Rising infections threaten to slow economic recovery
BALTIMORE — Rising coronavirus infections across dozens of states are threatening the U.S. economic recovery, forcing businesses and consumers to freeze spending and keeping the unemployment rate stubbornly high.
The government reported Thursday that retail sales rose a sharp 7.5% in June, but the positive trend was undercut by more recent data showing that credit card spending has stalled. A separate report showed that more than a million Americans sought unemployment benefits last week — a sign that companies continue to cut jobs.
Economists fear any positive momentum could come to a halt if infections and deaths rise and more businesses close.
“Conditions in the labor market remain weak, and the risk of mounting permanent job losses is high, especially if activity continues to be disrupted by repeated virus-related shutdowns,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
It was the 17th consecutive week that jobless claims surpassed 1 million. Before the pandemic, just 200,000 people sought unemployment assistance in a typical week.
Adding to all this pressure are signs that the recovery in consumer spending began to stall at the end of last month, according to the bank JPMorgan Chase.
“This is my biggest nightmare, that we would open and reclose small businesses,” said Sandy Sigal of NewMark Merrill Companies, which operates a total of 85 outdoor lifestyle centers in California, Colorado and Illinois. Sixty of the centers are in California, which has now reclosed gyms and nail salons, among other businesses.
The uncertainty of what comes next is heightened by the pending expiration of many of the government-support programs that have shored up the finances of both businesses and families.
Meghan McGowan, 30, lost two jobs when the pandemic intensified in March, one as a full-time librarian in Detroit and a second as a substitute in a different library system. The looming expiration of $600 in extra weekly unemployment is nerve-racking because the hiatus on her student loans will end this fall, and she has an auto insurance bill due.
“Before, when I was working through grad school, I worked in restaurants, so that had always been my backup plan, but that’s not an option now,” she said.