Newsletter: Signs of Stabilization

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Leveling Layoffs

The number of workers applying for and receiving unemployment benefits has stabilized at historically high levels, signs that while the labor market is healing hundreds of thousands of workers are still losing their jobs each week. New applications for benefits edged lower to a seasonally adjusted 1.5 million in the week ended June 13. While it is the fewest weekly applications since mid-March, it also showed the pace of layoffs is no longer significantly easing. The number of Americans receiving benefits payments fell slightly to 20.5 million in the week ended June 6. (Those continuing claims are reported with a one-week lag.) A stable level of people on benefit rolls suggested that new layoffs are being offset by employers hiring or recalling workers. But with the economy having slipped into recession this year, many firms have remained cautious about rehiring, leaving millions of people out of work since the pandemic hit, Eric Morath reports.

WHAT TO WATCH TODAY

The U.S. current account deficit in the first quarter is expected to narrow to $103 billion from $109.82 billion the prior quarter. (8:30 a.m. ET)

Boston Fed President Eric Rosengren speaks on the economy and financial conditions at 10:15 a.m. ET, Vice Chairman Randal Quarles speaks on stress testing at 12 p.m. ET, and Chairman Jerome Powell and Cleveland Fed President Loretta Mester speak on building a resilient workforce during the Covid-19 era at 1 p.m. ET.

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

TOP STORIES

Ups and Downs

A big bounce for U.S. retail sales and solid hiring gains in May offered some hopes of a quick, V-shaped recovery. As more data come in, the picture is mixed. Regional manufacturing surveys from the New York and Philadelphia Fed showed healthy rebounds in activity and rising optimism—the Philadelphia index for expectations over the next six months reached its highest level in nearly 30 years. “What we notice when we look at the empirical record is that by the time the expectations component gets this elevated from the lows, the recession is behind us,” RBC Capital Markets economist Tom Porcelli said.

But the jobless claims and other high-frequency data warn of a possible stall in what could be a nascent recovery. Google mobility reports show that returns to workplaces remain depressed, OpenTable figures on restaurant diners might have plateaued and Homebase numbers on small businesses suggest that the number of open businesses and hours worked by hourly employees has leveled off. 

“It’s just going to take a long time, I think, to get back to where we were in February.” —Cleveland Fed President Loretta Mester

Winners and Losers

Kroger said shoppers are stockpiling less than when the coronavirus pandemic arrived in the U.S., but that sales remain elevated as people cook more at home. Kroger’s sales rose 30% in March and increased more than 20% in April and May. The biggest U.S. supermarket operator expects sales to taper and consumer demand to moderate as restrictions ease across the country, Jaewon Kang reports.

Carnival Corp. reported its largest quarterly loss ever and said it expects to book a loss for the rest of the fiscal year. Cruise operator spokesman Roger Frizzell said the company isn’t sure when it can begin cruising again, and that Carnival Cruise Line’s Aug. 1 sailing plan is “premature” but hasn’t been canceled. He said cruising could begin in Europe before the U.S., Dave Sebastian reports.

Just Getting Started

European officials are pushing forward with plans to tax tech giants after the U.S. declared international talks on the issue to be at an impasse, raising the specter of trans-Atlantic trade conflict, Sam Schechner reports.

The Bank of England launched another burst of stimulus and the European Central Bank said lenders across the region had tapped its loan program for a record €1.3 trillion ($1.5 trillion), signs that central banks’ efforts to fuel a recovery aren’t yet done. Economic activity in Europe is tentatively picking up as governments gradually relax restrictions on work and daily life. But hopes for a quick rebound have faded, putting the onus on central banks and treasuries to repair the region’s economies, Jason Douglas and Tom Fairless report.

Back and Forth

New York City will begin the second phase of its economic reopening next week, allowing for workers to return to offices and restaurants to offer outdoor dining. The second phase, which starts Monday, also permits barber shops and beauty salons to open their doors to customers but at a limited capacity. The city, the hardest hit in the nation by the new coronavirus pandemic, estimates between 150,000 to 300,000 workers will return to their jobs during this phase, Katie Honan and Charles Passy report.

Few businesses in China’s capital have been as hard hit by the coronavirus as restaurants, many of which were forced to shut for months, lay off employees and eke out an existence selling takeout meals. Now, mere weeks after most of them had returned to business, they are facing the prospect of another prolonged shutdown—and many fear that they won’t survive a second downturn. On June 11, Beijing authorities identified a fresh wave of infections. In response, authorities raised the alert to the second-highest level, which suspends wedding ceremonies, banquets and other large public gatherings. As it was the first time around, the economic pain is likely to be disproportionately borne by the services sector, especially restaurants. Many have been subject to stringent coronavirus restrictions on social distancing. Meantime, many customers are choosing to stay away, fearing infection, Jonathan Cheng reports.

WHAT ELSE WE’RE READING

What happens when police use of deadly force sparks a high-profile investigation? Police respond with work slowdowns that lead to more crime. “[A]ll investigations that were preceded by ‘viral’ incidents of deadly force have led to a large and statistically significant increase in homicides and total crime. We estimate that these investigations caused almost 900 excess homicides and almost 34,000 excess felonies. The leading hypothesis for why these investigations increase homicides and total crime is an abrupt change in the quantity of policing activity,” Harvard’s Tanaya Devi and Roland Fryer write in a working paper.

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