Amid strong June job growth, signs U.S. recovery may be stumbling

July 2, 2020

By Howard Schneider

(Reuters) – The U.S. economic recovery, after two months of faster-than-expected job gains, may be stumbling as a surge of new coronavirus infections prompts states to delay and in some cases reverse plans to let stores reopen and activities resume.

The latest batch of high-frequency data assembled by Federal Reserve officials, economists, cellphone tracking companies, and employee time management firms suggests activity stalled in recent days, casting a cloud over Thursday’s strong U.S. employment report.

The Labor Department reported a gain of 4.8 million jobs in June, marking the second straight month of record employment growth.

But a Federal Reserve Bank of New York weekly economic index dipped slightly last week as consumers grew less confident about the economy.

Meanwhile, estimates of foot traffic to retail stores, compiled by Reuters from cellphone data supplied by Safegraph and indexed to March 1, fell for the first time since early April, at the bottom of the economic crisis triggered by the novel coronavirus pandemic. Similar data from Unacast also dipped, with what had been a tentative return to restaurants, gyms and beauty salons stalled amid rising coronavirus infections.

Hours worked at a sample of more than 44,000 small businesses, whose employee hours are managed by Homebase, fell in 25 states in the week ending June 28. That included a more than 7% decline in Arizona and a more than 5% drop in Texas, where new outbreaks forced governors to renege on aggressive efforts to reopen the economy.

“More than ever, we’re concerned about the worsening health situation and its impact on the burgeoning recovery. Rebounding mobility and poor use of protective equipment will make for a dangerous summer cocktail,” Oxford Economics analyst Gregory Daco wrote. The firm’s recovery index rose slightly for the week ended June 19 as Americans spent and drove more, and continued returning to restaurants and hotels.

That rising mobility helped spur the June job gains and pushed the unemployment rate down to 11.1% from 13.3% in May. But with mixed adherence to social distancing, mask use and other personal behaviors that can slow the spread of the coronavirus, it also caused the indexes’ health measures to erode.

COVID-19 caseloads have reached new records nationally and particularly in a cluster of southern and southwestern states which were hesitant at first to set strict rules for managing the health crisis.

Goldman Sachs analysts estimated that states including over half the U.S. population had now paused or partially reversed their reopening plans, with limits reimposed most often on bars, restaurants and the size of gatherings – likely undermining what remained of the slight improvement in the company’s tracking indices for industrial and consumer activity.

“The spread of the virus is worsening in almost every state,” company analysts wrote, noting that only the small New England states of Vermont and New Hampshire currently meet all four of the recommended criteria for restarting commerce.

For more details on the data referred to in this story:

Unacast https://www.unacast.com/covid19/covid-19-retail-impact-scoreboard, Homebase https://joinhomebase.com/data/covid-19, Safegraph https://www.safegraph.com/dashboard, Kronos https://www.kronos.com/about-us/newsroom/update-us-workforce-activity, NYFed https://www.newyorkfed.org/research/policy/weekly-economic-index, Goldman https://www.goldmansachs.com/insights/topics/covid-19.html, Oxford https://www.oxfordeconomics.com, DOL https://oui.doleta.gov/unemploy/DataDashboard.asp

(Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao)