Are We Already In A Recession? Yes, According To Fed Indicator With ‘Excellent’ Track Record

A highly watched economic indicator with a good track record in predicting recessions cut its forecast for second-quarter gross domestic product growth this week, implying the nation has fallen into a technical recession despite economists widely calling for a return to growth in the second quarter.

The Federal Reserve Bank of Atlanta’s GDPNow model on Thursday projected the U.S. economy shrank 1% in the second quarter, slipping into negative territory after economic data showed consumer spending dropped in May, while domestic investments, another component of GDP growth, also fell.

The model, which estimates GDP growth using a methodology similar to the one used for the Bureau of Economic Analysis’ official estimates, has been steadily trimming its second-quarter GDP forecast based on updated economic data that’s fueled concerns of a prolonged economic downturn in recent weeks.

The U.S. economy unexpectedly shrank 1.6% in the first quarter as the omicron variant fueled a record surge in Covid cases, so another negative quarter would indicate the nation has slipped into a technical recession, which is defined as two consecutive quarters of negative GDP growth.

“The model’s long-run track record is excellent,” DataTrek analysts wrote in a note to clients Thursday night, pointing out its average error has been just 0.3 points since the Atlanta Fed started running it in 2011—but was zero through 2019, before the unprecedented volatility around the pandemic.

With an error margin of 1.2 points one month before the government’s first GDP estimate, the model may still ultimately forecast positive growth for the quarter, DataTrek’s Nicholas Colas and Jessica Rabe noted, though they add the indicator will be “important to watch” as its predictive ability improves with time.

Most economists are still predicting a return to growth, with average projections calling for GDP to increase more than 3% last quarter, but many have become increasingly bearish in recent weeks, with Bank of America’s Ethan Harris on Friday downgrading his forecast to zero growth last quarter (from 1.5% previously) after the weak spending data for May.

What To Watch For

The Bureau of Economic Analysis unveils its first estimate of second-quarter GDP growth—or decline—on July 28, but it won’t release a final estimate until September. Adjusted for inflation, consumer spending fell for the first time this year in May, according to Thursday’s data. The worse-than-expected decline makes a second straight quarterly decline in GDP “much more likely,” Pantheon Macro chief economist Ian Shepherdson wrote in a Friday note, forecasting that GDP would fall 0.5% in the second quarter.

However, he notes the National Bureau of Economic Research—“the semi-official arbiter” whose declarations are accepted by the government—“very probably will not” declare a recession unless employment, which remains one of the economy’s strongest pillars, starts declining as well. Rather than purely going off technical recessions, the NBER vaguely defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

Despite growing bearishness, many economists aren’t convinced the U.S. will fall into recession—at least not imminently. In a research note on Monday, analysts at S&P Global Ratings said the economy has enough momentum to avoid a recession this year, but warned “what’s around the bend next year is the bigger worry.” The economists put the odds of a recession in 2023 at 40%. One week earlier, Morgan Stanley put them at 35%.

Fueled by government stimulus and the war in Ukraine, prolonged levels of high inflation pushed the Fed to embark on the most aggressive economic tightening cycle in decades—crashing markets and sparking recession fears. “People are really suffering from high inflation,” Fed Chair Jerome Powell testified before Congress last week, noting it remained “absolutely essential” for the Fed to restore price stability, before acknowledging it would be “very challenging” to avoid a recession while doing so.

I’m a senior reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina

Source: Are We Already In A Recession? Yes, According To Fed Indicator With ‘Excellent’ Track Record

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Inflation Unexpectedly Spiked 8.6% In May Hitting 40-Year High As Gas Prices Surge Again

Consumer prices rose 8.6% in the 12 months ending in May, unexpectedly returning to record levels—and climbing at the quickest pace in four decades—amid an unprecedented surge in gas prices. Overall prices rose 1% from April—surpassing the 0.7% economists were expecting and much higher than the previous month’s increase of 0.3%, according to data released by the Labor Department on Friday.

The unexpected jump marks the largest 12-month increase since the period ending December 1981, according to the release, and comes after prices in April fell on a monthly basis for the first time since August. The overall increase was the result of broad upticks across shelter, food and gas prices, which jumped 4% after falling 6.1% in April, the government said.

