Inflation as measured by the consumer price index will surge 5.1% year-over-year during the fourth quarter, forecasters for the National Association for Business Economics (NABE) said, raising their estimate in May for a 2.8% year-over-year increase in prices. The forecasters anticipate inflation will ease to 2.4% year-over-year during the fourth quarter of 2022, according to a survey.
“Inflation expectations have moved up significantly from those in the May 2021 survey,” according to Holly Wade, survey chair and executive director for the research center at the National Federation of Independent Business. “But panelists anticipate inflation will ease in 2022.”
The NABE panel reduced its estimate for growth in gross domestic product (GDP) this year to 5.6% from 6.7% in May, citing the coronavirus delta variant as the biggest risk to the expansion.
NABE expectations that inflation will cool next year align with the view of Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen. Both policy-makers have staked record stimulus in part on the premise that the fastest price gains in decades will slow as pandemic-induced kinks in supply chains even out.
The Fed’s preferred inflation measure — the core personal consumption expenditures price index — rose 3.6% in July compared with a year earlier, well above the central bank’s 2% target.
In an estimate released after a two-day meeting on Wednesday, Fed officials forecast that so-called core inflation will rise 2.3% next year, slightly above the 2.2% estimate by the NABE panel.
Confident that inflation will ease, Fed policy-makers indicated after their meeting that they may begin to cut $120 billion in monthly purchases of Treasury and mortgage bonds as early as their next scheduled gathering in November. Powell said that the Fed will gradually taper and may conclude bond buying “around the middle of next year.”
Half of the 18 participants in the Fed’s policy-making committee expect to raise the benchmark interest rate from a record low by the end of 2022.
“I expect inflation to decelerate,” Fed Governor Lael Brainard said Monday in a speech to NABE. “But with delta disrupting the rotation from goods to services and prolonging supply bottlenecks, it is uncertain just how fast and how much inflation will decelerate over the remainder of the year and into next year.”
With the delta variant disrupting demand and supply, the employment report for September due out on Oct. 8 “may be weaker and less informative of underlying economic momentum than I had hoped,” she said.
More than half (58%) of the NABE forecasters see downside risks to economic growth for the remainder of 2021, while 16% “expect the balance to be to the upside — a complete reversal from the May survey results,” Wade said.
Sixty-three percent of panelists identify the delta variant as the leading risk to growth, while 5% of respondents said fiscal policy inaction or gridlock as their greatest growth concern, NABE said. Two-thirds (67%) of survey respondents predict that nonfarm payrolls will return to pre-pandemic levels by the end of 2022.
Powell and Yellen will have an opportunity to update their views on inflation and the economy, and the outlook for record monetary and fiscal stimulus, in testimony scheduled for Tuesday before the Senate Banking Committee.
The NABE panel of 47 forecasters spans a range of organizations, including economists from Ford, Grant Thornton, Moody’s Analytics, the Conference of State Bank Supervisors, Nationwide Insurance, Morgan Stanley, the National Association of Homebuilders, Visa and Wells Fargo.
Higher expenses for labor, drugs and supplies as well as a continuation of delayed care during the ongoing COVID-19 pandemic is projected to cost hospitals an estimated $54 billion in net income over the course of this year, according to a new Kaufman Hall analysis released by the American Hospital Association.
Hospitals and health systems are seeing sicker patients, the report said. This includes COVID-19 patients and patients who put off care during the pandemic. They are requiring longer lengths of stay and more services than prior to the pandemic in 2019, the report said.
The seven-day average of new hospital admissions of patients with COVID-19 has increased 488%, from 1,900 on June 19 to 11,168 on September 14, the report said, citing recent data from the Centers for Disease Control and Prevention.
Many hospitals are also reportedly spending a lot more on staffing, paying for contract or travel nurses due to shortages.
WHY THIS MATTERS
The report projects hospitals nationwide will lose an estimated $54 billion in net income over the course of the year, even after taking into account federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding from last year.
If there were no relief funds from the federal government, losses in net income would be as high as $92 billion.
However, the AHA said, the uncertain trajectory of the Delta and Mu variants in the U.S. this fall could result in even greater financial uncertainty for hospitals.
Despite the recent announcement of additional provider relief funds, none have yet to be allocated or distributed, the AHA said.
