Newsletter: Truth and Consequences

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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

About 30 million Americans have lost an extra $600 a week in unemployment benefits, the dollar posted its worst month in nearly a decade and the next jobs report could be make-or-break for policy makers and politicians. Jeff Sparshott here with the latest on the economy.

Roller Coaster

The July jobs report, to be released Friday, could be among the most politically consequential of the economic downturn caused by the coronavirus pandemic. The labor market has swung wildly since the virus nearly halted the economy in mid-March. Consumer fear of infection and government-mandated shutdowns of businesses caused the loss of more than 20 million jobs in April, the largest decline in a single month in Labor Department records back to the late 1930s. Allowing employers to reopen and recall workers subsequently resulted in the best back-to-back months of hiring in May and June, with employers adding a combined 7.5 million jobs. The July report will show whether the healing continued or sputtered amid rising Covid-19 cases and deaths, as some jurisdictions halted or rolled back reopening plans. The information could influence policy makers’ next steps, businesses’ hiring strategies, consumers’ confidence and voters’ moods, Eric Morath reports.


IHS Markit’s U.S. manufacturing index for July is out at 9:45 a.m. ET.

The Institute for Supply Management’s U.S. manufacturing index for July is expected to rise to 53.8 from 52.6 a month earlier. (10 a.m. ET)

U.S. construction spending for June is expected to rise 1.2% from a month earlier. (10 a.m. ET)

Federal Reserve: St. Louis’s James Bullard speaks at a virtual meeting on the economy and monetary policy at 12:30 p.m. ET, Richmond’s Thomas Barkin speaks to the Northern Virginia Chamber of Commerce at 1 p.m. ET, and Chicago’s Charles Evans speaks at a virtual roundtable on the economy and monetary policy at 2 p.m. ET.

Japan’s Tokyo consumer-price index for July is out at 7:30 p.m. ET.


Neither a Borrower nor a Lender Be

When unemployment soared this spring at the start of coronavirus lockdowns, credit-card debt and delinquencies were widely expected to surge. Instead, amid the deepest economic crisis since the Great Depression, credit-card debt in the U.S. and other advanced economies has fallen. Fewer people are late on their credit-card payments. Consumer demand for new borrowing—through credit cards, personal loans and even pawnshops—is down sharply. The main reason, according to economists and financial executives, is government stimulus programs launched in the U.S. and other advanced economies that have worked unexpectedly well. The flood of money, along with debt-relief measures such as deferred-mortgage and student-loan payments, has stabilized the finances of many households and even left some in better shape than before the pandemic—at least for now, Matthew Dalton and AnnaMaria Andriotis report.

Yeah, but, what happens next? Democrats and Republicans remained at odds in weekend negotiations on a new coronavirus economic relief package, including aid to replace the federal $600-a-week boost to unemployment benefits that expired Friday, Josh Zumbrun reports.

The extra $600 propped up household income and helped lift consumer spending in May and June. As of mid-July, just over 30 million Americans received unemployment benefits through state, long-running federal or new pandemic programs. “In the absence of a new supplemental jobless benefit, the hit to aggregate U.S. household income will be somewhere in the neighborhood of $72 billion and is likely to weigh meaningfully on consumer spending,” economists at Wells Fargo said.

Cases of the new coronavirus in the U.S. reached a record for the month of July. White House coronavirus coordinator Dr. Deborah Birx said the pandemic had reached a new stage and is more widespread than ever. She warned that residents face increased risks of infection and asked schools located in areas experiencing a surge in cases to use distance learning instead of in-person classes.

Areas outside the U.S. are dealing with a coronavirus resurgence. Cases are rising in Europe as young people hit beaches and bars. Melbourne, Australia’s second-largest city, is imposing a tough, new six-week citywide lockdown in a bid to more quickly suppress the spread of the coronavirus.

Markets are weighing in on the U.S. response to the pandemic. The ICE Dollar Index, which measures the dollar against a basket of other major currencies, in July notched its worst month in nearly a decade and recently hit a two-year low. The fall extended a reversal that began in late March, spurred lately by ballooning worries that mounting coronavirus cases will stall the U.S. economic rebound, Amrith Ramkumar reports.

The Official Unofficial GDP Data

With the economy buffeted by unprecedented uncertainty, analysts have turned to a wide range of unofficial, private data to track the economy. It turns out the official scorekeeper does the same. To arrive at Thursday’s estimate of a 32.9% annualized contraction in gross domestic product, the Bureau of Economic Analysis (part of the Commerce Department) made assumptions where data is incomplete, especially June. In a technical note, the agency said those assumptions “were based on a variety of sources, most notably: private high-frequency credit card transactions data to better capture shifts in consumer spending, news reports on reopenings, and industry and trade association reports, that include volume data, such as health care patient visits and traveler throughput.” —Greg Ip

Inner City Blues

A sharp rise in homicides this year is hitting large U.S. cities. The murder rate is still low compared with previous decades, and other types of serious crime have dropped in the past few months. But researchers, police and some residents fear the homicide spike, if not tamed, could threaten an urban renaissance spurred in part by more than two decades of declining crime, Jon Hilsenrath reports.

Recovery Takes Hold in China

A private gauge of China’s manufacturing activity rose in July to its highest level in more than nine years, boosted by accelerated production and recovering demand. The Caixin China manufacturing purchasing managers index, which is weighted toward small private manufacturers, rose to 52.8 in July from 51.2 in June, Caixin Media Co. and research firm IHS Markit said Monday. July’s reading marked the third consecutive month that the Caixin PMI stood above the 50 level separating contraction from expansion. Total new orders, reflecting demand from home and abroad, also increased at the fastest rate since the start of 2011.


Political party matters more than local health policy. “We document four facts: (1) mask use is robustly correlated with partisanship; (2) the impact of partisanship on mask use is not offset by local policy interventions; (3) partisanship is the single most important predictor of local mask use, not Covid severity or local policies; (4) Trump’s unexpected mask use at Walter Reed on July 11, 2020 significantly increased social media engagement with and positive sentiment towards mask-related topics. These results unmask how partisanship undermines effective public responses to collective risk and how messaging by political agents can increase public engagement with mask use,” the University of Chicago’s Maria Milosh and co-authors write in a Becker Friedman Institute working paper.


Real Time Economics has launched a downloadable calendar with concise previews forecasts and analysis of major U.S. data releases. To add to your calendar please click here.


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