Key Takeaways
- As the restrictions on economic and social activities continue to loosen, new coronavirus cases have moved sideways nationally (versus downward), just as trends in mobility continue to rise. State-wide actions reveal that policymakers' preference is to tolerate rather than eradicated the virus.
- New business applications with planned wages are back near their year-over-year trend, and mortgage applications have recovered strongly--both positive signs for the future. Still, economic activity in people-facing businesses--retail, recreation, leisure, travel, restaurants, and hospitality--have risen from their lows only modestly.
- Unemployment claims have started to ebb but still remain at remarkably high levels. Continuing claims declined at a disappointingly slow pace in last couple of weeks. The net jobs gain of 2.5 million in May was a welcome news. The healing process has begun, but getting back to pre-COVID employment is going to take 20 million more.
As the restrictions on economic and social activities continue to loosen, new coronavirus cases have moved sideways nationally (versus downward), just as trends in mobility continue to rise. Lockdown fatigue means the bar for returning to a lockdown is substantially higher. According to Eurasia Group, in Texas, Arizona, Florida, North Carolina, and several other states, cases have grown significantly over the last two weeks but all are continuing apace with plans to reopen their economies; only one state, Utah, has indicated that it will pause its scheduled reopening until cases are declining again.
Apple and Google mobility data continue to show normalization of movement, with a strong bias toward driving, walking, and park visits. Although mobility data in retail and recreation--which are more indicative of economic activity that track consumer spending--show only a weak recovery so far, hard data on light vehicle sales showed a respectable rebound in May helped by generous promotions. Sales were up 40% to a 12.2 million annualized rate from 8.7 million in April and up 7% versus March when the lockdowns started.
New business applications with planned wages remain 9% below last year on year-to-date comparison but have recovered close to normal on year-over-year trend basis. Although not all new applications convert into business formations, getting back to trend rate is a good sign. Even better would be if applications surpass the trend rate to make up for lost potential from March to May. Mortgage applications have recovered strongly, now back to January levels, which bodes well for housing activity in the summer months.
Still, activities directly affected by social distancing--retail, recreation, leisure, travel, restaurants, and hospitality--are rising from their lows but have improved only modestly. Consumer confidence stabilized well above the troughs of the global financial crisis but have yet to pick up meaningfully.
Unemployment claims remain uncomfortably high but are ebbing. We saw a disappointingly small 339,000 drop in continuing claims to 20.9 million at the end of May, however, from a downwardly revised 21.3 million (was 21.5 million). The insured jobless rate fell to 14.4% from 14.6% (it was 14.8%) last week, versus a 17.1% peak in the second week of May and a 1.2% cycle-low for nearly two years ending in mid-March.
The net jobs gain of 2.5 million in May was a welcome news, but getting back to pre-COVID employment is going to take 20 million more. The pace of the jobs rebound is likely going to be nonlinear--with the eye-popping pace (in the millions) concentrated more in the summer months when the first wave of workers return to work than in the fall.
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The views expressed here are the independent opinions of S&P Global's economics group, which is separate from, but provides forecasts and other input to, S&P Global Ratings' analysts. The economic views herein may be incorporated into S&P Global Ratings' credit ratings; however, credit ratings are determined and assigned by ratings committees, exercising analytical judgment in accordance with S&P Global Ratings' publicly available methodologies.
| U.S. Chief Economist: | Beth Ann Bovino, New York (1) 212-438-1652; bethann.bovino@spglobal.com |
| U.S. Senior Economist: | Satyam Panday, New York + 1 (212) 438 6009; satyam.panday@spglobal.com |
| Research Contributors: | Debabrata Das, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai |
| Arun Sudi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai | |
| Shruti Galwankar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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