Newsletter: Covid-19 Is Reshaping the Economy

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Crude Awakening

U.S. crude supply is falling at its quickest pace ever, easing a global oil glut and spurring a swift recovery in fuel prices. Yet oil’s push back above $40 a barrel isn’t enough for beleaguered shale producers, which until recently were the driving force behind a transformation of the global energy industry. For many of them, prices haven’t risen far enough to help ease the strain of debt taken on during boom times. And the need to cut output in the face of pandemic-hit demand means they can’t pump their way out of trouble, Amrith Ramkumar reports.

Many investors expect a plunge in new drilling activity to damp U.S. crude output moving forward. The number of wells drilling for oil in the U.S. has tumbled to its lowest level in more than a decade and a fraction of the total from the start of the year, figures from Baker Hughes show. 

WHAT TO WATCH TODAY

IHS Markit’s U.S. services index for June is out at 9:45 a.m. ET.

The Institute for Supply Management’s nonmanufacturing index for June is expected to rise to 50.1 from 45.4 a month earlier. (10 a.m. ET)

Japan’s household spending for May is out at 7:50 p.m. ET, and provisional trade figures for June are out at 7:50 p.m. ET.

TOP STORIES

Spending Patterns

U.S. consumers are buying again, but their shopping patterns show broad fears of persistent health risks amid the pandemic. Coronavirus cases, after reaching a plateau in April and May, are rising across the South and West, sparking fears of a resurgence. The data show consumers have in many ways been mindful of the risks all along, consistently shunning hotels and air travel and spending on driving and Airbnb bookings, Gwynn Guilford reports.

People want to get outside. Pent-up demand for outdoor leisure drove sales in sporting goods as states reopened beaches and parks.

Clothes spending rebounded faster in states that reopened in late April and early May. However, in-person spending powered little of that recovery.

Restaurants that survived the coronavirus hit in March and April are reeling from a second punch that could put more out of business. Numerous states, cities and counties have halted or rolled back reopening plans for bars and restaurants amid a surge in Covid-19 cases and suspicions by public-health officials that gathering in crowded eateries and nightspots might be contributing to the virus’ spread, Heather Haddon reports.

Off the Job

After years of effort to secure talent in a tight labor market, many executives responding to the shock of the coronavirus pandemic have so far preferred to furlough workers instead of severing ties completely. Of the 87 firms in the S&P 500 to announce staff reductions from early March through the end of June, 65 chose to furlough workers, Tatyana Shumsky and Kristin Broughton report.

The Covid-19 recession is especially painful for Latino workers. Prior downturns were largely led by lower spending on goods. This one is hitting service industries, where Latinos make up half the workforce in sectors like housekeeping, roofing and painting, Harriet Torry reports.

Raphael Bostic, the Federal Reserve Bank of Atlanta’s president, is shining a light on how economic and social upheaval have changed how the central bank talks and thinks about racial and economic inequality. Mr. Bostic, an economist whose work has focused on racial disparities in access to capital, has helped lead those public discussions as the first Black president to lead one of the 12 regional reserve banks in the system’s 106-year history. The pandemic’s economic and health toll has hit Black Americans and other minority groups hardest. It has coincided with a rethink inside the Fed of how it should evaluate the impacts of its policy decisions on those at the margins instead of focusing on broad aggregates, Nick Timiraos reports.

“We are a different Fed in a lot of ways.” —Atlanta Fed President Raphael Bostic

Take Me to the Pilot

Don’t know how much stimulus is needed? Put it on autopilot. Some economists and lawmakers say say enhanced unemployment benefits could be authorized to continue until the unemployment rate falls below a preset threshold, avoiding the political fights that can slow stimulus efforts. While the current proposal for triggers revolves around unemployment insurance, in theory tax cuts, higher benefits for food stamps and stimulus checks could be similarly linked to the state of the economy, Kate Davidson reports.

Off Target

Economic fallout from the coronavirus pandemic has cast doubt on whether China can meet its targets to buy U.S. goods under this year’s trade deal. China has made strides toward its agricultural and manufacturing targets, but it remains far behind—maybe hopelessly far—an ambitious target for purchases of oil, natural gas, refined petroleum products like propane and butane, and coal, Josh Zumbrun reports.

Send Money

Migrant workers from developing countries sent a record $554 billion back to their home countries last year. Now, many who lost their jobs because of the pandemic are running out of cash to send home, dealing a blow to the fragile economic health of the developing world, Jon Emont reports.

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