New wave of COVID-19 cases robs the U.S. economy of momentum
Just when it seemed safe to get out and about, the coronavirus epidemic has come back with a vengeance and sidetracked a fragile U.S. economic recovery.
There’s no doubt the economic rebound has lost steam in July. The big question is just how much.
The answer probably won’t be available for a few more weeks through the normal channels of government and other long-standing economic reports that come out monthly.
Yet an array of new-fangled indicators from off-the-beaten track private sector sources such as Homebase and Kronos already show the damage has been done.
Hiring tapered off in early July at retailers, restaurants and other small and medium-sized businesses amid a surge in COVID-19 cases in states such as California, Texas, Florida and Arizona.
California has already closed large swaths of its economy again and 21 other states have either tightened restrictions or slowed their plans for reopening.
A new survey of consumer attitudes, what’s more, shows growing anxiety among Americans again. Consumer sentiment fell in early July and returned close to a pandemic low.
It’s not all bad news, though.
Large and economically powerful states in the Northeast such as New York, New Jersey and Pennsylvania are gradually reopening businesses, offsetting some of the backsliding that’s taken place among states that were among the first to loosen restrictions.
“While some states have seen some rolling over here on the heels of case spikes, there are offsets from the states that re-opened much later,” chief U.S. economist Tom Porcelliof RBC Capital Markets said in a note to clients.
Homebase and Kronos, a pair companies that track how many hours employees work, both show some deterioration in July, but not nearly enough to suggest the recovery has been derailed. Just delayed.
The biggest report on tap in an otherwise quiet week ahead is initial jobless claims on Thursday. The number of people applying for jobless benefits has stalled at around 2.4 million a week for the past month, suggesting a fresh wave of layoffs is crashing over the economy. And as many as 30 million people still appear to be receiving benefits.
“Initial jobless claims remain horrifically high,’ said Scott Anderson, chief economist at Bank of the West.
The high level of jobless claims signals the next phase of the recovery is likely to be a lot slower than it was in May and June, when massive government financial relief and the reopening of the economy uncapped a gusher of pentup demand.
It will be hard for the economy to make a lot more progress until millions of people are able to return to their jobs — and that depends on states getting the coronavirus under control again.