“So much for the idea that inflation has peaked,” Bankrate Chief Financial Analyst Greg McBride said in emailed comments after the report, noting that increases were “nearly ubiquitous.” Core inflation, which excludes volatile food and energy prices, rose 0.6% in May against an expectation of 0.5%; shelter prices rose at the fastest pace in 31 years while food prices climbed at the largest rate in more than 41 years.

Stock futures immediately fell after the worse-than-expected report, with the S&P 500 reversing early gains and falling 1.6% below Thursday’s closing level in premarket trading. In another concerning sign, used car prices, which McBride says “had been the ray of hope for easing price pressures” after three straight months of declines, jumped 1.8% for the month of May.

Rising energy prices have elevated inflation readings during the pandemic to the highest level in decades, and stocks have struggled in recent months as Federal Reserve officials work to combat the surge by unwinding the central bank’s pandemic-era stimulus measures. After rising 27% in 2021, the benchmark S&P 500 has tumbled 16% this year.

Meanwhile, oil prices have surged more than 15% over the past month with demand expected to spike this summer—adding to supply concerns spurred by intensifying sanctions against Russia, one of the world’s top oil-producing countries. “Any hopes that the Fed can ease up on the pace of rate hikes after the June and July meetings now seem to be a long shot,” says McBride. “Inflation continues to rear its ugly head and hopes for improvement have been dashed again.”

Since Monday, the national average for a gallon of regular gasoline has increased by nine cents to $4.71. According to new data from the Energy Information Administration (EIA), total domestic gasoline stocks decreased by 700,000 bbl to 219 million bbl last week. Meanwhile, gasoline demand grew from 8.8 million b/d to 8.98 million b/d as drivers fueled up for Memorial Day weekend travel.

These supply and demand dynamics have contributed to rising pump prices. Coupled with volatile crude oil prices, pump prices will likely remain elevated as long as demand grows and supply remains tight. At the close of Wednesday’s formal trading session, WTI increased by 59 cents to settle at $115.26. Crude prices have increased amid supply concerns from the market as the European Union works to implement a 90 percent ban on Russian oil imports by the end of this year.

Crude prices were also boosted by increased demand expectations from the market after China lifted COVID-19 restrictions in Shanghai. Additionally, EIA reported that total domestic stocks decreased by 5.1 million bbl to 414.7 million bbl last week. As a result, the current storage level is approximately 13.5 percent lower than a year ago, contributing to rising crude prices.

I’m a senior reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business

Source: Inflation Unexpectedly Spiked 8.6% In May—Hitting 40-Year High As Gas Prices Surge Again

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Heart Problems Surge In COVID Patients Up To 12 Months After Infection

A massive analysis of health records has revealed recovered COVID-19 patients are at a significantly higher risk of cardiovascular complications in the year following an acute infection. The new findings, published in Nature Medicine, showed COVID-19 survivors were 55 percent more likely to experience a serious cardiovascular event after recovering.

“We wanted to build upon our past research on COVID’s long-term effects by taking a closer look at what’s happening in people’s hearts,” explained Ziyad Al-Aly, senior author on the new study from Washington University. “What we’re seeing isn’t good. COVID-19 can lead to serious cardiovascular complications and death. The heart does not regenerate or easily mend after heart damage. These are diseases that will affect people for a lifetime.”

The researchers looked at medical records from the US Department of Veteran Affairs, analyzing around 150,000 positive COVID-19 cases. Cardiovascular outcomes in the 12 months after acute disease were compared to two large control groups of more than five million patients.

In a period starting 30 days after initial infection, and up to a year later, COVID patients were 72 percent more likely to experience coronary artery disease compared to those without SARS-CoV-2 infection. They were also 52 percent more likely to have a stroke and 63 percent more likely to suffer a heart attack.

Overall, the study found COVID-19 patients experienced a 55 percent higher rate of major adverse cardiovascular events in the year following their acute disease. These adverse events included cerebrovascular disorders such as stroke, ischemic and non-ischemic heart disease, pericarditis, myocarditis, and heart failure.

Al-Aly pointed out that risks of cardiovascular events were higher in those with pre-existing heart conditions and those suffering from more severe COVID-19. However, across all cohorts the study still found COVID-19 increased one’s risk of heart problems.

