with Brent D. Griffiths

The economy is sending up alarms across the map, showing how the pandemic's resurgence is dragging a fledgling rebound back into a skid. 

Economists are watching a raft of real-time data measuring everything from credit card spending to the extent to which people are venturing from home as the crisis remains too fluid to judge solely by traditional indicators of stress. Their analysis depicts a recovery that peaked a month ago. The weeks since have seen an uptick in businesses closing permanently, a drop-off in consumer spending; and layoffs reaching into white-collar sectors that have typically proven more recession-proof.

The upshot, economists warn, is likely a longer slog out of a deeper hole — and more permanent scarring. “It’s not just the regulations forcing a rollback, not just increased fear among consumers, and not just the deteriorating public health situation,” Oxford Economics chief U.S. economist Gregory Daco tells me. “It’s a combination of all these factors, and we’ve seen them all taking hold over the last four weeks.”

Job losses are piling up again.

In the immediate term, many now see rising chances for employment rolls to shrink this month, after posting two months of job growth in May and June. 

By mid-July, there were about 6.7 million fewer Americans on the job than a month earlier, according to the Household Pulse Survey, a weekly poll the Census Bureau debuted this spring. The latest installment found employment dropped by 4.1 million in just the past week. Via former Obama Treasury Department economist Ernie Tedeschi:

Tedeschi noted the survey is new and “experimental” with a limited track record, but it accurately predicted strong employment growth in June — and notably now appears to be projecting a turn in the opposite direction. “Between this, the mobility data, and the high-frequency small business data, I think July is very likely to be weak,” he tweeted. “Negative is a distinct possibility and would certainly be consistent with a story of state re-closings.”

The pain is no longer just concentrated among hospitality, travel and retail sectors that absorbed some of the heaviest blows early in the pandemic lockdowns. Data from the jobs site Indeed shows openings for retail work actually increased by 5.4 percent over mid-July last year, while software job postings have plunged 35 percent:

Anecdotal evidence supports the conclusion that white-collar jobs are taking a more painful hit now: LinkedIn announced Tuesday it is eliminating 960 positions, or 6 percent of its workforce, a signal “that hopes for a quick hiring rebound for professionals may be dimming,” Jena McGregor reports. Indeed, “salary cuts are spreading most rapidly in white-collar industries, which suggests a deep recession and slow recovery since white-collar workers are usually the last to feel financial pain,” Heather Long and Andrew Van Dam reported earlier this month.

More businesses are shutting their doors for good.

Yelp reports that 55 percent of the business closures listed on its website as of July 10 are permanent, up 14 percent from June. Via the latest Yelp Economic Average report, released Wednesday: 

Three of the four states enduring the greatest number of closures — California, Texas and Florida — have been epicenters of the latest outbreaks:

The rising permanent closures — and the other signs of permanent damage — point to a failure of the central mission of Washington's multi-trillion-dollar bailout effort. The unprecedented policy response has aimed to preserve the economy in an induced coma until the country moves past the pandemic. Now, as emergency relief programs expire, and lawmakers and the Trump administration squabble over how to replace them, the specter of a sharper downturn looms. 

And with state and local leaders reimposing restrictions where the coronavirus is spiking again, consumers have already moved to isolate themselves and close their wallets, observes Joseph Brusuelas, chief economist for the consultancy RSM. He says real-time indicators, from OpenTable restaurant reservations to Apple mobility data showing how widely people are roaming, imply “the public is not yet ready to go back to crowded restaurants or send their kids back to school. And they are likely to hold back on a whole array of consumer-based activities because they require closer proximity to other individuals.”

In that sense, Brusuelas says, “it does look like the beginning of all this, when the public pulled back before officials ordered lockdowns. The public is clearly making its own decisions independent of orders” from elected officials. 

The latest readings point to a longer and more painful climb back to economic health.

Brusuelas says lower-income Americans' worries about the looming expiration of enhanced unemployment benefits may be compounding the recent blow to consumer spending. The New York Fed economists this week blamed that downturn in retail sales for reversing a two-month rally in the bank’s Weekly Economic Index.

Other macroeconomic assessments see a similarly troubling picture emerging. “The foundations to this recovery are cracking under the weight of a mismanaged health crisis,” Oxford Economics’s Daco writes in a note out this morning. In it, he reports the firm’s own Recovery Tracker “fell for the third time in five weeks in the week ended July 10.”

The dynamic prompted Brusuelas, in his latest analysis, to boil down the challenge facing the country into a four-word epigram: “No vaccine, no recovery.”

Latest on the federal response

Senate GOP struggles to finalize its relief plan.

Some lawmakers speculate that a deal might never happen: “Several lawmakers speculated openly that they might be unable to make any deal with Democrats at all, suggesting the possible need for a stand-alone extension of unemployment benefits that expire at the end of this month," Erica Werner, Jeff Stein, Seung Min Kim and Rachael Bade report.

