Newsletter: U.S. Labor Market Cools, U.K. Output Jumps – Real Time Economics

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Wrong Way

New applications for unemployment benefits rose last week, another sign the labor market’s recovery is cooling amid continuing disruptions from the coronavirus pandemic. Weekly initial claims for jobless benefits rose by 135,000 to a seasonally adjusted 1.1 million in the week ended Aug. 15. The number of new claims shows that fresh layoffs are occurring even as the economy broadly is showing signs of recovering from the deep economic downturn caused by the pandemic and the shutdowns aimed at curbing it, Eric Morath reports.

The report followed others from the government and private firms showing that job gains slowed in July from June, job postings fell this week for the first time since April and several companies are planning more layoffs. Still, the data show the job market is improving, though more slowly than in the spring. The number of people collecting unemployment benefits through regular state programs, which cover most workers, fell to the lowest level since April. Nationally, new hiring is more than offsetting job cuts.

WHAT TO WATCH TODAY

IHS Markit’s preliminary manufacturing index for August is expected to rise to 51.5 from 50.9 at the end of July, and the services index is expected to rise to 51.0 from 50.0. (9:45 a.m. ET)

U.S. existing-home sales for July are expected to rise to an annual pace of 5.39 million from 4.72 million a month earlier. (10 a.m. ET)

The European Commission’s flash consumer confidence indicator for August is out at 10 a.m. ET.

The Baker Hughes rig count is out at 1 p.m. ET.

Live Q&A: Atlanta Fed President Raphael Bostic joins WSJ chief economics correspondent Nick Timiraos for a conversation on the economic outlook and the central bank’s response to the coronavirus pandemic shock on Sept. 3. Submit your questions today.

TOP STORIES

What Would You Do With $600?

Americans receiving unemployment insurance lost a $600-a-week supplement when that federally funded benefit expired at the end of July. At the national level, credit card and other consumer data suggest that loss hasn’t hampered overall spending. But it does appear to have had an acute impact among individuals. Facteus, a financial data firm that tracks debit- and credit-card spending, looked at transactions among prepaid debit cards—a common way for states to distribute unemployment benefits and some employers to distribute wages. Average unemployment deposits dropped sharply beginning in August, to about $430 a week from roughly $700. That led to a distinct shift in spending. Transactions at department stores, for example, had followed about the same trajectory among unemployment debit cards and payroll debit cards—until the end of July.

Spending on fast food tells a similar story.

When will the unemployed get an extra $300 a week in benefits? President Trump signed an executive order on Aug. 8 to offer $300 a week in federally funded enhanced unemployment benefits for workers laid off during the coronavirus pandemic. He also called on states that participate to provide another $100 a week for each recipient. The WSJ’s Sarah Chaney and Gwynn Guilford explain what we know about the program.

Fits and Starts

U.K. private-sector output picked up at the fastest pace in almost seven years, the eurozone economy lost momentum and activity in Japan continued to contract in August. While the surveys of purchasing managers showed mixed fortunes across major economies, there were common themes: an uncertain outlook and more job losses. “Private sector firms reported another sharp fall in employment numbers as scarring from the pandemic and lingering doubts about the sustainability of recovery resulted in a need to cut overhead,” IHS Markit economist Tim Moore said of the latest U.K. survey.

U.S. indexes are out at 9:45 a.m. ET.

A Tale of Two Economies

For many, the stock market and economy appear increasingly disconnected. Part of the reason for the divide: The share of Americans who own stock, either directly or through retirement or mutual funds, is falling, and stock ownership is increasingly concentrated among a sliver of the population. The top 10% of Americans by wealth owned 87% of all stock outstanding in the first quarter, according to data from the Federal Reserve. That share has grown over the past decade, from 82.4% in 2009. The stock market has surged over that period, with the S&P 500 more than quadrupling from its low during the financial crisis in March 2009, Paul Vigna reports.

Under Pressure

The oil market is back under pressure from the twin forces of rising supply and stalling demand. Futures for Brent crude, the benchmark in international energy markets, fell 1% to $44.94 a barrel Thursday after a group of major producers said the recovery in demand from the Covid-19 shock had been unexpectedly slow, Joe Wallace reports.

Knock-Out Blow

India’s emerging middle-class consumers were faltering even before the coronavirus arrived. The pandemic has all but knocked them out. Economic activity in India has been slow to rebound after one of the globe’s tightest lockdowns. Now, concerns are growing that the economy will be depressed for years to come as consumer spending on staples from McDonald’s to shampoo has dropped drastically, Eric Bellman reports.

WHAT ELSE WE’RE READING

Parents and their kids are getting hit hard by Covid-19. “We find evidence of disproportionate hardship: households with children have been more likely to suffer job and income losses, contributing to a greater need to dig into savings, a higher rate of missed rent and debt payments, and food insufficiency. We also observe a greater reliance on external support, including unemployment benefits, SNAP aid (food stamps), and financial support and food donations from friends, family, and food banks,” economists from the New York Fed write at Liberty Street Economics.

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