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Measure for Measure
Friday’s U.S. jobs report is expected to show U.S. employers shed nearly 30 million positions from payrolls this spring due to the coronavirus pandemic and related shutdowns. Nonfarm payrolls fell by a combined 21.4 million in March and April, the Labor Department said. Economists surveyed by The Wall Street Journal expect the May employment report will show that another 8 million jobs were lost last month, Eric Morath reports.
That is just one of several varying estimates of job destruction: Other data suggest layoffs may have topped 40 million, while another count shows only about 20 million are tapping unemployment benefits. No matter the measure, job loss due to pandemic is historically high and likely to leave a lasting mark on the U.S. economy.
WHAT TO WATCH TODAY
The ADP employment report for May is expected to show a loss of 8.75 million jobs from a month earlier. (8:15 a.m. ET)
IHS Markit’s U.S. services index for May is expected to rise to 37.5 from a preliminary reading of 36.9. (9:45 a.m. ET)
The Institute for Supply Management nonmanufacturing index for May is expected to rise to 44.0 from 41.8 a month earlier. (10 a.m. ET)
U.S. factory orders for April are expected to fall 12.5% from a month earlier. (10 a.m. ET)
The Bank of Canada releases a policy statement at 10 a.m. ET.
TOP STORIES
Jobs, Income and Inequality
In the decade before Covid-19, African-Americans’ economic circumstances, crushed during the 2007-09 recession, had slowly but steadily improved. Then lockdowns crashed the economy, and last week the death of a black man, George Floyd, at the hands of police touched off a wave of angry and at times violent protests. The events have highlighted painful inequities that continue to weigh on African-Americans, in their health, their incomes and their treatment by the justice system, Greg Ip writes.
Between 2011 and February, the share of working-age people who are employed, reached 59% in February for black Americans, less than 2 percentage points below that of whites—near the narrowest such gap since at least 1972. Wage gains for black Americans had also started to accelerate.
But differences in income and wealth barely changed. And while all racial groups saw their wealth devastated by the 2008 financial crisis, blacks’ has been much slower to recover.
Don’t Call it a Comeback
A private gauge of China’s service sector activity rebounded sharply to a nearly 10-year high in May as domestic demand recovered amid government measures to buoy economic growth. While activity is improving, the economy still isn’t back to pre-coronavirus levels. “In general, the improvement in supply and demand was still not able to fully offset the fallout from the pandemic, and more time is needed for the economy to get back to normal,” said Wang Zhe, a senior economist at Caixin Insight Group.
Elsewhere, the picture wasn’t as bright. Service-sector indexes for Japan, India, Australia, the eurozone and elsewhere improved but remained deep into contractionary territory, suggesting steep economic losses and a long road to recovery.
It’s a Long Way to the Top
The developed world’s longest ongoing economic expansion is about to go bust. Australia’s 28-year growth streak survived a regional economic crisis in the 1990s, a global economic crisis in the 2000s, and a boom-bust cycle in its core commodity sector in the 2010s. Now, a recession looms after catastrophic bush fires and restrictions to slow the spread of the new coronavirus took a heavy toll. Australia’s gross domestic product contracted by 0.3% in the first three months of this year and economists expect a steeper drop in activity in the three months through June, James Glynn and Alice Uribe report.
Tariff Time
The Trump administration is taking the initial step to prepare tariffs against a range of trading partners unless they back off proposals to impose taxes that would fall heavily on major American internet companies. Tuesday’s announcement is a replay of an aggressive tactic pursued against France last year in which the U.S. ultimately threatened that country with tariffs on $2.4 billion of goods. Though the French tax was ostensibly designed to target digital services in general, French officials often referred to the measure as the “GAFA tax” which stands Google, Apple, Facebook and Amazon.com—the American companies on whom such a tax would heavily fall, Josh Zumbrun reports.
“President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies.” —U.S. Trade Representative Robert Lighthizer
Price Check
A cold war with China would be expensive. U.S. dependence on China isn’t just about buying masks or iPhones. China’s companies are major customers for U.S. high technology and its students help fund America’s universities and paper over decades of underinvestment in basic science and math education. If “decoupling” proceeds, then much more federal funding for basic research—and for U.S. science and math education—may be needed to plug the gap. That probably means higher taxes and a more welcoming immigration policy for foreign talent from India and other nations to offset a potential Chinese brain drain. Finally, American consumers need to be prepared to pay more for the luxury of a secure and diversified supply chain, Nathaniel Taplin writes.
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