Newsletter: Maybe the Recovery Already Started

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Maybe the Recovery Already Started

The U.S. economy will be in recovery soon—if it’s not already. A monthly Wall Street Journal survey found that more than two-thirds of economists, 68.4%, expect the recovery to start in the third quarter. Just over a fifth, 22.8%, said it already began in the current, second quarter. The U.S. entered a recession in February, the National Bureau of Economic Research determined this week. A recovery doesn’t mean an immediate rebound to prepandemic levels of output and employment. Business and academic economists polled in the survey expect gross domestic product to shrink 5.9% this year, measured from the fourth quarter of 2019. They also expect, on average, that the unemployment rate will be 9.6% by December, Harriet Torry and Anthony DeBarros report.

WHAT TO WATCH TODAY

U.S. import prices for May are expected to rise 0.7% from the prior month. (8:30 a.m. ET)

The University of Michigan consumer sentiment index for June is expected to rise to 75.0 from 72.3 at the end of May. (10 a.m. ET)

Richmond Fed President Thomas Barkin participates in a virtual panel on ‘Virginia’s Economic Recovery and the Pandemic’ at 10 a.m. ET.

The Baker Hughes rig count is out at 1 p.m. ET.

TOP STORIES

Second Wave

Some U.S. states that were largely spared during the early days of the Covid-19 pandemic are now seeing record hospitalizations, causing some experts to fear that loosened restrictions and the approach of summer led many Americans to begin letting down their guard. The post-Memorial Day outbreaks in states come roughly a month after stay-at-home orders were lifted, Eliza Collins and Elizabeth Findell report.

Investors didn’t like the latest data on infections or suggestions of a long recovery. The Dow Jones Industrial Average fell more than 1,800 points on Thursday for its worst day since March. U.S. stock futures rose Friday, reversing some of this week’s selloff. Follow our latest market coverage here.

I Saw the Sign

The number of people seeking unemployment benefits continued to fall while those receiving them appeared to plateau, signs the U.S. labor market continues to slowly mend. Even so, the number of Americans applying for and drawing on unemployment insurance remains historically high. About 1.5 million applications were filed last week, compared with a prepandemic peak of 695,000 in 1982. So-called continued claims—the number receiving weekly benefits—was 20.9 million in the week ended May 30 compared with a prepandemic record of 6.6 million in 2009, Sarah Chaney and Kim Mackrael report.

🎧 The Journal Podcast: Black employment had climbed to a record level before the pandemic undid that progress in a matter of weeks. WSJ’s Amara Omeokwe explains the fragility in the economic situation of black Americans and what that could mean for their recovery.

The net worth of U.S. households saw a record decline in the first three months of this year as the coronavirus pandemic sent shock waves through the economy and caused equity prices to plummet. The figures, published in a quarterly Federal Reserve report, show the beginning of the pandemic’s impact on the U.S. economy, Paul Kiernan reports.

Another Check for $1,200?

Congress is facing summer deadlines for stimulus spending decisions. Millions of jobless Americans will see their extra unemployment benefits disappear at the end of July unless Congress extends them. Deferred tax payments are due July 15. And many state and local governments must complete annual budgets by June 30. They are counting on more federal aid to close gaping deficits that have forced them to cut spending and lay off workers, Kate Davidson and Nick Timiraos report.

Treasury Secretary Steven Mnuchin said the White House is weighing whether to back a second round of stimulus payments. Congress provided an initial round of onetime payments of $1,200 for most adults and $500 for children under age 17 as part of the Cares Act enacted in March.

Down and Out in Paris and London

The U.K. economy shrank by a fifth in April, a record decline that exposes the cost of nationwide lockdowns on the world’s advanced economies. The U.K. is among only a handful of economies that report monthly national output data. The figures offer one of the first detailed glimpses of the cost of the coronavirus-induced shutdowns on a major economy. U.S. gross domestic product figures for the second quarter are due to be published July 30, Jason Douglas and Paul Hannon report.

Europe’s borders are reopening for the summer. Not everyone is invited. The European Commission recommended European Union countries remove borders within the bloc on June 15 and allow citizens from selected outside countries to return from July 1. But it seems unlikely most U.S. citizens will be able to visit the bloc soon and signs are emerging that countries, who have final say on border controls, are going their own way. The July 1 opening is aimed at boosting Europe’s depressed tourism industry in time for the crucial summer season. Tourism is one of the EU’s biggest economic sectors, accounting for around 10% of economic output in the bloc, Laurence Norman reports.

WHAT ELSE WE’RE READING

Trust the experts? “If past epidemics are a guide, the virus will not have an impact on the regard in which science as an undertaking is held. But it will reduce confidence in individual scientists, worsen perceptions of their honesty, and weaken the belief that their activities benefit the public. The strongest impact is likely to be felt by individuals in their ‘impressionable years’, whose beliefs are in the process of being durably formed,” Cevat Giray Aksoy, Barry Eichengreen and Orkun Saka write at the Center for Economic Policy Research.

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