THE LARGER TREND
This latest analysis incorporates actual hospital performance data in the first and second quarters of this year, from before the latest surge. Projections were then made for the remainder of 2021 based on this data.
Based on the analysis, median hospital margins are projected to be 11% below pre-pandemic levels by year’s end. More than a third of hospitals are expected to end 2021 with negative margins.
Many hospitals were financially challenged and already operating in the red heading into the COVID-19 pandemic, the AHA said last year.
CARES Act funding helped hospitals and health systems, but covered only a portion of the more than $323 billion in losses hospitals were expected to have in 2020.
The government allocated a total of $175 billion in relief funds to providers.
ON THE RECORD
“America’s hospitals and health systems continue to face significant, ongoing instability and strain as the COVID-19 pandemic endures and spreads,” said AHA President and CEO Rick Pollack. “With cases and hospitalizations at elevated levels again due to the rapid spread of the Delta variant, physicians, nurses and other hospital caregivers and personnel are working tirelessly to care for COVID-19 patients and all others who need care. At the same time, hospitals are experiencing profound headwinds that will continue throughout the rest of 2021.”
Nearly 396 million doses of the COVID-19 vaccine have been shipped to various U.S. states as of this afternoon, of which some 343.4 million doses had been administered, according to TIME’s vaccine tracker. About 49.3% of Americans had been completely vaccinated.
More than 195.3 million people around the world had been diagnosed with COVID-19 as of 1 a.m. E.T. today, and nearly 4.2 million people have died. On July 27, there were 614,584 new cases and 9,937 new deaths confirmed globally.
Here’s how the world as a whole is currently trending:
And here’s every country that has reported over 3 million cases:
The U.S. had recorded more than 34.6 million coronavirus cases as of 1 a.m. E.T. today. More than 611,000 people have died. On July 27, there were 70,740 new cases and 462 new deaths confirmed in the U.S.
Here’s how the country as a whole is currently trending:
Here’s where daily cases have risen or fallen over the last 14 days, shown in confirmed cases per 100,000 residents:
All numbers unless otherwise specified are from the Johns Hopkins University Center for Systems Science and Engineering, and are accurate as of July 28, 1 a.m. E.T. To see larger, interactive versions of these maps and charts, click here.
Unemployment claims jumped last week, as the delta variant of the coronavirus sparked rising caseloads around the country and renewed fears about the potential for more restrictions and business closures.
The number of new claims grew to 419,000 from 368,000, the third time in six weeks that they had ticked up, according to data from the Department of Labor.
Economists said the uptick was concerning but cautioned that it was too early to tell whether it was a one week aberration or telegraphed a more concerning turn for the labor market.
“The unexpected bump in claims could be noise in the system, but it’s also not hard to see how the rise of the covid-19 delta variant could add thousands of layoffs to numbers that already are double what they were pre-Covid,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Overall, unemployment numbers have been falling gradually from the peaks at other stages of the pandemic, but they are still well above pre-pandemic averages.
The jobless numbers have provided a jarring catalogue about the economic devastation wrought by the pandemic — spiking to records as the pandemic unfolded in March 2020, and remaining at historic high levels throughout most of 2020.
The coronavirus surge last fall helped precipitate a rise in claims that saw the labor market, as seen in the monthly jobs report, slide backward too.
But until recently, the last few months been marked by strong jobs growth and a sense of optimism as vaccinations picked up, giving economists hope that the country was back on track to recovering the nearly 7 million jobs it is still down from before the pandemic.
Now, the delta variant is driving an alarming increase in covid-19 cases around the country, according to public health officials: the number of new cases increased more than 40 percent in the last week, sending jitters through the stock market, and is raising questions about whether state and local health authorities will reinstitute restrictions to slow the virus’ spread.
Frick said that the report showed the potential for unemployment claims to start trending upward after months of steady declines.
“There’s definitely a correlation, however loose, that the rise in covid does cause a rise in claims,” he said. “My fear is that the rise in the delta variant could cause claims to go back up…Certainly one week doesn’t show that. But I wouldn’t be surprised if we start to see claims rise.”
However, there are also lots of signs that the economy continues to rebound despite rising caseloads.
