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Wrong Way

Filings for weekly unemployment benefits rose for the first time in nearly four months, a sign the jobs recovery could be faltering. Initial unemployment claims rose by a seasonally adjusted 109,000 to 1.4 million for the week ended July 18, halting what had been a steady descent from a peak of 6.9 million in late March. The data also show that the number of people receiving benefits has shrunk in recent weeks. Taken together, claims and benefits totals suggest new layoffs are being offset by hiring and employers recalling workers, though at a slower pace than a few weeks ago, Eric Morath reports.

Last week’s increase in applications came after several states imposed new restrictions on businesses such as bars and restaurants when coronavirus cases rose.

WHAT TO WATCH TODAY

IHS Markit’s U.S. manufacturing index for the opening weeks of July is expected to rise to 52.0 from 49.8 at the end of June. Services are expected to rise to 51.0 from 47.9. (9:45 a.m. ET)

U.S. new-home sales for June are expected to rise to an annual pace of 702,000 from 676,000 a month earlier. (10 a.m. ET)

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

TOP STORIES

Ugly, Bad and Good

Jobless claims aren’t the only data suggesting trouble for the labor-market recovery. U.S. employers added 4.8 million jobs in June, helping recoup some of the massive losses from earlier in the year. But the Census Bureau’s weekly household pulse surveys, which tracked the big rise that month, now indicate that a resurgent pandemic has reclaimed most of those gains. Of course, other indicators point to continued job gains, the weekly survey is a new product and it isn’t meant to stand in for the official monthly report. Even so, the dropoff is a worrisome sign for a struggling labor market.

Time is running short for millions of unemployed Americans. Senate Republicans scrapped their plans to release a proposal for the next coronavirus relief bill after continued differences with the White House on unemployment insurance and direct cash payments. With the delay, Republicans won’t roll out their roughly $1 trillion legislation until next week, further compressing an already tight timeline to reach an agreement with Democrats and pass a fifth coronavirus relief bill. A $600 weekly supplement to state unemployment benefits is set to expire July 31, though it will effectively end in many states this weekend, Andrew Restuccia and Andrew Duehren report.

Once Congress does approve an economic relief package, a second round of stimulus payments could reach many Americans faster than last time. The Internal Revenue Service now has procedures, online tools, bank-account information and coordination with other agencies that it didn’t have set up in advance when the first round of payments was approved in the spring, Richard Rubin reports.

Another bit of good news: Some of the businesses hit hardest by the pandemic are driving the jobs recovery. Health-care providers and restaurants—which closed during lockdowns—have recalled millions of laid off workers. Job growth has also been boosted by increased demand in a handful of industries, including logistics firms, financial services and retailers such as furniture stores, Eric Morath and Kim Mackrael report.

Corporate America Doesn’t Expect This to Be Over Soon

Hershey said subdued Halloween celebrations this year as a result of the coronavirus pandemic could hurt candy demand during a holiday that typically generates a tenth of its sales. The owner of Reese’s and Jolly Rancher said it is planning to make less Halloween-themed candy to avoid having loads of leftovers that it would have to pull back or try to sell at a discount, Annie Gasparro reports.

AMC Entertainment is pushing back the reopening of its U.S. theaters to mid-to-late August, after a number of summer blockbusters delayed their release dates. The nation’s largest theater chain previously said it would reopen at the end of July. U.S. theaters closed and Hollywood studios halted the release of major motion pictures in March as the pandemic took hold, and they remain in a holding pattern as several states are experiencing a resurgence in Covid-19 cases, Dave Sebastian reports.

Walt Disney canceled the planned August release of “Mulan” and said it would also delay the release of future installments in the “Avatar” and “Star Wars” series by a year, R.T. Watson and Erich Schwartzel report.

American Airlines and Southwest Airlines said they were tempering expectations for an air-travel recovery, as mounting coronavirus cases have driven down bookings by as much as 80% in some parts of the U.S. Southwest said cancellations are picking up and demand looks weaker heading into fall. Executives at American said bookings have started to slide and business travel, which usually picks up after Labor Day, shows no signs of resuming, Alison Sider and Doug Cameron report.

“In short, the crisis continues,” American Chief Executive Doug Parker said.

Europe’s Comeback

Encouraging news from Europe: Purchasing managers indexes for the U.K. and eurozone returned to growth this month, with output advancing at the fastest rate in years. The data suggest some economic rebound in the third quarter after a disastrous spring. “The concern is that the recovery could falter after this initial revival. Firms continue to reduce headcounts to a worrying degree, with many worried that underlying demand is insufficient to sustain the recent improvement in output,” IHS Markit economist Chris Williamson said. Manufacturing and service-sector activity are still contracting in Japan, though not as severely as prior months. U.S. data are out at 9:45 a.m. ET.

There’s Gold in Them Thar Hills

The price of gold neared an all-time high that has stood for almost nine years on Thursday, punctuating a furious rally driven by anxious investors seeking refuge from the coronavirus-induced economic slowdown. Prices have risen nearly 25% this year, extending an advance that began early in 2019. The coronavirus has sparked a global gold rush, with physical traders in London and New York trying to get their hands on more metal and individuals around the world ordering bars and coins, Amrith Ramkumar reports.

