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Is the U.S. Labor Market Already Losing Steam?
The Labor Department’s July jobs report is out Friday at 8:30 a.m. ET. Economists are forecasting a net gain of 1.482 million jobs, a figure that in normal times would be blowout fantastic but in current circumstances would be a disappointing slowdown from the prior two months.
Where do we see a slowdown? Labor Department data show the number of people filing claims for unemployment insurance ticking up toward the end of July. And separate research from the Census Bureau and payroll software provider Homebase show employment stagnating or declining since June.
The shift is correlated with a rise in Covid-19 cases. By the end of July, small-business employment in states that were initially hit hard by Covid-19 and late to reopen was roughly the same as states that had reopened early but then faced a rising number of infections, Homebase data shows. Neither set of states was trending in the right direction.
Another reaction to rising caseloads? More social distancing. Measures of mobility in early openers versus late openers have converged. One possible benefit of renewed caution: Four virus hot spots—Arizona, California, Texas and Florida—started showing tentative signs of improvement after being pummeled by the virus in July. One possible takeaway: “The economic recovery going forward is likely to be geographically uneven, dictated by local infection conditions,” Dallas Fed economists wrote in a new research brief.
What do the developing trends mean for Friday’s employment report? Don’t be surprised if there’s a surprise in either direction. Forecasts are especially fraught in an economy whipsawed by any crisis, and especially this crisis. But some economists are warning of a marked deterioration. “We conclude that the pace of improvement in the labor market has stalled and begun to roll over, though it is not clear this will be fully captured in [Friday’s] July jobs report,” Deutsche Bank economists wrote in a note to clients. —J.S.
WHAT TO WATCH TODAY
Bank of Japan Gov. Haruhiko Kuroda speaks at a Columbia Business School webinar at 8 a.m. ET.
The ADP employment report for July is expected to show a gain of 1 million jobs from the prior month. (8:15 a.m. ET)
The U.S. trade deficit for June is expected to narrow to $50.3 billion from $54.6 billion a month earlier. (8:30 a.m. ET)
IHS Markit’s U.S. services index for July is expected to register at 49.6, unchanged from a preliminary reading. (9:45 a.m. ET)
The Institute for Supply Management’s nonmanufacturing index for July is expected to fall to 55 from 57.1 a month earlier. (10 a.m. ET)
Cleveland Fed President Loretta Mester speaks on the economic outlook at 5 p.m. ET.
The U.S. and China have agreed to high-level talks on Aug. 15 to assess Beijing’s compliance with the bilateral trade agreement signed early this year, according to people briefed on the matter. The trade pact has emerged as one of the few remaining avenues for the two countries to engage on matters of mutual concern. Relations have deteriorated in recent months, with the Trump administration hammering Beijing over the coronavirus outbreak, Hong Kong and the treatment of Uighurs in western China. The focus will be on the so-called phase-one deal, which includes China’s commitment to boost its U.S. imports by $200 billion over two years. So far, China has fallen well short of the pace needed to reach the target, Lingling Wei and Bob Davis report.
The latest point of contention: Washington’s ultimatum to the Chinese owner of TikTok—sell the app’s U.S. operations or leave the country.
White House negotiators said they aim to reach a deal with Democrats on a new coronavirus-relief package by the end of the week, with both sides saying they made progress in talks to bridge differences in unemployment payments and other aid proposals. Neither side disclosed whether progress had been made on the most intractable of the issues, including aid for states and localities and how much money the federal government would provide to supplement state jobless aid, Siobhan Hughes and Kristina Peterson report.
Democrats are trying to use the coronavirus relief law to repeal the cap on state and local tax deductions. Republicans are mocking the effort as a tax cut for the rich, Richard Rubin reports.
Businesses owned by Black people were hit especially hard by the coronavirus pandemic because of a combination of geography, limited reach of a key federal aid program and weaker ties to banks, a new report from the Federal Reserve Bank of New York finds. The authors suggest their findings can offer insight for federal policy makers as they consider additional coronavirus aid, Amara Omeokwe reports. “To have the greatest impact, the next round of Covid-19 relief should be more targeted geographically to focus on the hardest-hit areas and communities that lack critical infrastructure (hospitals, banks) to ameliorate the gaps,” the report said.
Do Not Pass Go
The number of businesses seeking chapter 11 protection rose 52% in July from a year earlier as the coronavirus pandemic roiled the economy and upended businesses from coast to coast. Personal bankruptcy filings were also up, according to legal-services firm Epiq Systems. The upward trend in bankruptcy filings in the U.S. is expected to continue in the coming months as government-funded assistance programs come to an end, Aisha Al-Muslim reports.
Cheers (Drink to That)
North America has been one of the most resilient liquor markets in the world since the Covid-19 pandemic began. It is a pity for Diageo that America’s exceptional drinking habits can’t be exported. The London-based maker of Johnnie Walker scotch and Guinness stout said Tuesday that sales in North America fell just 1% over the six months through June compared with the same period of 2019. Far tougher conditions everywhere else dragged group sales down 23% overall, Carol Ryan reports.
WHAT ELSE WE’RE READING
A second wave of U.S. layoffs is under way. A new Cornell-JQI-RIWI survey finds 31% of recalled workers have been laid off a second time and another 26% have been told by their employer they may be laid off again, with a notable rise in “healthy” states. The results suggest “repeat layoffs and furloughs are not directly related to resurgence of the Covid-19 virus (and renewed economic shutdowns in affected states), but are rather linked to overall economic conditions in the U.S. and–likely–the exhaustion of the [Paycheck Protection Program] funds by businesses.”
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