The more than 2.2 million people that the Transportation Security Administration said it screened at airports on Sunday was the most since late February 2020 — and nearly three times the amount it was on the same day last year.
Restaurant dining has largely rebounded in recent months, at times surpassing the levels from before the pandemic — on Saturday the number of diners was 1 percent higher than the same day in 2019, according to data from Open Table.
Last week, some 12.5 million claims were filed for unemployment insurance overall, according to the most recent numbers — down from 32.9 million filed at the same point last year.
Nevada, Rhode Island and California topped the list of states with the highest number of people on unemployment, the Labor Department said.
Economic concerns in recent months have been more focused on the ways that workers are still held back from filling some of the more than 9 million job openings in the country, than unemployment, with high hopes that school re-openings in the fall will help many parents get back into the labor force.
While CFOs, on the whole, remain optimistic about an economic rebound this year, they’re concerned about labor availability and accompanying cost pressures,according to a quarterly survey by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.
Over 75% of CFOs included in the survey said their companies faced challenges in finding workers. More than half of that group also said worker shortage reduced their revenue—especially for small businesses. The survey panel includes 969 CFOs across the U.S.
“CFOs expect revenue and employment to rise notably through the rest of 2021,” Sonya Ravindranath Waddell, VP and economist at the Federal Reserve Bank of Richmond said. “[But] over a third of firms anticipated worker shortages to reduce revenue potential in the year.”
As many companies struggle to find employees and meet renewed product demand, it’s unsurprising CFOs anticipate both cost and price increases, Waddell said.
About four out of five CFO respondents reported larger-than-normal cost increases at their firms, which they expect will last for several more months. They anticipate the bulk of these cost increases will be passed along to the consumer, translating into higher-priced services.
Despite labor concerns, CFOs are reporting higher optimism than last quarter, ranking their optimism at 74.9 on a scale of zero to 100, a 1.7 jump. They rated their optimism towards the overall U.S. economy at an average of 69 out of 100, a 1.3 increase over last quarter.
For many CFOs, revenue has dipped below 2019 levels due to worker shortage, and in some cases, material shortages, Waddell told Fortune last week. Even so, spending is on the rise, which respondents chalked up to a reopening economy.
“Our calculations indicate that, if we extrapolate from the CFO survey results, the labor shortage has reduced revenues across the country by 2.1%,” Waddell added. “In 2019, we didn’t face [the] conundrum of nine million vacancies combined with nine million unemployed workers.”
The delta variant of the coronavirus is sweeping through the United States, raising the average number of cases to 30,000-per-day, crowding hospitals in areas with large number of unvaccinated people and spurring questions about the nation’s recovery from the pandemic.
Stocks tanked on Monday, with the Dow Jones Industrial average dropping 725 points after being down more than 900 points at one time.
It was the worst one-day performance in the Dow since last October, and followed losses in markets around the world as investor fears about how the delta virus might slow both the health and economic recovery took hold.
Health officials have described the latest stage of the coronavirus as a pandemic of the unvaccinated while emphasizing that those who have had their shots are relatively safe.
Yet Los Angeles County on Saturday reinstated a mask mandate for indoor public settings, a sign that local communities may decide to reimpose restrictions as a safety measure.
An Olympic gymnast and an Olympic women’s basketball player both announced they had tested positive as they prepared for the Games, which is being held in a state of emergency in Tokyo where the rate of vaccinations is behind the United States.
Canada had also been well behind the U.S. in its vaccination rate but surpassed its southern neighbor on Monday, a sign of how much more slowly the vaccination rate now is in the United States. A big reason is that many people who are unvaccinated do not want to get the vaccine, something the Biden administration has increasingly blamed on social media and some conservative media outlets.
While the 30,000 cases per day on average is more than double the 13,000 average at the end of June, that rate is still well below highs from last fall and earlier this year.
Still, deaths are also ticking back up, at around 240 per day.
Because vaccinated people are still overwhelmingly protected, especially from severe outcomes, case and death numbers are likely to stay well below the worst of last winter’s surges, before vaccines were widely available.
But unvaccinated people are at increasing risk, especially given the rise of the highly transmissible delta variant, and the vaccination campaign is hitting a wall, leaving more than 30 percent of adults without any shots and exposed to the full dangers of the virus.