TWEET OF THE DAY

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Original Source: blogs.wsj.com

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

Our House, in the Middle of Our Street

The U.S. housing market is staging a recovery as buyers shake off high unemployment and a rising number of coronavirus infections. Sales of previously owned homes rose 20.7% in June from the prior month, according to the National Association of Realtors, the biggest monthly increase on record going back to 1968. The surge follows other recent bullish indicators such as rising new-home sales, robust home-builder activity and a flood of mortgage applications. Record-low mortgage rates and pent-up demand are driving sales: Apartment renters are seeking more space, young families are moving to the suburbs, and wealthy city dwellers are looking for second homes, Nicole Friedman reports.

WHAT TO WATCH TODAY

U.S. jobless claims for the week ending July 18 are expected to hold steady at 1.3 million. (8:30 a.m. ET)

The Conference Board’s leading economic index for June is expected to rise 2.1% from the prior month. (10 a.m. ET)

The European Union’s preliminary consumer confidence index for July is out at 10 a.m. ET.

The Kansas City Fed’s manufacturing survey for July is out at 11 a.m. ET.

TOP STORIES

Crisis Mode

Small businesses are bracing for a prolonged crisis while short on cash and customers. Hopes for a quick economic recovery from the coronavirus pandemic have been dashed, and companies are exhausting rescue funds. Many are shutting down or slashing jobs again, Ruth Simon, Amara Omeokwe and Gwynn Guilford report.

Casino magnate Sheldon Adelson’s Las Vegas Sands Corp. reported a 97% decline in revenue as the global pandemic damps visitation to the gambling hubs of Las Vegas and Macau, Katherine Sayre reports.

“I’ve never felt more gloomy than I do today about what’s happening in Las Vegas short term.” —Sands CEO Robert Goldstein

Whirlpool said it recovered significantly in June and improved its guidance for the year, signaling damage from the coronavirus pandemic might be lighter than the appliance maker expected. Chief Executive Marc Bitzer said consumers stuck at home are upgrading kitchen appliances, especially in the U.S. where home-improvement stores have largely remained open, Austen Hufford reports.

Unilever is sort of a microcosm for shifting demand. The consumer-goods giant said underlying sales—a closely watched figure that strips out currency movements and deals—declined 0.3% in the second quarter. But that result masks huge volatility: “Although it looks like we are flat on topline, we had record growth and record declines just one click below that,” said CFO Graeme Pitkethly. Food service and out-of-home ice cream businesses, for example, were hit by lockdowns while demand for hand and home-hygiene products grew double digits.

Given all the ups and downs, what’s happening with the recovery? It seems like it stalled. Data from Facteus, which tracks transactions by 15 million debit and credit card holders, suggest consumer spending has stabilized with new patterns of winners and losers largely locked in place. Some retail has more than recovered from prepandemic levels but entertainment and travel are still depressed. And since late June, consumer outlays appear somewhere between steady and decelerating.

A leveling off in activity is feeding through to broader economic measures. IHS Markit aggregates data that go into gross domestic product to create its own monthly GDP measure. Hard numbers and forecasts show the sharp drop and a quick but only partial rebound in output through June. Since then, though, high-frequency data suggest a slowdown in activity, and IHS Markit’s forecast now reflects that. 

The Ten-Dollar Founding Father

Despite a worse pandemic response, the U.S. economy has fared better than Europe’s in part because of its greater fiscal firepower. The European debt deal this week is all about eliminating that institutional gap. Leaders of the EU agreed to finance a €750 billion ($860.64 billion) package with bonds that are the obligation of the EU itself, rather than its individual members. The breakthrough is widely compared to the infant United States’ assumption of states’ debts at the prodding of Treasury Secretary Alexander Hamilton. Importantly, the European Central Bank can buy EU bonds with newly created money just as the Federal Reserve buys Treasurys. That all but eliminates any risk of default. In short, the EU is beginning to acquire economic institutions that may one day rival the U.S.’s in their flexibility and firepower, Greg Ip writes.

Will Americans get a second stimulus check? President Trump said he wants to send a second round of direct payments, House Democrats passed a bill that would send Americans $1,200 each, and Republican leaders in the Senate now see additional checks as a part of any deal with Democrats. Whatever lawmakers ultimately agree upon would be part of a much broader package that could include different types of aid, such as expanded unemployment insurance, Andrew Duehren reports.

Korea in Recession

South Korea’s economy fell into a recession in the second quarter of the year as the global coronavirus pandemic took a heavy toll on the export-reliant country. Gross domestic product posted its worst performance since the first quarter of 1998, at the height of the Asian financial crisis, Kwanwoo Jun reports.

WHAT ELSE WE’RE READING

The Paycheck Protection Program helped save jobs. “We estimate that the PPP boosted employment at eligible firms by 2% to 4.5%, with a preferred central tendency estimate of approximately 3.25%. Our estimates imply that the PPP increased aggregate U.S. employment by 1.4 million to 3.2 million jobs through the first week of June 2020, with a preferred central tendency estimate of about 2.3 million workers,” MIT’s David Autor and co-authors from the Federal Reserve and ADP write in a new paper.

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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.

 

Original Source: blogs.wsj.com

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