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The U.S. officially entered a recession, a record number of countries around the world are plunging into recession, and U.S. markets rallied. Jeff Sparshott here to take you through key developments in the global economy.
Starting Over
The U.S. officially entered a recession in February, marking the end of the 128-month expansion that was the longest in records reaching back to 1854. While Monday’s announcement by the National Bureau of Economic Research didn’t come as a surprise to economists, the group typically waits until a recession is well under way before declaring it has started. But this time, the severity and breadth of the coronavirus-induced downturn prompted it to break with past practice, “even if it turns out to be briefer than earlier contractions,” the NBER’s Business Cycle Dating Committee said. There are tentative signs that the economy may have hit bottom. Employers added 2.5 million jobs last month, the most in a single month on records dating from 1948, and the unemployment rate fell to 13.3%, Kate Davidson reports.
Friday’s surprisingly upbeat jobs report continued to stoke investor demand for stocks: The Nasdaq Composite closed at a record high on Monday and the S&P 500 is now up slightly for the year. Global stocks weren’t following suit Tuesday morning.
WHAT TO WATCH TODAY
The U.S. job openings and labor turnover survey for April is out at 10 a.m. ET.
U.S. wholesale inventories for April are out at 10 a.m. ET.
The Federal Reserve begins a two-day policy meeting.
China’s consumer and producer prices for May are out at 9:30 p.m. ET.
TOP STORIES
Global Contagion
The global economy is expected to shrink by about 5.2% in 2020 as a result of the coronavirus pandemic, making it one of the four most severe downturns in 150 years, the World Bank said Monday. Never before have so many countries entered a recession at once, even during three more severe episodes—the Great Depression and the downturns following the two world wars, the bank said.
The World Bank semiannual forecast for the global economy predicts a rebound next year, with growth of 4.2%. Even so, the report underscores the extent of the damage that has been wrought on economic activity around the world, Josh Zumbrun reports.
Budget Blowout
The Congressional Budget Office estimates the federal deficit widened to $424 billion last month, more than twice the level from a year earlier. For the past 12 months, the deficit as a share of gross domestic product stood at roughly 10%, the highest level since February 2010 when the U.S. was still climbing out of the last recession. CBO has estimated the deficit could reach $3.7 trillion for the fiscal year that ends in September, easily surpassing the high-water mark hit during the last downturn, Kate Davidson and Richard Rubin report.
Future’s So Bright
Americans are growing more upbeat about what lies ahead for the economy. “Consumers grew comparatively more optimistic about labor market outcomes with earnings growth, job finding, and job loss expectations all slightly improving,” the Federal Reserve Bank of New York said in its May Survey of Consumer Expectations. But the bank noted that whatever improvement there has been, key readings in the survey still remain “far below” where they were before the coronavirus pandemic took hold earlier this year, Michael S. Derby reports.
Open for Business
Europe and Asia have so far avoided a significant resurgence of Covid-19 cases even though most countries have emerged from lockdown and restarted chunks of their economies. The preliminary evidence offers some hope to areas of the U.S. that are emerging from the lockdown, though disease experts caution that the virus is far from defeated and the risk of a major new wave of infection remains. That caveat means some degree of social distancing and other markers of post-Covid society will need to stay in place while researchers hunt for a vaccine, Jason Douglas and Dasl Yoon report.
Even with the virus in retreat in some places, the World Health Organization said it was continuing to spread rapidly around the world, especially in the Americas and South Asia. And more than a dozen U.S. states have seen confirmed cases increase in the past week at a pace faster than in the week prior.
What Should Older Workers Do?
Many older workers have continued clocking in despite a heightened risk from Covid-19. In some cases, the strong work ethic of an older generation of workers kept them in harm’s way, family members said, while others kept working to pay bills even after federal health authorities warned in early March that older people faced greater risk. The risk of exposure could persist as states allow more workplaces to open. Many federal and state reopening plans say older or otherwise vulnerable residents should stay home. Around 80% of Covid-19 deaths in the U.S. are people 65 and older, according to the CDC. Nationwide, that age group represents 7% of the overall workforce, Jacob Bunge, Alexandra Berzon and Kris Maher report.
WHAT ELSE WE’RE READING
Lockdowns helped prevent 4.8 million test-confirmed coronavirus cases in the U.S. “Because infection rates in the countries we study would have initially followed rapid exponential growth had no policies been applied, our results suggest that these policies have provided large health benefits. For example, we estimate that there would be roughly 465x the observed number of confirmed cases in China, 17x in Italy, and 14x in the U.S. by the end of our sample if large-scale anti-contagion policies had not been deployed. Consistent with process-based simulations of Covid-19 infections, our analysis of existing policies indicates that seemingly small delays in policy deployment likely produced dramatically different health outcomes,” UC Berkeley’s Solomon Hsiang and a team of researchers write in Nature.
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