Amid election uncertainty and COVID-19 surge, US economic recovery wobbles

Amid election uncertainty and COVID-19 surge, US economic recovery wobbles

California closes indoor shopping malls
A closed Victoria's Secret store is seen at an indoor shopping mall before the mall closes again due to new restrictions by the State of California during the global outbreak of the coronavirus disease (COVID-19) in Carlsbad, California, on Jul 14, 2020. (Photo: REUTERS/Mike Blake)

WASHINGTON: Fresh signs the US economic recovery may be faltering surfaced over the last week with high-frequency measures of retail traffic and jobs both ebbing amid a record-breaking surge in coronavirus cases.

Millions of formerly employed Americans remain sidelined by the recession triggered by the virus, and uncertainty over the future direction of the country - politically and economically - remains especially high in the shadow of this week's still-unsettled US presidential election.

Foot traffic to retail locations turned lower, according to data collected by Unacast and Safegraph and indexed to Mar 1, before a state of emergency was declared to combat the pandemic. The firms' information is based on cellphone movements matched against a library of identified retail locations.

Estimates of seated diners at restaurants collected by reservation site OpenTable fell for a third straight week.

The number of people working declined for a second straight week at a sample of around 55,000 small businesses whose employee time is managed by Homebase.

The firm has been providing data on that set of businesses, all of which were open at the start of the year, to see how they fared through the pandemic. The number of them now open has fallen for six weeks in a row, from a post-pandemic high of 45,347 in mid-September to 44,403.

Employment at a broader set of industries, maintained by UKG, has been sluggish, growing at less than 1 per cent through October, virtually flat for the smallest businesses, and falling over the past week.

An index of job openings maintained by the Indeed Hiring Lab was relatively flat through October, at around 15 per cent below the levels of a year ago. Estimates from analytics firm Chmura, comparing new job openings to predicted levels without the pandemic, showed a deeper gap of more than 20 per cent.

New claims for unemployment insurance, at 751,000 for the week ending Oct 31, have changed little in recent weeks, stalled at a level above the peak seen during the 2007-2009 Great Recession.

Dave Gilbertson, UKG's vice president for strategy and operations, said it appears the new wave of infections has led to "extreme caution" when it comes to hiring plans.

The virus has now infected nearly 10 million people and the number of new cases topped 100,000 on Wednesday for the first time. Compared with the more geographically contained outbreak in the spring, centred in densely populated areas around the Northeast, COVID-19 is now in wide circulation, with the highest rates of infection in the Midwest. More than 233,000 people in the country have died.

The overall pace of recovery shows signs of plateauing, and a broader read on that will come on Friday when the US Labor Department releases its monthly employment report for October. The country is expected to have added 600,000 non-farm payroll jobs last month, according to a Reuters poll of economists. That would still leave a gap of roughly 10 million from pre-pandemic levels.

Even that data will be backward-looking, rooted in estimates from a government survey conducted three weeks ago.

In the more quickly evolving pandemic economy, economists have turned to alternative data sources to gauge conditions closer to real time.

Those indicators were the earliest to show the initial rebound in May and June. They have turned flat this fall, particularly in October as the coronavirus spread.

Adding to the economic risk now: Uncertainty over the outcome of Tuesday's presidential election and whether a still-gridlocked US leadership will find ways to stem the country's twin health and economic crises.

Early measures helped. Legislation passed by Congress in March unleashed trillions of dollars of federal assistance for households and businesses, keeping establishments solvent and supporting personal income, spending and savings despite continued high unemployment.

New bankruptcy data from Epiq AACER for October showed that, while the number of Chapter 11 filings used by larger companies remains about 30 per cent higher than the last year, the number of new filings fell more than 26 per cent from September. Including personal and other commercial bankruptcies, overall filings are down more than 40 per cent on a year-to-date basis compared to 2019.

A New York Fed weekly index of projected gross domestic product rose last week and has climbed steadily, tracking the ongoing resumption of economic activity.

But on a broad basis, the situation is at best uncertain.

An Oxford Economics broad recovery index fell for the third straight week and hit its lowest level since mid-August, driven by a sharp drop in health metrics that may be curbing people's willingness to move about and may be starting to suppress demand.

"The dangerous cocktail of surging Covid infections and fading fiscal support has led to a visible slowdown," wrote Gregory Daco, Oxford's chief US economist. "The economy is sending distressing signals to policymakers."

Source: Reuters