This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.
New applications for unemployment benefits have held persistently at high levels in recent weeks, suggesting layoffs remain elevated and the labor market’s momentum is easing. Initial claims for jobless benefits have held nearly flat at more than 1.3 million a week since late June, according to the Labor Department. That halted what had been a swift decline from a peak of 6.9 million in late March, when the pandemic and business closures shut down parts of the U.S. economy. Similarly, the number of workers receiving unemployment benefits through regular state programs—which covers the majority of workers—has plateaued near 17 million in recent weeks. The stable number suggests that new hires and recalls of workers are offsetting layoffs, but no longer significantly pushing down the number on jobless assistance, Eric Morath reports.
The Labor Department releases jobless claims data at 8:30 a.m. ET.
WHAT TO WATCH TODAY
U.S. jobless claims are expected to register at 1.423 million in the week ended Aug. 1, down slightly from 1.434 million a week earlier. (8:30 a.m. ET)
Dallas Fed President Robert Kaplan speaks about the economy at 10 a.m. ET, and Fed governor Lael Brainard speaks about instant payments at 12 p.m. ET.
Japan household spending for June is out at 7:30 p.m. ET.
Many economists expect last week’s expiration of $600 in enhanced weekly unemployment benefits to lead to a sharp drop-off in household spending and a setback for the U.S. economy’s near-term recovery, even if the lapse turns out to be temporary. The payments, economists say, allowed consumers to pay rent, utilities, car loans and credit-card bills, protecting the economy from the cascading effects of a sudden drop in consumer demand as the coronavirus pandemic swept across the U.S., Kate Davidson reports.
In normal times, spending by unemployed workers typically falls about 7%, because benefits only replace a fraction of their wages. Since Congress authorized the enhanced payments in March, spending among laid-off workers climbed 10% from before the pandemic, while aggregate spending among people with jobs fell 10%, researchers at the University of Chicago and the JPMorgan Chase Institute found.
There’s still no deal to replace the enhanced benefits, which ran out at the end of July. The White House moved to increase the pressure on Democratic leaders to give ground in their coronavirus-aid negotiations, saying Republicans were prepared to walk away and rely on executive actions by President Trump if an agreement isn’t within reach by the end of the week, Siobhan Hughes reports.
Chicago Fed President Charles Evans said the U.S. economy would face a much steeper climb should Congress fail to at least partially extend more generous unemployment benefits and take broader fiscal policy action. “Trouble is brewing with the expiration of these relief policies,” Mr. Evans told reporters. “If we go very long without somehow addressing the reduction and evaporation of that support, I think it’s going to show up in lower aggregate demand. And that would be very costly for the economy.”
Home Sweet Home, Office, Classroom…
In a world of zero interest rates and bubbly stock markets, your house may offer the best returns of any asset class—provided you think of “return” the right way. Total return is capital gains plus income. With stocks and bonds, the income is dividends or interest—cold, hard cash. But with your house, it is the services it provides, which may not be cashable but are very tangible. Traditionally, the most important service your house delivered was shelter. But since the pandemic, its services have expanded way beyond that: office, classroom, recreation space, Greg Ip writes.
Speaking of services, the Institute for Supply Management’s index of activity in industries such as travel, health care, restaurants and real estate rose to 58.1 from 57.1 in June. Readings above 50 indicate expansion, while a level below that shows a contraction. “Respondents remain concerned about the pandemic; however, they are mostly optimistic about business conditions and the economy as businesses continue to reopen,” said survey director Anthony Nieves.
U.S. exports and imports both rose in June for the first time in six months. But trade flows remained well below prepandemic levels, reflecting an only partial economic recovery, Paul Kiernan reports.
The U.S. has become dependent on China for vital pharmaceutical supplies. Acetaminophen, antibiotics and high blood pressure treatments are among a slew of pharmaceutical ingredients made predominantly by China. Pandemic-related disruptions and high demand have expanded concerns about the supply of medicines, Chuin-Wei Yap reports.
Top of the Pops
The Bank of England held its benchmark interest rate steady and said the U.K. economy would take until the end of 2021 to make up the ground lost during the coronavirus pandemic. Officials estimate the economy shrunk by around 20% in the second quarter as a nationwide lockdown to contain the outbreak came into force. That compares with estimates of 9.5% for the U.S. and 12% for the eurozone, highlighting the scale of the U.K.’s economic hit, Jason Douglas reports.
Explosion Brings Lebanon to the Brink
Lebanon was already grappling with an economic and political crisis. Tuesday’s catastrophic explosion destroyed one of Lebanon’s economic arteries, the port of Beirut, and caused billions of dollars in damage. Rebuilding the unraveling economy will be much harder now, Jared Malsin and Nazih Osseiran report.
WHAT ELSE WE’RE READING
What if Covid-19 is here to stay? “We do not yet know whether individuals who recover from Covid-19 can be reinfected. If immunity wanes, the disease will become endemic, in sharp contrast to a model in which recovery confers permanent immunity. This column considers the possibility that immunity is indeed only temporary, and derives a stylised optimal containment policy to reduce the initial wave of contagion and then manage persistent infections. In practice, this means that partial lockdowns and social distancing measures may be the norm for years to come,” Chryssi Giannitsarou and Flavio Toxvaerd write at the Center for Economic Policy Research.
SIGN UP FOR OUR CALENDAR
Real Time Economics has launched a downloadable calendar with concise previews forecasts and analysis of major U.S. data releases. To add to your calendar please click here.