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The American Economy is Healing—Slowly
The U.S. economy didn’t deteriorate as badly in May as it did in April. That is a far cry from saying that it is getting better. The Institute for Supply Management said its index for nonmanufacturing activity climbed to 45.4 last month from 41.8 in April. That came on top of its report Monday that its manufacturing index had climbed to 43.1 from 41.5. But anything under 50 indicates worsening activity. The underlying message: Even though restrictions to stem the spread of the novel coronavirus eased last month and more Main Street businesses were able to at least partially resume operations, the crisis is far from over, Justin Lahart writes.
WHAT TO WATCH TODAY
The European Central Bank releases a policy statement at 7:45 a.m. ET.
U.S. jobless claims for the week ending May 30 are expected to fall to 1.8 million from 2.123 million a week earlier. (8:30 a.m. ET)
The U.S. trade deficit for April is expected to widen to $50 billion from $44.4 billion the prior month. (8:30 a.m. ET)
U.S. productivity is expected to fall 2.7% in the first quarter, unrevised from a previous estimate. (8:30 a.m. ET)
Japan household spending for April is out at 7:30 p.m. ET.
TOP STORIES
Back to Work
Last week’s jobless claims report showed the number of people receiving unemployment benefits fell for the first time since February. Another drop would suggest people are being rehired. Even so, it could take years for the economy to regain the millions of jobs lost during the coronavirus pandemic, Sarah Chaney reports.
The latest report is out today at 8:30 a.m. ET.
States across the country are being hit by unemployment-benefit fraud, reflecting the vulnerabilities that workers and governments face in the midst of historically high levels of jobless claims. Scott Dahl, the inspector general for the U.S. Labor Department, said at least $26 billion in unemployment insurance payments could be wasted during the pandemic, Sarah Chaney reports.
The coronavirus pandemic caused unemployment to rise in every metropolitan area in the U.S. in April. Tourist destinations and factory towns were hardest hit, Eric Morath reports.
Damage, Devastation
Looting strikes a second blow to businesses in minority neighborhoods. Vandalism and theft at many large retailers are delaying efforts to restart an economy that lost millions of jobs to the Covid-19 pandemic. The damage to small businesses could be more devastating, potentially permanently closing doors. Small businesses, especially minority-owned ones, typically have little savings and very often don’t have multiple locations to help blunt the ravages of the pandemic and the looting, Scott Calvert and Ruth Simon report.
Jumbled supply chains and new safety protocols are hobbling U.S. manufacturers as they look to emerge from coronavirus shutdowns. Some factories are looking for alternative suppliers to compensate for plants that remain closed or are overwhelmed by orders for items in high demand. Other companies say new protective equipment and procedures to add space between workers will weigh on their profits and productivity, Austen Hufford and Bob Tita report.
After the Money’s Gone
Nine weeks after Congress approved its largest-ever economic relief measure to counter the coronavirus pandemic, most of the direct cash assistance aimed at keeping the economy afloat has been spent or committed. The so-called Cares Act included a projected $1.2 trillion in direct aid; Congress topped up that sum in April with an additional $400 billion. Of the total, roughly $1.12 trillion, or about 70%, has been distributed, Kate Davidson and Paul Kiernan report.
Germany adopted its second economic-stimulus package since the start of the coronavirus pandemic, bringing their total cost to €1.3 trillion ($1.5 trillion), by far the largest in Europe as a share of gross domestic product. Years of budget surpluses and negative borrowing costs have allowed Germany to rapidly deploy a vast protective shield to cushion the impact of the pandemic, Bojan Pancevski and William Boston report.
U.S.-China Chill
The Trump administration threatened Wednesday to bar mainland Chinese airlines from flying to and from the U.S. starting later this month, saying Beijing has failed to approve resumption of these routes by U.S. carriers. The threat of a ban was the latest sign of souring U.S.-China relations that are at their worst in more than three decades, Alison Sider and Ted Mann report.
Chinese state-controlled companies have canceled some shipments from U.S. farm exporters, according to maritime officials. The cancellations involve orders made following the phase one trade pact between the two countries signed in January. China committed in the agreement to increasing purchases of U.S. goods and services by $200 billion over 2017 levels, Costas Paris reports.
Hot Soup
Campbell Soup raised earnings expectations for its fiscal year after demand skyrocketed for its soup and snacks during the coronavirus pandemic. Sales in its latest quarter jumped 17% on a comparable basis, including a 35% surge in U.S. soup sales—the strongest performance by that metric in decades. But demand has exceeded Campbell’s manufacturing capacity, causing it to lose market share in heat-and-eat soups, Annie Gasparro reports.
QUOTE OF THE DAY
“This is the biggest recession we’ve experienced in our lifetime. It’s like a car crash, without an airbag.” —Jérôme Haegeli, chief economist at insurance company Swiss Re
WHAT ELSE WE’RE READING
Could anything good come of coronavirus? “If more of us end up working remotely after the pandemic, there is one change that could make work better: ending the misalignment between the school day and the work day. The gap between 3 p.m. and 5 p.m. in many countries is grossly unfair to working parents. Some propose making school days longer, but I advocate shorter work days,” the University of Pennsylvania’s Adam Grant writes in the Economist.
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