“Lawmakers and aides emphasized that their intention was to negotiate and pass a deal with Democrats in the next several weeks. Senate Majority Leader Mitch McConnell is readying a bill as a starting point for talks that he had hoped to launch as early as Wednesday, though that timeline slipped to [today] as internal negotiations bogged down.”

  • There has been some progress: Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows announced an agreement with key senators late Wednesday on certain spending priorities in the bill. As part of this, senators agreed to $16 billion for testing and tracing — down from the $25 billion they had initially sought — after administration officials argued that $9 billion remained unspent in a federal fund. Administration officials had initially sought to zero out the testing funding.”
  • The payroll tax cut remains a sticking point: “Sen. Kevin Cramer (R-S.D.) said he thought it was possible that even if they succeed in overcoming their internal differences, Republicans would be unable to bridge the ‘pretty big gap’ with Democrats, who have embraced a $3 trillion bill containing multiple priorities Republicans oppose, such as a large package of aid for cities and states, among other things.”

Mnuchin still wants a deal by the end of next week: “The secretary and other administration officials insist they must act by the end of next week, because enhanced unemployment benefits are set to expire for millions of Americans. McConnell has dismissed that timeline as unrealistic but is working to unveil his bill so that negotiations with Democrats can commence.”

Coronavirus fallout

From the U.S.:
  • At least 3,943,000 cases have been reported; at least 140,000 have died.

Via the Covid Tracking Project:

  • Amid rising deaths, Trump paints rosy picture: Trump painted a wishful view Wednesday of the U.S. response to the pandemic, in which existing treatments can almost cure patients flooding hospitals, all schools will safely reopen this fall, and the country’s soaring cases are confined to a handful of states,” William Wan and Jacqueline Dupree report.
  • Home sales rack up record gain: U.S. home sales increased by the most on record in June, boosted by historically low mortgage rates, but the outlook for the housing market is being clouded by low inventory and high unemployment,” Lucia Mutikani reports.
  • Small businesses brace for prolonged crisis: “An estimated 1.85 million U.S. businesses closed their doors or temporarily suspended operations in the second quarter, according to Oxxford Information Technology Ltd. in Saratoga, N.Y., which tracks roughly 32 million U.S. businesses of all sizes using data from credit bureaus, surveys and government sources,” the Wall Street Journal's Ruth Simon, Amara Omeokwe and Gwynn Guilford report.
From the corporate front:
  • Pfizer, BioNTech reach $1.95 billion reach vaccine deal with the federal government: “The agreement could allow the U.S. to buy a large portion of the vaccine Pfizer plans to make through the end of 2021 and comes on top of the government’s vaccine contracts with AstraZeneca for 300 million doses and Novavax for at least 100 million doses,” Hannah Denham and Carolyn Y. Johnson report.
  • Tesla posts profit amid lockdowns: Elon Musk's company “reported a $104 million second-quarter profit, attributing the gains to ‘operational improvements’ to reduce expenses in a quarter where production was disrupted,” Faiz Siddiqui reports. “During a conference call with analysts, Musk announced Tesla would be building its next ‘Gigafactory’ plant in the Austin area."
  • United CEO says mask wearing will help demand: “Chicago-based United expects revenues, which fell 87 percent in the second quarter from a year ago, to recover over time to around 50% of 2019 levels and plateau there until a vaccine is widely distributed,” Reuters's Tracy Rucinski and Sanjana Shivdas report.
  • Banks face unique problem with masks: The American Bankers Association, the industry’s largest lobbying group, said Monday it was ‘urging’ its members to require customers wear face masks,” Renae Merle reports. Relaxing prohibitions against face masks initially made sense, Brian P. Brooks, the acting comptroller of the currency, said in a letter to the U.S. Conference of Mayors last month … but it's not sustainable.”
  • Companies start cutting office space: “A Reuters analysis of quarterly earnings calls over the past week revealed more than 25 large companies plan to reduce their office space in the year ahead, a move designed to reduce the second-largest expense after payrolls at corporations,” David Randall reports.
Around the world:
  • U.N. calls for temporary basic income: “Introducing a temporary basic income for the world’s poorest people could prevent the spread of the coronavirus by freeing up millions of workers to stay home, the U.N. Development Programme said,” Antonia Farzan reports. “Paying a guaranteed basic income to 2.7 million people who live at or below the poverty line in 132 developing countries would cost $199 billion per month, the agency calculated in a new report.”
  • Mexican president dismisses importance of masks: “Although most states in Mexico have required their residents to wear face masks in public, one prominent Mexican seems unconvinced: President Andrés Manuel López Obrador,” Teo Armus reports.

When superpowers collide

Consulate fight becomes latest skirmish in U.S.-China relations.

