Newsletter: A Lost Decade

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Lost Ground

The U.S. economy could take the better part of a decade to fully recover from the coronavirus pandemic and related shutdowns. The Congressional Budget Office, a nonpartisan legislative agency, said the sharp contraction triggered by the coronavirus caused it to mark down its 2020-30 forecast for U.S. economic output by a cumulative $7.9 trillion, or 3% of gross domestic product, relative to its January projections. GDP isn’t expected to catch up to the previously forecast level until the fourth quarter of 2029, Paul Hannon and Paul Kiernan report.

The roughly $3.3 trillion in stimulus programs enacted by Congress since March will only “partially mitigate the deterioration in economic conditions,” the CBO said.

WHAT TO WATCH TODAY

U.S. auto sales for May are out today.

Japan’s Jibun Bank purchasing managers index for services in May is out at 8:30 p.m. ET.

The China Caixin purchasing managers index for services in May is out at 9:45 p.m. ET.

TOP STORIES

Lost Output, Fewer Jobs

Factories in the U.S. and abroad continued to reduce output and shed jobs in May. Surveys of purchasing managers at manufacturers in the U.S., Asia and Europe offered signs that the decline in global factory activity is starting to bottom out after the record fall seen in April. But sentiment remained negative, suggesting any recovery in the months ahead could be tentative. One sign factories don’t expect conditions to improve rapidly: Many reported further job cuts. In India and South Korea, those reductions in payrolls were the largest on record, Paul Hannon and Paul Kiernan report.

Developing Downturn

Brazil’s economy shrank during the first three months of this year. Turkey’s economy slowed, and India’s yearly output posted its slowest growth in 11 years. The latest data highlight the struggles of many developing-world economies even before the coronavirus pandemic caused governments to order lockdowns in late March. The second quarter will be worse than the first, and economic output in all three countries is expected to decline this year, reversing a historic run for growth across much of the developing world. Both India and Brazil, the world’s fifth and ninth largest economies, will likely have their worst economic performance on record, Vibhuti Agarwal, David Gauthier-Villars and Jeffrey T. Lewis report.

On the Road Again

U.S. oil prices notched their largest monthly gains on record in May, recovering a big chunk of the losses caused in March and April when the country went into lockdown to counter the spread of the coronavirus. All that unburned fuel swamped refineries and storage facilities and sent oil prices into negative territory for the first time. Since the start of May, though, domestic inventories have been drawn down sharply as producers choked back output and drivers returned to the road, Ryan Dezember reports.

Rollercoaster

Will Americans ride rollercoasters in a pandemic? As some theme parks gingerly begin to reopen this week, they are asking whether cash-strapped, jittery thrillseekers will return in the face of a still-spreading coronavirus pandemic. The parks, which closed across the nation in March, are requiring masks and temperature checks and social distancing for guests. But it remains uncertain whether enough people will venture out to the parks to stave off a financial shock for the companies, Scott Patterson reports.

Neither Snow nor Rain nor Heat nor Gloom of Night

Surging e-commerce volumes are straining the U.S. Postal Service’s parcel network as staffing shortages and backlogs in hard-hit areas slow deliveries. The problems have delayed some packages for days and even weeks, shippers and consumers say, holding up orders at a time when many people are shopping more online to avoid infection with the virus, Jennifer Smith reports.

Protests Sweep Cities

The U.S. economy cratered because of the new coronavirus and efforts to contain it. Now, officials fear demonstrations could cause a jump in new cases. The U.S.’s reported death toll rose to more than 105,000 while confirmed cases surpassed 1.8 million, according to data from Johns Hopkins University. Globally, cases passed 6.2 million; deaths stood at more than 375,000, Jennifer Calfas and Sune Engel Rasmussen report.

Business leaders across industries are speaking out about social injustice and racial inequality in the wake of George Floyd’s death at the hands of police and the protests in dozens of U.S. cities the fatal event has sparked. Goldman Sachs asked bank employees to have conversations outside their comfort zones about race and discrimination. Peloton Interactive committed to donating $500,000 to the NAACP’s Legal Defense Fund. Washington, D.C.-based restaurant chain &pizza said it would give workers extra paid time off so they can participate in protests. In part, the flood of messages reflects how quickly the world has changed for chief executives and big businesses, who up until a few years ago tended to steer away from hot-button issues. Now, many leaders of industry say more consumers and employees expect brands and businesses to have a point of view—and share it, Kathryn Dill reports.

“Even though I’m the CFO of a global bank, the killings of George Floyd in Minnesota, Ahmaud Arbery in Georgia and Breonna Taylor in Kentucky are reminders of the dangers Black Americans like me face in living our daily lives.” —Mark Mason, Citigroup’s chief financial officer

WHAT ELSE WE’RE READING

One size doesn’t fit all in a coronavirus lockdown. “Better social outcomes are possible with targeted policies. Differential lockdowns on groups with differential risks can significantly improve policy trade-offs, enabling large reductions in economic damages or excess deaths or both. We also find that the majority of these gains can be achieved with a simple targeted policy that applies an aggressive lockdown on the oldest group and treats the rest of the population uniformly,” MIT’s Daron Acemoglu, Victor Chernozhukov, Iván Werning and Michael Whinston write in a working paper.

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