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Thrift Shop
Consumer spending likely hit rock bottom in April. Economists forecast that spending dropped nearly 13% last month, which would be the largest monthly decline for records tracing back to 1959. Weak spending adds to the evidence that the U.S. economy is in for a long, slow recovery after the coronavirus pandemic and related lockdowns wiped out a decade of job gains in a month and left millions of Americans without a steady source of income, Sarah Chaney and Gwynn Guilford report.
Since April, activity in some pockets of the economy appears to be perking up—or at least not deteriorating further—as states start to reopen businesses and Americans return to work. Services, which account for more than two-thirds of consumer spending, were especially hard hit by social distancing and a rebound will be crucial to the broader economy’s health.
WHAT TO WATCH TODAY
U.S. trade in goods for April is out at 8:30 a.m. ET.
U.S. consumer spending for April is expected to fall 12.9% from the prior month. (8:30 a.m. ET)
The Chicago purchasing managers index for May is expected to rise to 40 from 35.4 a month earlier. (9:45 a.m. ET)
The University of Michigan consumer sentiment survey for May is expected to rise to 74 from a preliminary reading of 73.7. (10 a.m. ET)
Fed Chairman Jerome Powell speaks at a Griswold Center for Economic Policy Studies event at 11 a.m. ET. Livestream here.
The Baker Hughes rig count is out at 1 p.m. ET.
TOP STORIES
Inflection Point
The number of workers receiving unemployment benefits fell for the first time since February and new weekly claims continued to ease, offering evidence that layoffs related to the coronavirus pandemic are slowing. The level of claims and the number of workers receiving jobless payments remain historically high and underscore that tens of millions remain jobless. But the numbers add to evidence that while layoffs have been steep and are continuing, some Americans are getting back to work. That suggests the U.S. labor market is at an inflection point where new layoffs are largely offset by hiring and workers are being recalled to their old jobs, Eric Morath reports.
Amazon.com will keep most of the U.S. jobs it added to meet surging demand in March and April. The retailer will give 125,000 of the 175,000 temporary hires the option of staying on full time, signaling it expects the recent growth to continue, Sebastian Herrera reports.
Even with anecdotal reports of hiring and signs the economy has bottomed out, more bad data are on the way. Yesterday we found out new orders for durable goods fell more than 17% in April and the U.S. economy’s first-quarter contraction was slightly steeper than initially estimated. Most economists expect an even bigger contraction for gross domestic product in the second quarter.
Volatile numbers have the White House shying away from forecasts. A senior administration official said the coronavirus has resulted in “fluctuating” economic data, and that White House projections wouldn’t provide a “meaningful snapshot” of the economy. The Congressional Budget Office expects a significant rebound in the second half of the year—though not nearly enough to make up for the damage in the first half.
More good news-bad news: Pending home sales posted their biggest annual decline on record in April. But real-estate brokers, economists and some home buyers are looking beyond the pandemic-driven slump and seizing on signs that the housing market is strengthening. One potential boost: Mortgage rates this week hit the lowest level in records tracing back almost 50 years.
Carbon Update
Coronavirus is buying time on climate change. Carbon emissions appear to be plateauing, making dire scenarios less likely, but limiting warming will still require steep emissions cuts, Greg Ip writes.
Sign of the times: The U.S. consumed more renewable energy than coal last year for the first time since 1885, according to the Energy Information Administration.
The Stock Market Is Not the Economy, Part Infinity
Crushed by U.S. sanctions and weak oil prices, Iran has one of the world’s most battered economies. It also hosts one of the best-performing stock markets. The Tehran Stock Exchange’s main index has shot-up nearly 100% since mid-February, making it a top performer in local currency terms. Tehran is using the market boom to sell off state assets, generate cash and shore up its deteriorating finances, even at the risk of backlash from burned investors if the bubble bursts, Benoit Faucon and Sune Engel Rasmussen report.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Tariffs and trade fights may have fallen off the front page, but the economic effects are lingering. “We find that the U.S.-China trade war lowered the market capitalization of U.S. listed firms by $1.7 trillion and will lower their investment growth rate by 1.9 percentage points by the end of 2020,” the New York Fed’s Mary Amiti, and Columbia University’s Sang Hoon Kong and David Weinstein write at Liberty Street Economics.
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