Analysts on both sides say things are worst than they've been in 40 years: “After the news broke, a phrase that Mao Zedong, who established the communist-run People’s Republic of China, wrote in 1949 about the China-U.S. relationship began trending on the Chinese Internet: ‘Cast Away Illusions, Prepare for Struggle,'” Anna Fifield, Carol Morello, Ellen Nakashima and Shane Harris report after the U.S. ordered Beijing to vacate a consulate in Houston by Friday.

“The State Department accused China of having engaged ‘in massive illegal spying and influence operations,’ interfering in ‘domestic politics,’ coercing ‘our business leaders’ and threatening ‘families of Chinese Americans residing in China, and more.’ The Chinese Embassy in Washington condemned what it called ‘an outrageous and unjustified move which sabotages China-U.S. relations …' The Chinese government is suspected of using the Houston consulate as a hub for aggressive intelligence operations that U.S. officials said had gone too far, and its closure can be read as a rebuke and a warning to Beijing."

Xi pledges stronger domestic market: “China’s president pledged to keep strengthening the country’s domestic market while further opening it to foreign investors during a meeting with local and international businesspeople, signaling his willingness to bolster economic ties at a time of rising international tensions,” the WSJ's Trefor Moss reports.

French limits on Huawei amount to eight year de facto ban: French authorities have told telecoms operators planning to buy Huawei 5G equipment that they won’t be able to renew licences for the gear once they expire, effectively phasing the Chinese firm out of mobile networks,” Reuters's Mathieu Rosemain and Gwénaëlle Barzic report.

“Like other countries in Europe, France is laying the ground for its next-generation 5G mobile market in the middle of a growing geopolitical storm between two global superpowers.”

Market movers

Stocks hit five-month high.

The milestone comes after a four-day rally. “U.S. stocks rose for a fourth day as investor optimism over the likelihood for a new spending bill and potential coronavirus vaccines outweighed concern about an escalation of tensions with China. The dollar weakened to the lowest level since March,” Bloomberg's Amena Saad and Sarah Ponczek report

“The S&P 500 jumped to a five-month high, with utilities, real estate and industrial shares leading the gains. Trump administration officials are said to be discussing a short-term extension of unemployment insurance before the benefits lapse. Futures had retreated overnight on news that the U.S. ordered China’s Houston consulate to quickly close. Shares of Microsoft Corp. slumped and Tesla Inc. surged after the companies released earnings following the close of regular trading.”

Pocket change

Nike shakes up its executive team.

The company also announced job cuts: “The company said the changes it is making will lead to a ‘net loss of jobs across the company,’ which will result in pretax, one-time employee termination costs of roughly $200 million to $250 million. As of May 31, 2019, Nike had approximately 76,700 employees worldwide, according to its annual report,” CNBC's Lauren Thomas reports.

“Among the leadership changes, which are all listed here, Nike has named the former head of its global categories, Amy Montagne, as vice president of its men’s business. It named the former head of its specialty businesses, Whitney Malkiel, as head of its women’s business. The former head of Nike’s North American kids business, McCallester Dowers, has been named head of kids globally. They are all reporting to Michael Spillane, who is becoming head of a new consumer creation division, Nike said.”

Apple releases study defending App Store's 30 percent cut: “For [CEO Tim] Cook, the questioning is expected to center around Apple’s App Store, which is the only way to install consumer software on an iPhone. For years, developers have alleged Apple engages in anti-competitive behavior, with complaints centering around Apple’s 30 percent cut of digital goods, and business practices such as requiring developers to use Apple’s payment system for digital purchases,” CNBC's Kif Leswing reports before Cook testifies at a major hearing on Capitol Hill.

“Apple presented some arguments defending the App Store that could factor into next week’s testimony. While the company says it’s not a preview of what Cook will say at Monday’s hearing, it commissioned a study from Analysis Group … finds that Apple’s App Store’s fees and practices are largely in line with other digital marketplaces, including the Google Play app store and the Amazon Appstore.”

Chart topper

Via Liz Ann Sonders, chief investment strategist for Charles Schwab & Co.: 

Daybook

Today:

  • The Labor Department releases the latest numbers on weekly jobless claims
  • The House Financial Services Committee holds a hearing on the Heroes Act, Democrats' sweeping proposal for the next phase of coronavirus relief
  • The Senate Small Business Committee holds a hearing on minority small businesses' access to capital during covid
  • Financial Services Chairwoman Maxine Waters (D-Calif.) and Sen. Elizabeth Warren (D-Mass.) deliver introductory remarks during the Center for Responsible Lending's virtual event honoring Dodd-Frank.
  • Amazon, AT&T, Southwest Airlines, Hershey, Intel, Alaska Air Group, Union Pacific, Tractor Supply Co., Aaron's and Scholastic are among the notable companies reporting their earnings. (Amazon CEO Jeff Bezos owns The Washington Post)

Friday:

  • The National Association of Realtors releases new-home sales data for June
  • Verizon, American Express, Bloomin' Brands, Goodyear Tire & Rubber, Honeywell International and Lear Corp. are among the notable companies reporting their earnings

The funnies

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Bull session