“… most remarkably, people who have never had any heart problems and were considered low risk are also developing heart problems after COVID-19,” said Al-Aly. “Our data showed an increased risk of heart damage for young people and old people; males and females; Blacks, whites and all races; people with obesity and people without; people with diabetes and those without; people with prior heart disease and no prior heart disease; people with mild COVID infections and those with more severe COVID who needed to be hospitalized for it.”

Exactly why SARS-CoV-2 infection is increasing a person’s risk of cardiovascular disease is still unclear. In the new study the researchers hypothesize a number of potential mechanisms, such as lingering damage in cells from the acute viral infection to a persistent hyperactive immune response following the disease.

“These mechanistic pathways might explain the range of post-acute COVID-19 cardiovascular sequelae investigated in this report,” the researchers wrote in the study. “A deeper understanding of the biologic mechanisms will be needed to inform development of prevention and treatment strategies of the cardiovascular manifestations among people with COVID-19.”

These results add to a growing body of data highlighting the long-term effects of COVID-19. Most recently, an Australian study tracked 20,000 COVID-19 cases for up to one year following acute infection. That study found COVID-19 significantly increased a person’s risk of neurological, cardiac and vascular disease events compared to those not infected with SARS-CoV-2.

“Risk of myocarditis and pericarditis is particularly high, estimated between 18- and 21-fold higher following SARS-CoV-2 infection,” the new Australian study noted. “Elevated risk have also been shown for acute myocardial infarction (AMI) between 3- and 6-fold, ischaemic stroke at 3- to 10-fold, and venous thromboembolism at up to 8-fold. Notably, these risk estimates are higher than those imposed by other viral respiratory infections and vaccination.”

It is important to note both of these studies, and most long-term COVID-19 follow-up research, are tracking cases from 2020. These are cohorts that are primarily unvaccinated and experiencing infection from early strains of the virus.

Al-Aly does indicate it is likely vaccination will reduce the long-term cardiovascular risks associated with COVID-19. But, it will take more time to understand exactly how much protection vaccines confer in terms of these long COVID outcomes.

In the short-term, Al-Aly says it is vital governments prepare for increased pressure on health systems over the coming years due to these longer-term effects of COVID-19. He especially notes these findings underscore the importance of vaccine distribution in low-income countries as a way to try to mitigate the future impact of these post-COVID events.

“Governments and health systems around the world should be prepared to deal with the likely significant contribution of the COVID-19 pandemic to a rise in the burden of cardiovascular diseases,” said Al-Aly. “Because of the chronic nature of these conditions, they will likely have long-lasting consequences for patients and health systems, and also have broad implications on economic productivity and life expectancy.”

Source: Heart problems surge in COVID patients up to 12 months after infection

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An Omicron Surges Spark Chain Reactions That Strain US Hospitals Everywhere

America’s hospitals and their workforces have reached and exceeded their breaking points in the last two years — and another surge of Covid-19 is already underway.

Earlier this month, with a new wave of Covid-19 cases looking likely after the omicron variant was identified, Rhode Island emergency doctors wrote their state leaders to warn that any new surge of patients would “lead to collapse of the state health care system.” In Kansas, patients in rural hospitals have been stuck in the ER for days while they wait for a transfer to a larger hospital with the capacity and resources to care for them.

With the fast-spreading omicron variant now upon us, some of the rhetoric around the pandemic has changed. Government officials, starting with President Joe Biden, are pointedly differentiating between the risks for vaccinated and unvaccinated people. This could create the perception that some places face more of a risk than others: Perhaps omicron will threaten rural communities (where vaccination rates are lowest) and their health systems, but perhaps more vaccinated cities and their hospitals will be better off.

Such thinking would be misguided. As convoluted and sometimes siloed as the US health system may seem at times, it is still a system. Patients transfer between facilities based on capacity or clinical need. If rural hospitals are shipping seriously ill patients to their urban neighbors, which already tend to run close to capacity even in normal times, a rural Covid-19 crisis could quickly become a crisis for everybody.

One hospital being overwhelmed isn’t a one-hospital problem, it’s an every-hospital problem. Even if your community is not awash with Covid-19 or if most people are vaccinated, a major outbreak in your broader region, plus all the other patients hospitals are treating in normal times, could easily fill your hospital, too. That makes it harder for the health system to treat you if you come to the ER with heart attack symptoms or appendicitis or any acute medical emergency.

