Saturday, July 18, 2020

Hopes for Economic Recovery Fizzle Amid Coronavirus Resurgence

I called the second California lockdown weeks ago. My wife works retail, and I suspect her employer is going back to curbside business soon, although they haven't yet. Frankly, everything else is locked down again, just like back in March.

Next, I'm predicting California colleges and universities will announce their spring 2021 classes will be all online.

We'll see.

At NYT, "A Resurgence of the Virus, and Lockdowns, Threatens Economic Recovery":

WASHINGTON — The United States economy is headed for a tumultuous autumn, with the threat of closed schools, renewed government lockdowns, empty stadiums and an uncertain amount of federal support for businesses and unemployed workers all clouding hopes for a rapid rebound from recession.

For months, the prevailing wisdom among investors, Trump administration officials and many economic forecasters was that after plunging into recession this spring, the country’s recovery would accelerate in late summer and take off in the fall as the virus receded, restrictions on commerce loosened, and consumers reverted to more normal spending patterns. Job gains in May and June fueled those rosy predictions.

But failure to suppress a resurgence of confirmed infections is threatening to choke the recovery and push the country back into a recessionary spiral — one that could inflict long-term damage on workers and businesses large and small, unless Congress reconsiders the scale of federal aid that may be required in the months to come.

The looming economic pain was evident this week as big companies forecast gloomy months ahead and government data showed renewed struggles in the job market. A weekly census survey on Wednesday showed 1.3 million fewer Americans held jobs last week than the previous week. A new American Enterprise Institute analysis from of shopper traffic to stores showed business activity had plunged in the second week of July, in part from renewed virus fears.

Amazon on Wednesday extended a work-from-home order for eligible employees from October to January, and Delta Air Lines said on Tuesday it was cutting back plans to add flights in August and beyond, citing flagging consumer demand.

The nation’s biggest banks also warned this week that they are setting aside billions of dollars to cover anticipated losses as customers fail to pay their mortgages and other loans in the months to come.

May and June will prove to be “easy” in terms of recovery, Jennifer Piepszak, the chief financial officer of JPMorgan Chase, said during an analyst call on Tuesday. “We’re really hitting the moment of truth, I think, in the months ahead,” she said.

Jamie Dimon, the bank’s chief executive, said much of the economic pain had been blunted by federal spending, which was now running out. “You will see the effect of this recession,” he said.

Some companies that used small-business loans to retain or rehire workers are now beginning to lay off employees as those funds run out while business activity remains depressed. Expanded benefits for unemployed workers, which research shows have been propping up consumer spending throughout the spring and early summer, are scheduled to expire at the end of July, while more than 18 million Americans continue to claim unemployment.

Many states are already renewing lockdowns, including California, where officials have ordered indoor bars, restaurants, gyms and other establishments to close. College sports conferences are beginning to cancel fall sports, including the lucrative football season, and concert tours are out of the picture.

“The earlier-than-anticipated resumption in activity has been accompanied by a sharp increase in the virus spread in many areas,” Lael Brainard, a Federal Reserve governor, said on Tuesday. “Even if the virus spread flattens, the recovery is likely to face headwinds from diminished activity and costly adjustments in some sectors, along with impaired incomes among many consumers and businesses.”

Most economists abandoned hope for a “V-shaped” recovery long ago. Now they are warning of an outright reversal, with mounting job losses and business failures. And this time, much of the damage is likely to be permanent.

“Our assumption has to be that we’re going into re-lockdown in the fall,” said Karl Smith, the vice president of federal policy at the conservative Tax Foundation in Washington.

Until recently, Mr. Smith said, he had been pushing administration officials and members of Congress to begin phasing out an extra $600 per week for unemployed workers — perhaps replacing it with an incentive payment for Americans who return to work — and to shift spending toward tax incentives.

The last two weeks of coronavirus data changed his mind. He is now calling for another large economic rescue package from Washington, including extending the enhanced unemployment benefits, offering more aid to small businesses and perhaps sending another round of stimulus checks to American households.