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Building Boom

U.S. new-home construction surged in July. Housing starts jumped 23% from June to an annual pace of almost 1.5 million, a reflection of rock-bottom interest rates and strong demand from buyers. Construction activity bottomed out in April amid Covid-19 lockdowns and broader uncertainty but has since mostly returned to prepandemic levels—July’s pace came in ahead of the 2019 average for starts. That augurs well for the recovery. Construction employment and consumer spending on furniture, appliances and home improvement have outperformed other sectors, helping buoy gross domestic product. “Although housing accounts for a small share of GDP, its impact on the broader economy is wide,” said Berenberg Capital Markets economist Roiana Reid.

WHAT TO WATCH TODAY

The U.S. quarterly services survey for the second quarter is out at 10 a.m. ET.

The Federal Reserve releases minutes from its July 28-29 policy meeting at 2 p.m. ET. Read our preview here.

Richmond Fed President Thomas Barkin speaks at a National Economists Club webinar at 3 p.m. ET.

TOP STORIES

Deal or No Deal

Treasury Secretary Steven Mnuchin on Tuesday said that talks remain stalled between Republicans and Democrats over another round of stimulus funding, though bipartisan appetite for a deal remains high. In the meantime, $600 a week in enhanced unemployment benefits expired at the end of July, creating a potential headwind for the recovery. But results so far appear muted, at least at a national level. Credit card spending tracked by JP Morgan Chase rose to a new post-Covid high in the week ending Aug. 14, bank economists said, and other real-time indicators suggest activity may have flatlined but hasn’t fallen off. One sign of consumer spending, the number of seated diners at restaurants, reached a post-pandemic high in the seven-day span ending Monday.

And the latest Google mobility data, which tracks location data on cell phones, shows visits to restaurants, retail stores and other recreation locations is roughly the same as in July.

Of course, that doesn’t mean that people who lost the enhanced benefits are able to return to work. One measure of labor-market vitality, the number of job openings, last week posted the first drop since April, according to employment web site Indeed.

Some financial relief could be on the way to the unemployed. Several states have received federal approval to disburse an extra $300 a week in benefits, though some said it would take a few weeks before they could deliver the money to workers. Arizona, Iowa, Louisiana, New Mexico, Colorado, Missouri and Utah were the first states to receive approval for Federal Emergency Management Agency funds to send out the enhanced unemployment benefits. President Trump signed an executive order earlier this month calling for the federal agency to provide the additional $300 a week, Sarah Chaney reports.

Higher and Higher

A rally in technology stocks helped lift the S&P 500 to new highs Tuesday. After more than a week of flirting with record levels, the index set its first intraday and closing highs since February. Stocks got an early boost after the Commerce Department said that housing starts jumped. Indexes also were lifted by the continuing rally in technology shares. Apart from the milestone for the S&P index, it was a relatively quiet session. Although recent economic data has been largely encouraging, traders have been held back by uncertainty over a new economic relief package in Congress, fresh U.S.-China tensions and some unease about how high stock prices are relative to earnings, Anna Isaac and Sam Goldfarb report.

So, is it a bubble? Streetwise columnist James Mackintosh says no. Investors aren’t irrationally buying just anything just because money is cheap: they are rationally buying the things that benefit during a pandemic.

Ups and Downs

Walmart’s quarterly sales surged as the retail behemoth continued to use its scale, e-commerce supply chain and grocery business to attract shoppers buying food and household goods during the coronavirus pandemic. The world’s largest retailer said sales were boosted by government stimulus spending, which lifted demand for general merchandise such as electronics, patio furniture, sporting goods and even apparel, a category with weak sales at the start of the pandemic. As the government funds tapered off, sales started to return to more normal levels in the month of July, Sarah Nassauer reports.

Another retail winner during the pandemic: Home Depot. The home-improvement retailer on Tuesday posted its strongest quarterly sales growth in nearly 20 years amid surging interest in household projects, Matt Grossman reports.

Boeing plans more job cuts in response to a pandemic-driven drop in jetliner demand it expects to continue for at least three years. The aerospace giant told its employees in a memo that it is adding a second round of buyout offers, a move that would further reduce its workforce by an unspecified number beyond the cut of 19,000 already announced in July. The company has increased the target set in April of cutting overall staff numbers by around 10%, Doug Cameron reports.

Video: College Towns Brace for Economic Shakeup

The coronavirus has pushed nearly half of U.S. colleges and universities into some degree of remote learning, a change that’s sending shock waves through small college town economies. WSJ’s Carlos Waters explains.

WHAT ELSE WE’RE READING

China’s housing market could be built on shaky ground. “We conclude that the sector is quite vulnerable to a sustained aggregate growth shock, such as Covid-19 might pose. In our baseline calibration, using input-output tables and taking account of the very large footprint of housing construction and real-estate related sectors, the adjustment to a decline in housing activity can easily trim a cumulative 5%-10% from the level of output (over a period of years),” Harvard’s Kenneth Rogoff and Tsinghua University’s Yuanchen Yang write in a working paper.

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