Skip to main content

State Shutdowns, the Election, and Economic Recovery

November 20, 2020

November has been a busy month, rife with concerns about state shutdowns, the election, and economic recovery. But has all this impacted our economic outlook? Catch our newest TrendsTalk episode with ITR President Alan Beaulieu to learn more.



Follow Us

SoundCloud   •  Spotify  •   iTunes   •   YouTube

← Back to list of episodes.

Transcript by Rev

Hi everyone. I'm Alan Beaulieu from ITR Economics. Great to talk with you today. It's the middle of November as we record this and boy, isn't life getting interesting? I know it already has been interesting for the last eight months, but it seems to be getting even more so as we go forward. So let's try to parcel through some of that together. We have taken some steps backwards. Well, maybe backwards isn't the best way to put it. Some steps toward security, at least in a lot of peoples' minds and probably in reality, in that some states and some governors and some mayors have decided to reverse somewhat in terms of the opening of the economy. With the surging in cases and with the increase in deaths and with an unknown number of deaths that can be saved, or people that can be saved by doing this, it's hard to judge them one way or the other. It's not my job to do so.

Today, the governor of New Mexico said that effective today, there's a two week stay at home order. And going back to the essential, nonessential. But for two weeks, we'll see how it goes. And no disrespect to people in New Mexico, but grateful that it's not a California, Florida or Texas decision, as that would have different consequences for the macroeconomic outlook. Today, Chicago, the mayor issued an advisory asking for basically a stay at home. If you leave home, make sure it's for essential things. He did not shut down any businesses that I could tell, but as much as you can just stay at home and keeping people apart. Certainly restaurants are facing a lot of pressure now and some more pressure as we go forward. Oregon is seeing their gyms and restaurants and others shut down, and there's some talk in LA about that, and other parts of the country.

Hospitality was never part of our main push to get the economy open again. We understand and feel bad for the impact on people, but as far as our macroeconomic environment, if you've been following ITR, this does not have a direct impact on our US industrial production forecast or even on our GDP forecast because as I said, we never anticipated that would be part of the... The GDP outlook would be buoyed along or pushed right along by restaurants and by hotels, which are still coming under pressure, obviously.

So where does that leave us? Well, it leaves us with a post-election wondering what's going on. As we've talked about before, there are lots of things that could happen. We still don't know whether the Republicans are going to hold the Senate. We don't know whether we will have a blue on blue and whether that means taxes will be going up for you and I. We have no way of knowing that right now. Obviously we're going to watch that closely, but in general, just keep in mind please that as we have showed a lot of our people in our presentations, it does not mean anything drastic is going to happen to GDP or in industrial production. If there's a blue on blue, it does not mean that you need to say, "Oh my gosh, this is the impact." Do not take a jump, leap, rush type of approach to this. Take a measured approach and see what happens. You may want to have plans, but you don't want to plan and act on the worst only to find out that it didn't happen. And worst is defined by your perspective, obviously.

But the reality is, take measured steps, if you will. Make plans. Don't implement. Instead, implement based upon the economy. And the economy right now is showing good things. You see in our ITR Trends Report that the dashboard's all green still. Retail sales are still doing well. As a matter of fact, when we look at automobile production, which got really hard hit into this and there was a lot of talk about how the automobile industry was going to take a long time to come back and all the rest of that. It's coming back now. When we look at manufacturing in the three countries that make up North America, Canada, the US, Mexico, obviously, we find that there's phase B or phase A in all the 3/12 rates-of-change. Here in the US, it's in phase A. Canada, it's in phase B for passenger cars. Light trucks in the US are in phase B. Canada, light trucks are in A. So we swap them back and forth. Mexico, it's B on B. That's a whole large part of the economy showing some nice rate-of-change movement past a COVID bounce.

When we look at the three month moving totals, they're all moving up of May or June three month moving total lows. So that's certainly good news. They're going to continue. Let that be a signal to you if you're in the industry that it's going to continue, because the rates-of-change are on your side. The lead indicators are on your side. The population's on your side. And if you are not in the automobile industry, just understand the importance of it please and that everything that it touches, all the parts, all the transportation, what it means about consumer activity, consumers' ability to get loans, consumers' ability to come in with some cash to put down, and all the positive impact of that on the US economy. Automobile retail sales for the month of October posted a 1/12 rate-of-change. October 2020 compared to October 2019, that was above the year ago level. Just 0.9%, but it's still above the year ago level. That's fantastic. And the 3/12 rate-of-change is rising. And listen to this, the automobile retail sales 12/12 rate-of-change, 1/12 including total.

The things that are hardest to swing, which is why they're the most important in seeing whether this is real or not. They're the ones that tell you whether this is just a gust of wind or there's something sustained going on. And both of those are rising off of August 2020 lows. In automobile retail sales, you have your 1212 signal, positive business cycle momentum ahead. And take that as a macroeconomic indicator for most of the people listening to my voice, take it as good news as we end 2020 and head into 2021.

More good news is found in two sources of vaccines that look like they'll be very effective. That should certainly help in 2021. A reminder, our forecast is not predicated upon a certain time, a certain month, a certain efficacy, but we certainly do like the good news. We do like what it means for you and I as we go forward. So we're going to end this year with a lot of thanksgiving in our hearts, I hope. We're going to end this year understanding there's a lot of good news out there and focus on the economy, our business, increased profitability, and the competitive advantages that will get us into the future. Thank you all very much. I hope you have a great day.


Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.