States with lower vaccination rates are seeing the worst outbreaks. Arkansas, Missouri, Florida and Louisiana are the four states with the highest per capita new cases per day, according to data from the Covid Act Now tracking site. The percentage of the population with at least one shot in those states is 44 percent, 47 percent, 56 percent, and 40 percent, respectively.
In contrast, Vermont and Massachusetts, where the vaccination rate is over 70 percent, are faring much better.
Vaccine resistance among some leading conservative commentators and lawmakers is raising fears that many of the remaining unvaccinated may never get the shots.
Sten Vermund, a professor at the Yale School of Public Health, said he is “not particularly worried” about COVID-19 for himself, because he is fully vaccinated.
“What worries me is my fellow Americans who for a variety of reasons choose not to get vaccinated; they continue to be in harm’s way,” Vermund said.
In the rare instances where vaccinated people do get COVID-19 cases, symptoms are likely to be much milder.
CDC Director Rochelle Walensky said Friday that 97 percent of people entering the hospital with COVID-19 are unvaccinated, part of why she said it “is becoming a pandemic of the unvaccinated.”
Conservative resistance to vaccination is stiffening. A Washington Post-ABC News poll released earlier this month found that 47 percent of Republicans said they were unlikely to get vaccinated, compared to just six percent of Democrats. Among Republicans, 38 percent said they definitely would not get the shots.
Former President Trump has previously encouraged people to get vaccinated, though he has not made a forceful push, for example by recording a public service announcement or getting his own shots in public.
On Sunday, though, Trump appeared to justify people not taking the vaccine, blaming President Biden.
“He’s way behind schedule, and people are refusing to take the Vaccine because they don’t trust his Administration, they don’t trust the Election results, and they certainly don’t trust the Fake News, which is refusing to tell the Truth,” Trump said in a statement.
Asked if Biden would request Trump film a public service announcement on vaccination, White House press secretary Jen Psaki said “we don’t believe that requires an embroidered invitation to be a part of.”
“Certainly any role of anyone who has a platform where they can provide information to the public that the vaccine is safe, it is effective, we don’t see this as a political issue,” Psaki said. “We’d certainly welcome that engagement.”
She also emphasized, though, that the administration is focusing on local doctors and community leaders to try to boost vaccination rates, not national officials.
The effort is hitting its limits, though. The pace of vaccinations has fallen to around 500,000 per day, down from over 3 million at the peak in April, according to Our World in Data.
“I’m not that hopeful that we’re going to get to people who have refused to be vaccinated,” said Preeti Malani, an infectious disease expert at the University of Michigan.
Experts increasingly say the best remaining hopes of reaching the remaining unvaccinated are school and employer mandates for their workers or students to get vaccinated.
France is experiencing a surge in vaccinations after President Emmanuel Macron announced this month that proof of vaccination, or a negative test, would be required for everyday activities like going to restaurants. The Biden administration has repeatedly ruled out a national vaccine passport in the U.S., though, and Republicans have rebelled against the idea.
Full approval of the vaccines from the Food and Drug Administration, as opposed to the current emergency authorization, could also help assuage some people’s fears, and some experts have called on the FDA to move faster on issuing a full approval.
The Biden administration has stepped up its calls for Facebook and other technology companies to do more to fight vaccine misinformation on their platforms.
Biden on Friday said social media companies are “killing people” with misinformation. On Monday, though, he dialed the criticism back down, instead pointing to 12 people responsible for much of the disinformation.
“Facebook isn’t killing people, these 12 people are out there giving misinformation,” Biden said.
“My hope is that Facebook, instead of taking it personally, that somehow I’m saying Facebook is killing people, that they would do something about the misinformation, the outrageous misinformation about the vaccine,” Biden added. “That’s what I meant.”
For its part, Facebook said over the weekend, before Biden’s walk-back, that the administration was “finger pointing” and the company was not the reason the president’s goal of getting 70 percent of adults at least one shot by July 4 was missed.
Los Angeles County’s move to return to an an indoor mask mandate, even for vaccinated people,
got mixed reviews from experts, but either way, it is unlikely to be replicated in places that are the hardest hit, given that places that are resistant to vaccines tend to also be resistant to masks.
