Newsletter: Two Steps Forward…

0

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Looking Up

U.S. services industries showed signs of recovery in June as businesses took early steps to reopen. But analysts warned those gains could be undone in July if a resurgence of Covid-19 cases in some states leads to another round of shutdowns. Businesses in two separate surveys of purchasing managers reported demand had started to stabilize and that orders were starting to pick up last month. The pace of job cuts slowed with some companies starting to hire again. Prices rose, another sign of renewed demand. Survey respondents also said they were increasingly optimistic about the outlook, even though overall business confidence remains subdued, David Harrison reports.

The service sector, especially the hospitality and accommodation industry, was hard-hit by the shutdowns this spring. Services account for roughly two-thirds of the U.S. economy, which means that an improvement in the sector could bode well for growth in the third quarter.

WHAT TO WATCH TODAY

The U.S. job openings and labor turnover survey for May is out at 10 a.m. ET.

Atlanta Fed President Raphael Bostic speaks to the Tennessee Business Roundtable at 9 a.m. ET, Fed Vice Chair Randal Quarles speaks on financial stability at 1 p.m. ET, and Richmond Fed President Thomas Barkin and San Francisco Fed President Mary Daly participate in a National Association for Business Economics webinar at 2 p.m. ET.

TOP STORIES

Balancing Act

Parts of the U.S. moved tentatively forward with reopening Monday, as other regions continued to struggle to contain the coronavirus pandemic. Miami-Dade County Mayor Carlos Giménez rolled back the area’s reopening and California added six counties—including San Diego County—to a watch list due to “concerning” levels of hospitalization, transmission or insufficient testing. New York City, meanwhile, entered Phase 3 of its reopening plan, allowing nail salons, spas and massage therapists to resume operations and easing restrictions on park activities, Allison Prang and David Hall report.

What do restaurants need to reopen? Public-health authorities in the U.S. have singled out restaurants and bars as a source of coronavirus contagion. Yet in Europe, bistros, pizzerias and cafes bustling with clientele have had no major outbreaks. The difference, health authorities say, stems from Europe’s success in flattening its infection curve before restaurants and bars reopened. And the Continent is also benefiting from something many eateries across the Sunbelt currently lack: fresh air. Punishing summer heat has pushed restaurants, bars and other indoor gathering spaces in the U.S. to close the windows and fire up the air conditioning. In Europe, summer temperatures tend to be milder, and most indoor spaces don’t have air conditioners to begin with, Matthew Dalton and Bertrand Benoit report.

Israel is facing a significant new outbreak and the government is scrambling to shut down swaths of the economy it had reopened. Israel’s cabinet approved closing all gyms, bars, banquet halls, public pools and cultural events, reimposing portions of a strict lockdown that the government had eased in May. The cabinet also moved to limit the number of people who could sit inside restaurants to 20; outside restaurants to 30; and indoor prayer services to 19, Felicia Schwartz and Dov Lieber report.

Some European nations are closing in on a milestone that to the U.S. seems distant: virtually stopping the new coronavirus from spreading within their territories. Echoing the achievement of Asia-Pacific countries such as New Zealand, Vietnam and Taiwan, a handful of places in Europe are reporting only a smattering of new daily infections. Their success has allowed them to reopen their economies earlier, at a faster clip and with greater confidence than the stop-start efforts of U.S. states and hard-hit neighbors such as the U.K., Jason Douglas reports.

The eurozone’s economic contraction will be larger than initially expected this year as lockdowns are eased more gradually than anticipated, the European Commission said Tuesday. The Commission said the combined economic output of the 19 countries that share the euro will fall by 8.7% in 2020, a deeper decline than the 7.7% forecast three months ago. The European Union’s executive arm highlighted widening divergences between the eurozone’s members, and said shared action is needed to limit the fallout for the currency area as a whole, Paul Hannon reports.

Unemployment rates in the world’s advanced economies will end the year higher than at any time since the Great Depression and not return to their pre-pandemic levels until 2022 at the earliest, the Organization for Economic and Cooperation and Development said Tuesday. The Paris-based research institute that serves the U.S. and 36 other countries said jobless rates could be even higher if a second wave of outbreaks leads to fresh lockdowns, Paul Hannon reports.

Buy American

More than 40 American business groups called on China to step up purchases of U.S. manufactured goods as well as energy and other products as part of a trade agreement. The business associations, led by the U.S. Chamber of Commerce, voiced strong support for the “phase-one” pact but pressed both sides—especially China—to “redouble efforts to implement all aspects of the Agreement.” The groups expressed their concerns that China is falling short of the overall purchase targets laid out in the trade deal, Lingling Wei and Bob Davis report.

School’s Out Forever

U.S. colleges are bracing for a devastating drop in international students this fall. Coronavirus concerns have prompted broad travel restrictions and visa-processing delays that are unlikely to resolve before the start of the fall semester. On top of that, deteriorating U.S.-China relations are threatening what has been by far the biggest pipeline of foreign students to U.S. campuses, Melissa Korn reports.

WHAT ELSE WE’RE READING

Did the Paycheck Protection Program hit the target? “We do not find evidence that the PPP had a substantial effect on local economic outcomes—including declines in hours worked, business shutdowns, initial unemployment insurance claims, and small business revenues—during the first round of the program. Firms appear to use first round funds to build up savings and meet loan and other commitments, which points to possible medium-run impacts,” economists João Granja, Christos Makridis, Constantine Yannelis and Eric Zwick write in a new working paper.

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.