(Reuters) – The US drive to boost its economy in the midst of a pandemic came to a halt last week with signs that declining unemployment and business subsidies may have begun to take a toll.
PHILO PHOTO: People who lose their jobs are usually waiting to work for unemployment following an outbreak of coronavirus (COVID-19) at an Arkansas Workforce Center in Fayetteville, Arkansas, US April 6, 2020. REUTERS / Nick Oxford
Hiring small businesses, shifts worked across a variety of industries, spending on credit cards and even demand for gasoline that typically grows through the summer remained flat and fell well below the levels a year ago.
Initial applications for unemployment insurance fell below 1 million for the first time since the beginning of March of the coronavirus-driven economic downturn, and the number of people continuing to collect benefits fell from 604,000 to 15,486 million in the week on August 1 some.
The outcome showed that a weekly index of the Federal Reserve of the New York Federal of Projected growth in gross domestic product improved slightly.
Graph: Oxford Economics Recovery Index here
But although the statistics of claims indicate that some repetition continues, the numbers remain massive by historical standards. Concerns are growing now that the continued spread of the virus and the inability of the White House and the U.S. Congress to delay agreement on new government support for harmful businesses and the unemployed might greatly hamper recovery.
“The recovery seems to be losing steam,” said AnnElizabeth Konkel, an economist with work website Indie Hiring Lab where postings went up for the 14th straight week but at the lowest rate since early May. “Initial unemployment claims have fallen, but there is still a long way to go.”
The risks can mount. Much of the U.S. economy is dependent on consumer spending, and significant support expires in July when Congress fails to extend a $ 600-a-week unemployment insurance supplement. The pandemic payments were authorized by legislators in March along with forgivable loans extended to hundreds of thousands of small businesses.
The combination of that support led to personal income growth despite widespread layoffs, support jumps in retail spending in May and June, and left many Americans throwing up savings and paying off debt – unusually in a recession.
The high savings rate can take a long time for family. A first hint as to whether households continue to spend or get nervous about the prolonged decline will come on Friday with the release of retail sales data in July. Retail sales are expected to have risen 1.9% in the past month, according to the consensus estimate of analysts surveyed by Reuters.
Broader measures following the general recovery have not shown much improvement. An Oxford Economics index combining health, economic and social data fell last week, and has not shown much change since mid-June.
Graph: here the real economy
JP Morgan data on credit card spending had not changed through the first week of August and have also been holding at about 10% below mid-year level since mid-June.
At this point, there does not seem to be much extra relief in sight. Democrats and Republicans in Congress remain deadlocked over further emergency aid, even with the U.S. economy about 13 million jobs short of where it was in February. President Donald Trump has ordered more benefits to be paid, but it is unclear if his order has legal authority.
There are some signs of resilience. Overall bankruptcies through July were 25% below the 2019 level, according to data from Epiq AACER, although Chapter 11 corporate bankruptcies have jumped as household names such as JC Penney and Neiman Marcus succumbed to the steep decline in retail traffic.
But the early hope for a rapid rebound has now vanished when the move to restore normal trade clashes with a rebound in cases of coronavirus. Florida set a record for coronavirus deaths this week, and daily growth of the case in the U.S. is more than double what it was at the beginning of June.
Estimates of retail sales of phones with phone locations have not shown much change, according to data collected by Safegraph and Unacast, and for both companies remain below recent highs in mid-June.
Graph: A social delay? over here
The number of employees on the job at small companies whose time registers are kept by Homebase fell slightly, and the growth in factory work changes did not show much change among companies whose time records are kept by data company Kronos.
The 0.5% increase in the time clock “steps” for the week ended on 9 August. Contrasts with an average weekly growth rate of 2.7% in May and 1.9% in June, “reinforcing the much slower labor recovery phase” that seems to be taking root after the July 4 holidays, said Dave Gilbertson, vice president of strategy and operations at Kronos.
Its weight may already fall on “high-touch service companies”, many of them small businesses such as restaurants, bars, gyms and beauty salons, whose fortunes were a motivation for both the US Government’s Paycheck Protection Program of loans to small businesses and for the pressure to lift pandemic restrictions sooner rather than later.
Unacast data showed an increase in foot traffic to that industry spread across many states in June, stopped in July, and fell through the first week of August.
Graph: NY Fed Weekly Economic Index NY Fed Weekly Economic Index here
Report by Howard Schneider; Edited by Dan Burns and Paul Simao
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