Tuesday, May 30, 2023

Newsletter: From Furloughed to Fired


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

Big Gains, Permanent Losses

The U.S. employment report for August is out Friday and likely to show another month of historic labor-market gains. But the number of jobs will remain well short of prepandemic levels, and many Covid-19 layoffs are becoming permanent: Thousands of furloughed workers are being told they won’t be coming back as companies brace for years of pandemic-related disruption. MGM Resorts and Stanley Black & Decker recently told some employees furloughed at the outset of the coronavirus pandemic that they wouldn’t be put back on the payroll. And companies bringing back the majority of furloughed workers, including Yelp and Cheesecake Factory, are making reductions as they adjust to the new reality that many coronavirus-related closures won’t be resolved this fall. More fresh layoffs at big employers loom, Patrick Thomas, Sarah Chaney and Chip Cutter report.

Economists say the new layoffs reflect a shift in corporate thinking toward a more protracted crisis. “Companies that thought they could either cut wages temporarily or cut costs temporarily or hold on are now finding out that the weakness of the pandemic is now longer than they hoped,” said Diane Swonk, chief economist at Grant Thornton.


Federal Reserve Vice Chairman Richard Clarida speaks on the central bank’s new monetary policy framework at 9 a.m. ET, and Atlanta Fed President Raphael Bostic speaks on philanthropy at 10:30 a.m. ET.

The Dallas Fed’s manufacturing survey for August is out at 10:30 a.m. ET.

China’s Caixin manufacturing index for August is out at 9:45 p.m. ET.


Spending Winners and Losers

U.S. consumers boosted their spending in July, but more slowly than in prior months as new coronavirus infections rose and the expiration of enhanced unemployment checks loomed. Overall consumer spending remained 4.6% below February’s prepandemic level. The great divide: goods vs. services. Americans are buying cars and household goods, but not airline or movie tickets.

On a national level, consumers have cut travel spending to just half what they spent last summer, according to the U.S. Travel Association. Yet, in July, more people visited Fort Sumter National Park, in South Carolina, and Sleeping Bear Dunes and Pictured Rocks on the Michigan shore of Lake Michigan than any month since the National Park Service began tracking in 1979. Visits to Valley Forge, in Pennsylvania, and Maryland’s Assateague Island hit multidecade highs last month. State parks have reported similar surges. The big vacation is out. America is going camping (and boating and hiking and fishing) instead, Gwynn Guilford reports.

Americans aren’t the only ones vacationing close to home. China is in the middle of a theme-park boom as domestic tourists seek amusements in their own backyards. For the region’s premier venues the pandemic has been a setback: Shanghai Disneyland was shut from January until May and then reopened at just 30% capacity. The official limit has since increased to 50%, with social-distancing measures discretionary. But for some regional parks, which rarely exceeded half their capacity before the coronavirus, the international travel shutdown appears to be boosting attendance. As of August, domestic tourism in China nearly recovered to pre-Covid-19 levels, Trefor Moss reports.

Activity across China’s manufacturing sector expanded for the sixth straight month. China’s official manufacturing purchasing managers’ index fell to 51.0 from 51.1 in July, the National Bureau of Statistics said Monday, but remained above the 50-mark that separates expansion from contraction. China’s nonmanufacturing PMI, which includes service and construction activity, rose to 55.2 in August from 54.2 in July, a sign that Beijing’s efforts to stimulate consumption at home are having an impact.

Flexible Framework

Federal Reserve Chairman Jerome Powell set out a new target for average inflation of 2%. But because he ruled out any mathematical definition of the average, anything from serious deflation up to inflation of 3.2% over the next five years could count as success. Should the average apply since the Fed adopted its target in 2012? Since Mr. Powell took over in 2018? Since five years ago? There is no correct answer, and the results are different enough to be significant for policy: Start from 2012, and the next five years need inflation of 3.2% to bring the average up to the goal. Start from Mr. Powell’s appointment, and it needs to be 2.3%, while starting five years ago would require inflation of 2.5%, James Mackintosh writes.

Balancing Supply and Demand on the High Seas

When countries began locking down their economies early this year in the face of the spreading coronavirus pandemic, the world’s container lines braced for a steep decline in shipping demand. Trade flows have in fact fallen, but profitability across the shipping industry is growing and some operators are reporting their best earnings in years. The reason: As demand collapsed in March and April, liner companies started canceling sailings and sidelining ships. At the same time, falling oil prices sent fuel costs for carriers down sharply. Based on half-year results so far in 2020, the top dozen carriers increased their profits on average by around 150% from last year, Costas Paris reports.


Remember life before Covid-19? Remember driving to work? “Altogether, $758 million is being saved per day by post-Covid remote workers who used to drive for their commute, a cumulative savings of over $90 billion since the onset of the pandemic. To put this into perspective, commuters who were commuting by car prior to the pandemic have saved over $2,000 each since mid-March, including the costs to the public from their driving. Although large, these savings do not even include the benefits from those who commuted via other modes or from the additional 16.9 million saved car commuting hours a day from those who were remote before Covid,” Upwork chief economicst Adam Ozimek writes in a recent report.


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.


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