Already, because of existing staffing shortages, rural hospitals are finding it difficult to find room for their patients at larger hospital systems. With omicron spreading rapidly, increasing the number of patients seeking care while sidelining health workers who have to quarantine, systemic overload may not be far off.

“When you have a Covid patient who needs ICU care, those hospitals are turning away patients,” Carrie Saia, CEO of Holton Community Hospital, located in a town of 3,000 people about 90 minutes east of the Kansas City metropolitan area, told me earlier this month. “We’re sending our patients farther away. Not because they’re full, they’re just out of staff.”

At earlier points in the crisis, large hospitals would limit transfers from smaller facilities in order to preserve their capacity to treat the most seriously ill patients. As a new wave driven by the omicron variant takes off, that could happen again.

As Karen Joynt Maddox, a practicing cardiologist and associate professor of medicine at Washington University in St. Louis, told me in August: “During Covid surges, we were told to limit transfers only to patients who had needs that could not be met at their current hospital (i.e. decline transfers because the family requested it, but equal services available at both places) because that was the only way we could make sure that we did have the ability to accept patients that only we (or another major referral center) could handle.”

The feedback loop works in reverse as well. Recently, the HCA hospital in Conroe, Texas, about 40 miles north of Houston, was dealing with such a staffing shortage in its emergency department that the facility temporarily asked ambulances to bypass it because the ED couldn’t handle any more patients, according to a spokesperson. Suddenly, hospitals in the heart of Houston were seeing an unexpected surge of patients who needed emergency care, causing long wait times at their facilities.

America’s hospitals are all in this together. So what can we do quickly to relieve the burden for all of our hospitals and prevent unnecessary deaths?

How we can all help hospitals handle a surge in omicron patients

Last week, the Biden White House detailed a new plan for helping hospitals handle the coming surge of Covid-19 patients. They are deploying emergency medical personnel to six states: Michigan, Indiana, Wisconsin, Arizona, New Hampshire, and Vermont. They are also planning to deploy another 1,000 military doctors and nurses in January and February, as well as ordering FEMA to work with states to add hospital beds. The White House also said it had 100,000 ventilators in the federal stockpile that could be deployed as needed.

Those policies could certainly help to alleviate the pressure on hospitals in places facing particularly acute crises. But the truth is, they can only do so much. US hospitals cannot suddenly grow the staff and physical capacity to handle another enormous surge of Covid-19 patients.

Infected medical workers add to the strain on hospitals. Hospitals have seen a spike in nurses and doctors testing positive; by late December, the El Centro Regional Medical Center, about two hours east of San Diego near the US-Mexico border, was seeing 5 to 10 percent of its staff either infected or being tested for exposure at any given time, according to CEO Adolphe Edward. Other hospitals have told me they are also seeing a growing number of workers test positive, which requires them to stop working and isolate.

The Centers for Disease Control and Prevention recently revised its isolation protocols for health care workers who test positive for Covid-19, shortening the standard isolation period from 10 days to 7 (if accompanied by a negative test). But that still takes doctors and nurses out of commission for several days if they contract the virus. (On Monday, the CDC released new guidelines for the general public stating that those who test positive can stop isolating after five days if they do not have symptoms.)

“You can send all the ventilators you want,” Roberta Schwartz, executive vice president at Houston Methodist Hospital, told me. “I have no one to staff them.”

Nearly 99 percent of rural hospitals said in a survey released in November they were experiencing a staffing shortage; 96 percent of them said they were having the most difficulty finding nurses. According to a September study commissioned by the American Hospital Association, the average cost of labor expenses for each discharged patient has grown by 14 percent in 2021 — even as the number of full-time employees has dropped by 4 percent.

“The only things I can think of could not be accomplished in two weeks,” Peter Viccellio, associate chief medical officer at Stony Brook University Hospital in New York, said. “We have a severe staffing shortage everywhere, and it’s not going to go away. It existed before Covid, and Covid just exacerbated it.”

Some policy changes — smoothing schedules that better distribute surgeries (and therefore patient volume) throughout the day or week, earlier discharges or more weekend discharges — could help. “But this won’t happen without a mandate,” Viccellio said.

