Accordingly, monetary policy will need to remain highly accommodative for some time yet,” it said, forecasting that its low interest rate policy is likely to remain in place “until 2024 at the earliest.”
Brazil’s central bank announced an increase in interest rates this week, bumping its target Selic rate to 3.5%. “The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with the convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2022,” it said.
Norway’s Norges Bank left its target interest rate at zero this week, but telegraphed an increase later this year. “The first phase of the Government’s plan for the reopening of society has been implemented, and much of the adult population in Norway is expected to be vaccinated by the end of summer. This suggests that economic activity will pick up through the year,” it said, adding “in the Committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised in the latter half of 2021”, it predicted.
The U.S. Federal Reserve this week published its latest Financial Stability Report, in which it sounded a warning over the sharp rise in values of assets such as stocks over the past year, as investors appear ever more willing to take on more risky bets. “Vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes have continued to rise from levels that were already elevated late last year. Equity indices are setting new highs, equity prices relative to forecasts of earnings are near the top of their historical distribution, and the appetite for risk has increased broadly, as the “meme stock” episode demonstrated,” it said. With strong demand for corporate bonds fueling record debt issuance, “the combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event,” the central bank warned.