The Economic Rebound May Be Losing Some Momentum
July 14, 2020
As new coronavirus cases surge in parts of the country, the economic recovery may be losing steam. Over the past 14 days, 38 states have seen an increase in cases, and Texas and California have reinstated partial lockdowns, dealing another blow to industries, most notably retail and hospitality, that were just beginning to find their footing.
Early data suggests that the labor market may be contracting. Data from digital timeclock companies showed the number of hours being worked was on a steady uptick until late June, when it began to flatten before declining in early July. The decline may be attributable to the July 4th holiday, but the past month has also seen a surge in claims for special relief from a federal unemployment program. The number of claims for the program, which covers gig workers and freelancers who would otherwise not qualify for state unemployment, jumped 53% in June, to a total of 14.5 million. This is in addition to the 16.8 million people collecting state benefits.
We will get a clearer picture of the recovery’s trajectory in coming days and weeks as consumer spending and sentiment numbers are released. Much of the recovery depends on consumer spending, so if the data indicates that Americans are too fearful to spend, it could dull the momentum of the economy further.