Economic Take

The number of Americans currently unemployed is now half of what it was back in April, but still far above the 3.5% rate in February. Yet, wage growth is pretty strong and recent surveys show businesses have nearly 7 million unfilled jobs. How has the pandemic affected the U.S. worker shortage and how may immigration reform play a role in solving it?  

Don’t look to a typical business cycle to explain the economic recovery from COVID-19. Instead, this week, we look at three trends involving the stock market, the job market and consumer activity and what they mean for national output.  

Last week, the Federal Reserve announced it would tolerate inflation “moderately” above its 2% target—why did the central bank do this now and what does it mean for financial markets? Also this week: signs of a consumer-driven Q3 GDP surge and a snapshot of the state of the job market.  

After remaining dormant for more than a decade, the U.S. housing sector has roared back to life in the middle a pandemic and an economic crisis. This week we take a look at what may be contributing to this residential real estate tailwind, including: favorable aggregate income trends, low mortgage rates and demographic shifts.  

Colleges and universities contribute up to 4% of U.S. GDP when you add up tuition costs, room and board, NCAA revenues and research dollars—virtual classrooms and cancelled sporting events will likely have a big impact on the higher education sector this fall. Also this week: a look at the strained finances of states and local communities due to COVID-19 disruptions.  

What does the state of the job market in July tell us about the broader U.S. economy? Also this week: Why the Federal Reserve’s balance sheet is starting to shrink and how the Fed is changing the way it manages inflation.

Last week’s historic GDP report—showing a 32.9% annualized drop—drove a lot of news headlines, which at the surface-level, didn’t tell us much about where the economy is headed. Let’s dig a little deeper into the report and unearth four additional nuggets of data that may provide some answers about the months ahead.    

In this special edition of Economic Take, Jim speaks with Fiona Greig, Director of Consumer Research at the JPMorgan Chase Institute, about a new report on the impact unemployment insurance has had on consumer spending and the U.S. economy since the start of the COVID-19 pandemic.    

Efforts to contain the latest flare-up of COVID-19 cases in the U.S. will probably not result in the same economic upheaval of March and April. Meanwhile, retail sales, the CPI, manufacturing output and housing starts in June all provide a favorable impression of the state of the recovery.

In the last couple of weeks, several populous states, including Florida, Texas and California, have experienced flare-ups in COVID-19 cases. Despite this, the stock market continues to rise and is once again near February’s historic highs. Is the market losing touch with economic reality or are investors seeing real silver linings?

Encouraging economic data, with all the makings of a V-shaped recovery, doesn’t feel as good as it looks on paper. As quickly as things are improving, there’s still a long way to go, and case numbers are rising in many communities. But innovative thinking—like a renewed interest in “pooled testing” to expand testing capabilities and reopen schools in the fall—offers hope.  

The government’s $4 trillion relief measures for COVID-19 won’t have much of an effect on GDP until consumers are able to travel and spend freely again. While there has been some encouraging economic news over the past couple of weeks, the additional $600 in weekly jobless benefits is set to expires on July 31. Since income is the key to the economy’s recovery, Washington may need to provide a few more lifelines before a vaccine arrives.      

Reports last week showed a burst of retail sales activity in May that recouped almost two-thirds of the ground lost in March and April. This week, the Commerce Department delivers its consumer spending report, which should help paint a clearer picture of the recovery. Finally, publicly held debt surged to 103 percent of GDP in May—should we be worried?    

The social distancing protocols that were implemented to disrupt the spread of COVID-19 were also a shock to aggregate supply. While aggregate demand is likely robust as some businesses reopen, the cost of services at those businesses may increase due to capacity limits. So although the economy may make good progress over the summer and fall, the road to a full recovery will still be rocky for many businesses and consumers.    

The May jobs report was a big deal, not because it was particularly surprising, but because it provided a positive boost to the recovery narrative. As workers continue to move back onto their employer’s books and consumer spending likely increases over the summer, there are two other trends to watch that may help determine the strength of the recovery.