The U.S. economic recovery is showing incipient signs of weakening in some states where coronavirus cases are mounting.
The ebbing is evident in such high-frequency data as OpenTable restaurant reservations and follows a big bounce in activity as businesses reopened from lockdowns meant to check the spread of Covid-19.
“We’re now starting to see very early evidence that things are leveling off” in some of the states that reopened first and are now suffering rising virus cases, said Michelle Meyer, head of U.S. economics at Bank of America Corp.
The result, she said, is likely to be an uneven recovery, even as gross domestic product rapidly rebounds next quarter from what will probably be the steepest nosedive since the Great Depression. “It’s going to be fits and starts,” she said. “It’s not going to be a smooth path.”
Jobs data on Thursday reflected that. Applications for unemployment benefits were higher than forecast for a second week, clocking in at 1.48 million after an upwardly revised 1.54 million in the prior period. The median forecast called for 1.32 million. Continuing claims, however, declined more than estimated -- to 19.5 million in the week ended June 13.
“The stickiness that we see in claims is a reason to be concerned,” Meyer said even before the latest report. “It tells you there’s still some firing going on” even as the economy reopens.
Among America’s most-populous states, Texas, Florida and California are experiencing a surge in coronavirus outbreaks even while others, including New York, see declines. Overall, counties accounting for between one-third and one-half of U.S. GDP are suffering from worsening trends in new cases or Covid-19-related deaths, according to research by Deutsche Bank AG economists.
The S&P 500 Index slumped 2.6% and Treasury yields fell on Wednesday as investors grew anxious about the economy’s prospects.
“We’re playing mediocre Whac-A-Mole” in controlling the disease, former Treasury Secretary Lawrence Summers said.
He told the Economic Club of New York on Wednesday that 30% of the economy will need to be shut back down -- either by government decree or by people and companies acting on their own -- to prevent the pandemic from getting out of control.