“We won’t prevent future catastrophes because of a very simple reason. It requires that we think of the future and plan for it,” he added. “You can see how that’s working out. We can’t frigging plan for one month from now.”

More money from the federal government could also allow hospitals to beef up their staffing, said Beth Feldpush, senior vice president of policy and advocacy at America’s Essential Hospitals, which represents critical access facilities. But all of these policies targeted directly to hospitals may only help at the margins. The American health system’s capacity is what it is — the time to act was long ago. Instead, the US health care system is behind many of its wealthy peers in the number of practicing medical staff in its hospitals.

So the quickest and surest action to prevent hospitals from being overwhelmed is actually to prevent people from needing to go to the hospital with Covid-19 in the first place, hospital leaders said. Get vaccinated — with three doses. Wear masks indoors in public places. Test before you see people who don’t live in your house.

Following the pandemic playbook can make a difference for hospitals bracing for another grim winter in this pandemic.

“The more we can help keep the public protected, the more we can keep our workers here,” Schwartz said, “and lessen the burden of this.”

Dylan Scott

I grew up in Ohio, lived in Las Vegas for a year and moved to Washington in 2011. I cover health care and other domestic policy. You’ll probably see me tweeting about Cleveland sports or the last movie I watched.

Source: An omicron Covid-19 surge anywhere can strain US hospitals everywhere

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Omicron Is Less Likely To Cause Hospitalization And Develop Into Severe Disease, South African Study Suggests

People who contract the omicron variant are 80% less likely to be hospitalized compared to previous variants and those hospitalized with omicron are at a 70% lower risk of severe disease than delta, according to a new study by South Africa’s National Institute for Communicable Diseases released Wednesday.

Key Facts

The study was conducted in South Africa between October 1 and November 30 and has not been peer-reviewed.

The study’s authors said high levels of population immunity due to vaccination or “natural infection” are likely to have been a cause behind the lower risk of disease severity compared to people who had been diagnosed with delta between April and November.

They added it is “difficult to disentangle” the effect of high levels of population immunity with “intrinsic lower virulence” when narrowing down the reason for reduced disease severity.

Crucial Quote

Professor Cheryl Cohen of the National Institute for Communicable Diseases, one of the study’s authors, said the data “really suggest a positive story of a reduced severity of Omicron compared to other variants,” Reuters reported.

Key Background

Omicron is driving a surge in new cases of Covid-19 in the U.S. The spike has prompted Chicago and Boston to join several cities that require proof of vaccination to enter indoor venues this week, while the National Hockey League will reportedly announce Wednesday its decision to pull out of the 2022 Beijing Olympics after it and the league’s players association agreed to halt the season until December 26 due to soaring Covid cases.

To combat the surge, the Biden Administration said Tuesday it will provide 500 million rapid at-home tests to Americans for free and deploy federal military medical personnel to help hospitals. Public health experts are bracing for a winter surge of cases driven by the omicron variant, which can evade some protection conferred by vaccinations and prior infections, as well as cases linked to the delta variant. Officials caution that they are still relying on preliminary data about the omicron variant’s severity compared with earlier forms of the virus.

Tangent

Some U.S. health experts and the Biden Administration have recommended a booster shot as the best way to increase protection against omicron. In Israel, officials are pursuing a fourth dose. Seniors and healthcare workers there will soon be able to receive a fourth Covid vaccine shot, the country’s Pandemic Expert Committee said Tuesday.

Fauci and Collins painted a stark but realistic picture of the winter ahead, on the heels of a week of coronavirus-related setbacks. Coronavirus cases, hospitalizations and deaths rose across much of the country last week, with officials warning of a surge just as millions of Americans — already weary after nearly two years of the pandemic — are expected to travel for Christmas and New Year’s.

On Friday, Pfizer and BioNTech announced that coronavirus vaccines for children younger than 5 would be pushed back further into 2022, as the companies modified their trials to include a third dose. On Sunday, New York, one of the country’s early epicenters in the pandemic, reported 22,478 cases.

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I am a Greece-born reporter covering breaking news. Email me at lkim@forbes.com

Source: Omicron Is Less Likely To Cause Hospitalization And Develop Into Severe Disease, South African Study Suggests

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