The Corner

The Economy

A Faltering Recovery

Traders work on the first day of in person trading at the New York Stock Exchange in New York, May 26, 2020. (Brendan McDermid/Reuters)

An article in Bloomberg has a round-up of generally depressing economic indicators here, and its authors note that:

An unprecedented increase in new Covid-19 cases is slowing the pace of the U.S. economy’s recovery from the pandemic.

Bloomberg Economics created a weekly dashboard of high-frequency, alternative and market-based data to track the economy’s plunge into recession and eventual recovery. Most of the dashboard’s 14 indicators, including applications for jobless benefits, mortgage applications and the S&P 500 index, signal a modest improvement following record plunges. But other measures, including restaurant bookings and oil rigs, have deteriorated amid a surge in coronavirus cases across the country.

This also caught my attention:

[H]omeowners remain under continued pressure and there are signs things could get worse, according to the U.S. Census Bureau’s Household Pulse Survey. Almost one in 10 households with a mortgage failed to make their last payment and 16% of respondents in a U.S. Census survey said they fear they can’t cover the next one, the data collected in late June showed.

As did this:

Federal Reserve Bank of Dallas President Robert Kaplan warned Monday that The increase in Covid-19 infections is muting the economic rebound.

Rising hospitalizations and death rates are having a “chilling effect on economic growth,” Kaplan, who is a voter this year on the rate-setting Federal Open Market Committee, said in a webcast Monday. He added that usage of face masks would mute virus transmissions and translate into faster expansion.

Any hopes of a V-shaped recovery were always, I thought, wildly optimistic. And the longer that the lockdowns lasted, the more remote the prospects of a speedy recovery were going to be.

The decision to enforce lockdowns on the scale that we have seen involved (or should have involved) an explicit recognition that they would have trade-offs — trade-offs that were far from straightforward. What is more, calculating those trade-offs was not a one-off matter — and still should not be. Deciding whether a lockdown was still “worth it” after two or four weeks is very different from deciding whether it is still worth it after two months. The same can be said about the decision to reinstate (in whole or in part) lockdowns a month or so, or maybe less, after lifting them. To apply a medical analogy, a treatment that is right for a patient who is otherwise in good health may not be appropriate for someone who is in a weakened condition.

The New York Times (my emphasis added):

It was harrowing enough for small businesses — the bars, dental care practices, small law firms, day care centers and other storefronts that dot the streets and corners of every American town and city — to have to shut down after state officials imposed lockdowns in March to contain the pandemic.

But the resurgence of the virus, especially in states such as Texas, Florida and California that had begun to reopen, has introduced a far darker reality for many small businesses: Their temporary closures might become permanent….

Nearly 66,000 businesses have folded since March 1, according to data from Yelp, which provides a platform for local businesses to advertise their services and has been tracking announcements of closings posted on its site. From June 15 to June 29, the most recent period for which data is available, businesses were closing permanently at a higher rate than in the previous three months, Yelp found. During the same period, permanent closures increased by 3 percent overall, accounting for roughly 14 percent of total closures since March.

The acceleration in the rate of closures is unsurprising. The longer the lockdowns and other COVID-19-linked uncertainty last, the more damaging the consequences.

Meanwhile, writing for Axios Markets, Dion Rabouin notes:

A new survey from Goldman Sachs… finds 84% of PPP [Paycheck Protection Program] loan recipients will exhaust their funding by the first week of August and only 16% say they’re very confident they will be able to maintain payroll if no further government relief is provided.

Put all this together, and it seems clear to me that there is now an even greater case for a blunt discussion about the trade-offs that are being made as the lockdowns continue and, for that matter, the policy implications (the human implications are, tragically, all too obvious) of the new spikes in the outbreak — even more so when some of the data are so confusing.

As for me, I will be sticking with my mask(s) for now.

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