“Vaccines are really the only way out,” Malani said. “We can’t live in masks forever.”
S&P Global Ratings on Wednesday upgraded its view on the nonprofit healthcare sector to stable. It had been at negative since March 2020, a view that was affirmed in January.
Analysts said the change results from coronavirus vaccination rates and decreasing COVID-19 cases as well as a drop in the unemployment rate that should reduce payer mix shakeup. They also pointed to generally healthy balance sheets across the sector.
Headwinds remain, most notably labor expenses as burnout among staff was heavily exacerbated by the pandemic. Increased salaries and benefit expenses will dampen margins going forward, according to the report.
The change is another sign for providers that their financial situation is on a rather swift recovery from the upheaval caused by the pandemic. Although some facilities, especially those that are smaller and in rural areas, are certainly still struggling, that was the case before COVID-19 as well.
Most nonprofit health systems reported first-quarter results that showed improved volumes and investment returns. Some are still sporting more than a year’s worth of cash on hand.
The S&P analysts warned, however, that potential COVID-19 outbreaks this fall would be a setback. That remains a concern with some parts of the country lagging in vaccination rates and the increasing prevalence of more contagious COVID-19 variants.
Other risks include the end of enhanced federal reimbursement and the return of the Medicare sequester cuts when the public health emergency ends, which is expected to be after the end of this year.
But the analysts said agile management teams should be able to combat these challenges.
“[T]o the extent that the pandemic has enabled faster decision making and allowed management teams to pivot and identify new opportunities for expense base restructuring and revenue enhancement, we believe these risks are manageable within our view of the stable sector view,” according to the report.
Medicare Advantage (MA) focused companies, like Oak Street Health (14x revenues), Cano Health (11x revenues), and Iora Health (announced sale to One Medical at 7x revenues), reflect valuation multiples that appear irrational to many market observers. Multiples may be exuberant, but they are not necessarily irrational.
One reason for high valuations across the healthcare sector is the large pools of capital from institutional public investors, retail investors and private equity that are seeking returns higher than the low single digit bond yields currently available. Private equity alone has hundreds of billions in investable funds seeking opportunities in healthcare. As a result of this abundance of capital chasing deals, there is a premium attached to the scarcity of available companies with proven business models and strong growth prospects.
Valuations of companies that rely on Medicare and Medicaid reimbursement have traditionally been discounted for the risk associated with a change in government reimbursement policy. This “bop the mole” risk reflects the market’s assessment that when a particular healthcare sector becomes “too profitable,” the risk increases that CMS will adjust policy and reimbursement rates in that sector to drive down profitability.
However, there appears to be consensus among both political parties that MA is the right policy to help manage the rise in overall Medicare costs and, thus, incentives for MA growth can be expected to continue. This factor combined with strong demographic growth in the overall senior population means investors apply premiums to companies in the MA space compared to traditional providers.
Large pools of available capital, scarcity value, lower perceived sector risk and overall growth in the senior population are all factors that drive higher valuations for the MA disrupters.However, these factors pale in comparison the underlying economic driver for these companies. Taking full risk for MA enrollees and dramatically reducing hospital utilization, while improving health status, is core to their business model. These companies target and often achieve reduced hospital utilization by 30% or more for their assigned MA enrollees.
In 2019, the average Medicare days per 1,000 in the U.S. was 1,190. With about $14,700 per Medicare discharge and a 4.5 ALOS, the average cost per Medicare day is approximately $3,200. At the U.S. average 1,190 Medicare hospital days per thousand, if MA hospital utilization is decreased by 25%, the net hospital revenue per 1,000 MA
enrollees is reduced by about $960,000. If one of the MA disrupters has, for example, 50,000 MA lives in a market, the decrease in hospital revenues for that MA population would be about $48 million. This does not include the associated physician fees and other costs in the care continuum. That same $48 million + in the coffers of the risk-taking MA disrupters allows them deliver comprehensive array of supportive services including addressing social determinants of health. These services then further reduce utilization and improves overall health status, creating a virtuous circle. This is very profitable.
MA is only the beginning. When successful MA businesses expand beyond MA, and they will, disruption across the healthcare economy will be profound and painful for the incumbents. The market is rationally exuberant about that prospect.