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Wave Goodbye
Stocks tumbled Wednesday as pockets of coronavirus infections emerged around the U.S., intensifying fears that officials would have to reinstate lockdown measures. But even without harsh restrictions, there are already signs that rising caseloads are affecting economic activity. “States with faster case growth are now underperforming economically based on measures of small business activity, restaurant bookings and consumer spending,” said Deutsche Bank economist Matthew Luzzetti.
Google mobility data shows visits to restaurants, cafes, shopping centers, theme parks, museums, libraries and movie theaters is on the rise nationwide but appears to have peaked or plateaued in states with rising infection rates.
It’s a similar story for workers. The number of hours worked at small businesses hit its most recent peak in mid-June and has since tailed off sharply in places like Texas and Arizona, according to scheduling and hiring software provider Homebase. “It is clear that the public is not psychologically immune to Covid-19, and will retrench as the virus starts spreading again, regardless of government restrictions,” said Jeffries economist Aneta Markowska.
WHAT TO WATCH TODAY
U.S. jobless claims for the week ending June 20 are expected to fall to 1.35 million from 1.508 million a week earlier. (8:30 a.m. ET)
U.S. durable goods orders for May are expected to rise 9.8% from the prior month. (8:30 a.m. ET)
U.S. advance economic indicators for May are out at 8:30 a.m. ET.
U.S. gross domestic product is expected to decline at a 5% annual pace in the first quarter, unrevised from an earlier estimate. (8:30 a.m. ET)
The Kansas City Fed’s manufacturing survey for June is out at 11 a.m. ET.
The Dallas Fed’s Robert Kaplan and European Central Bank’s Yves Mersch speak at 9:30 a.m. ET, the Atlanta Fed’s Raphael Bostic speaks at a Florida Chamber of Commerce webinar at 11 a.m. ET, the Cleveland Fed’s Loretta Mester speaks to a Paycheck Protection Program webinar at noon ET, and the Kansas City Fed’s Esther George speaks on the economic and monetary policy outlook at 1:30 p.m. ET.
The Federal Reserve releases its latest supervisory stress test results for banks at 4:30 p.m. ET.
Japan releases its Tokyo consumer-price index for June at 7:30 p.m. ET and provisional trade figures for June at 7:50 p.m. ET.
TOP STORIES
Action, Reaction
A Wall Street Journal analysis shows the acceleration in coronavirus cases isn’t attributable solely to increased testing. Meanwhile, businesses are struggling with reopening timetables as Covid-19 spreads. Walt Disney is delaying the reopening of its Disneyland Resort, Apple said it is temporarily closing seven stores around Houston, and restaurants around the country that recently reopened have temporarily closed again for deep cleaning or staff self-quarantines following outbreaks, Collin Eaton reports.
Political leaders are also responding. New York Gov. Andrew Cuomo said the state would delay reopening shopping malls, movie theaters and gyms, and New York, New Jersey and Connecticut rolled out self-quarantining requirements that would affect people traveling from virus hotspots. Nevada Gov. Steve Sisolak ordered face masks to be worn by everyone in public starting Friday, including gamblers inside Las Vegas Strip casinos. Washington Gov. Jay Inslee issued a mandatory face-covering order, slated to begin Friday.
National and global data suggest economies bottomed out in April. But damage is lingering. Roughly 140,000 Yelp-listed businesses that had closed since March 1 remained closed on June 15. A large minority of that set, 41%, has shut for good, Matt Grossman reports.
State and local governments are struggling with budget deficits. New York City Mayor Bill de Blasio said the city could lay off or furlough up to 22,000 employees in the fall as it faces a $9 billion budget shortfall from the coronavirus, Katie Honan reports.
A tale of four cities: Illinois has had a relatively stringent lockdown policy compared with neighboring Iowa. The result plays out across the Quad Cities, a river-straddling metro area of around 420,000 that includes Scott and Muscatine counties on the Iowa side, as well as Rock Island and Henry counties in Illinois. The difference has created a clear shift in spending patterns and potential longer-term consequences, Doug Cameron reports.
The International Monetary Fund on Wednesday downgraded its already glum forecasts for the year. The IMF now expects the global economy will shrink 4.9% in 2020, compared with its April estimate of 3%. Most countries are beginning to emerge from the lockdowns and in many cases there are encouraging signs that large numbers of workers are returning to work and economic activity is stabilizing or even picking up. But in sum, the world has made less progress than expected in combating the pandemic and salvaging businesses, Josh Zumbrun reports.
Red, Red Wine
The U.S. Trade Representative’s office, which imposed 25% tariffs on wine, cheeses, olives and other products from the European Union in October, is now considering raising levies to 100%, citing a lack of progress in negotiating a settlement and eliminating subsidies for Airbus. Importers, restaurateurs and others who buy European wines say higher tariffs would devastate an industry floored by months of lockdowns, Josh Zumbrun reports.
Noted With Interest
The Internal Revenue Service will pay interest on refunds for taxpayers filing after April 15, even though the filing deadline has been extended into July, thanks to a quirk in the tax code. The result: Many people who chose to delay filing their tax returns will get a bonus from the government, Richard Rubin reports.
A top White House economist is stepping down, becoming the latest high-level economic policy staffer to exit the Trump administration during the worst economic downturn since the Great Depression. Tomas Philipson, the acting chairman of the Council of Economic Advisers, will depart next week, leaving the three-member panel with one remaining, Nick Timiraos, Kate Davidson and Andrew Restuccia report.
WHAT ELSE WE’RE READING
Government-imposed shutdowns meant to contain the coronavirus had only a small impact on overall consumer activity. “While overall consumer traffic fell by 60 percentage points, legal restrictions explain only 7 percentage points of this. Individual choices were far more important and seem tied to fears of infection. Traffic started dropping before the legal orders were in place; was highly influenced by the number of Covid deaths reported in the county; and showed a clear shift by consumers away from busier, more crowded stores toward smaller, less busy stores in the same industry,” the University of Chicago’s Austan Goolsbee and Chad Syverson write in a new working paper.
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