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Think Globally, Act Locally
State and local governments from Georgia to California are cutting money for schools, universities and other services as the coronavirus-induced recession wreaks havoc on their finances. Widespread job losses and shuttered businesses have reduced revenue from sales and income taxes, forcing officials to make agonizing choices in budgets for the fiscal year, which started July 1 in much of the country. The task has been complicated by uncertainty over the economic outlook, which depends largely on unknowns such as the course of the virus and how fast a vaccine can be developed, David Harrison reports.
Governments have cut 1.5 million jobs since March, mostly in education, and more reductions are likely barring a quick economic recovery. It is unclear whether states will get more help from Congress.
WHAT TO WATCH TODAY
Atlanta Fed President Raphael Bostic speaks to the Rotary Club of Columbus at 12:45 p.m. ET.
U.S. consumer credit for May is out at 3 p.m. ET.
Mexican President Andrés Manuel López Obrador is in Washington, D.C., for a series of meetings with President Trump. Joint press statement at 6:35 p.m. ET.
Japan machinery orders for May are out at 7:50 p.m. ET.
China’s consumer- and producer-price indexes for June are out at 9:30 p.m. ET.
Can America Get Back to Work if Schools Stay Closed?
President Trump pressured states to reopen schools this fall, emphasizing the benefits of in-person instruction for children and the relief for parents marshaled into home learning. Classroom instruction is seen as one of the most fundamental institutions of precoronavirus life, but many districts say they plan to also offer alternatives to full-time in-person learning for parents concerned about their children returning to school. School advocates and outside groups estimate that public schools will need billions of dollars in federal aid to cover the heightened costs of operating during a pandemic, Alex Leary, Tawnell D. Hobbs and Andrew Duehren report.
More potential trouble for working parents: The Trump administration’s temporary ban on work visas includes au pairs. Approximately 20,000 young people, primarily women, come to the U.S. each year to do nanny and household work in exchange for room, board and a modest weekly stipend, Lauren Weber and Michelle Hackman report.
Baby steps: Thousands of New York City child-care facilities could reopen as early as next week under a measure approved by the city’s Board of Health. The board temporarily closed most city-licensed child-care facilities and preschools that serve small children in April because of rising Covid-19 cases, Melanie Grayce West reports.
The number of Americans dismissed from their jobs fell sharply in May to match levels recorded before the coronavirus pandemic and related shutdowns caused widespread layoffs. Tuesday’s report showed hirings and the number of open jobs also rose in May from April, signs that the labor market was healing this spring. However, the 5.4 million openings in May were dwarfed by the 21 million Americans unemployed that month, Eric Morath reports.
A more current but unofficial measure of job openings has shown steady improvement for nine straight weeks. U.S. job openings posted on the website Indeed have increased steadily since bottoming out in early May—but remain well below prepandemic levels. Rising Covid-19 caseloads don’t appear to be affecting hiring plans, at least not yet. “The trend in job postings to July 3 in surge metros like Phoenix, Miami and Memphis has stayed on course,” Indeed economist Jed Kolko said.
Other economic and anecdotal data are flashing warning signs. The New York Fed’s Weekly Economic Index—a measure of ten daily and weekly indicators—deteriorated for the first time since the economy showed signs of bottoming out in April.
And airlines are preparing to cut thousands of workers and tap government loans as a surge of coronavirus cases and fresh government travel restrictions upend a nascent recovery in travel, Alison Sider reports.
The U.S. reported 60,000 new coronavirus cases, a single-day record, with infections continuing to rise rapidly in states such as Florida and Texas. Alongside epidemiologists, Fed officials are monitoring the virus’s path closely. Vice Chairman Richard Clarida told CNN the central bank is looking at a broad range of scenarios but doesn’t anticipate a double-dip recession. Atlanta Fed President Raphael Bostic told the Financial Times there are troubling signs economic activity is leveling off and the recovery could be bumpy.
“As we have said many times, ultimately, the course of the economy is going to depend on the course of the virus.” —Fed Vice Chairman Richard Clarida
Fuel Burning Fast on an Empty Tank
The global auto market is splitting three ways, complicating efforts by the industry’s main players to recover from their deepest crisis in years. While sales in post-lockdown China are showing signs of recovery, they are continuing to fall in the U.S., according to company and industry data. Europe is becoming the world’s weakest-performing auto market. This lopsided recovery is putting extra stress on an industry that was already struggling with softening demand and soaring technology costs before the coronavirus pandemic hit. The recovery in China is helping those car makers with substantial business there, such as Tesla. Shares of General Motors, Ford Motor and Fiat Chrysler are each down roughly 30% in 2020, and their combined market value now represents just a third of Tesla, William Boston reports.
TWEET OF THE DAY
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WHAT ELSE WE’RE READING
Jena, a town of about 110,000 people in Germany, started mandating facemasks on April 6, about three weeks before the rest of the country did the same. Findings from the natural experiment: “Requiring face masks to be worn decreases the growth rate of Covid-19 cases by about 40% in Germany. … In sum, our results suggest that requiring masks is a cost-effective, less economically harmful, and democracy-compatible containment measure for Covid-19,” Timo Mitze, Reinhold Kosfeld, Johannes Rode and Klaus Wälde write at the Center for Economic Policy Research.
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