The economy is in deep trouble again. Coronavirus is to blame

https://www.cnn.com/2020/07/23/business/coronavirus-economy-recovery/index.html

The economy is in deep trouble again. Coronavirus is to blame - CNN

Restaurant reservations are waning. The rebound in air travel is leveling off. And foot traffic at stores is dwindling once again. There is mounting evidence that America’s fragile economic recovery is already stalling as the number of coronavirus infections and deaths spike.

Real-time economic indicators bottomed out in May as stay-at-home orders were lifted and many Americans felt safe enough to start visiting shopping centers, restaurants and even airports.
That gave hope, perhaps prematurely, of a rapid V-shaped recovery for the United States from the historic collapse caused by the pandemic.
But there is now a growing sense that the recovery is losing steam as coronavirus infections surge in California, Texas, Florida and other Sun Belt states.
“The premature reopening of the U.S. economy has resulted in an intensification of the pandemic, which is now causing growth in the economy to slow,” Joe Brusuelas, chief economist at RSM International, wrote in a note to clients Tuesday.
The stall of the fragile recovery comes as Congress debates whether the economy needs more stimulus — and if so, how much to provide. The $600 weekly enhanced unemployment benefits expire this month unless lawmakers take action.
Economists say there is nothing to debate: The recovery is faltering.
“Activity is now clearly contracting in COVID hot spots, including the Sun Belt and the West,” Aneta Markowska, chief economist at Jefferies, wrote in a report on Monday.
That is hardly surprising, given that 22 states have either reversed or paused their reopening due to health concerns.

Recovery hopes overdone?

This doesn’t mean the US economy will keep shrinking in the third quarter. Economists are still betting GDP will turn sharply positive after having collapsed by an estimated 34% during the second quarter. But now they worry that the forecasts for blockbuster growth may be overly optimistic.
For instance, S&P Global Economics warned Wednesday that its estimate for a surge in third quarter GDP at an annualized pace of 22.2% is “at risk of weakening” because of the health crisis.
“Although our base case is for a gradual recovery through next year,” S&P economists wrote, “the [recent] surge in COVID-19 and hospitalizations has raised concerns that a more likely scenario is that the COVID-19 recession has not bottomed out.”
The latest real-time economic indicators suggest those concerns are warranted.
More turbulence for air travel: The resurgence of coronavirus infections is derailing the travel industry’s modest recovery. The number of air passengers processed through TSA security lines fell during the week ended July 20, compared with the prior week, according to Bank of America. This metric is down more than 70% from a year ago.
United (UAL) CEO Scott Kirby told CNBC on Wednesday that the airline doesn’t “expect to get anywhere close to normal until there’s a vaccine that’s been widely distributed to a large portion of the population.”
Restaurant trouble: As the CNN Business Recovery Dashboard clearly shows, restaurant reservations on OpenTable have weakened in recent weeks. During March and April, as the pandemic wreaked havoc, reservations were down nearly 100% from a year ago. That figure rebounded to down “only” 50% in mid-June, but has since rolled over and stood at -65% as of Monday.
Foot traffic to Chipotle (CMG) was down 47% during the first week in June, according to Placer.ai, an analytics platform that uses anonymized location data. Traffic improved to down just 30% by the end of June, but has since “stagnated” through mid-July, Placer.ai said.
Retail slowdown: In April, US retail traffic declined by a staggering 98%, according to Cowen. Traffic steadily improved, with June traffic down 57%, but that rebound has stalled. US retail traffic fell 47% from a year ago during the second week of July, Cowen said, a slight deterioration from the first week in July when traffic was down 45%.
Small business shutdowns: As of Sunday, 24.5% of small businesses in the United States were closed, according to Jefferies. That is worse than late June, when only 19% were closed. Jefferies pointed to “particular weakness in COVID hot spots” and noted that small business employment had dropped to levels unseen since the end of May.
Weaker spending: After plunging by as much as 31% year-over-year in early April, purchases on credit cards issued by Synchrony turned positive in late June. However, Synchrony (SYF) said Tuesday that spending during the first two weeks of July was down 2%.
Unemployment website visits: Web traffic to state unemployment portals “leveled off at still-high levels, suggesting labor market momentum has stalled,” Jefferies said. That jibes with official government statistics in the CNN Business Recovery Dashboard that show unemployment claims have tumbled from their spike this spring but remain elevated. In fact, another 1.4 million Americans filed for first-time unemployment benefits last week — the first increase in weekly claims since late March.
“The spread of the virus since mid-June has clearly had an adverse effect on economic activity,” economists at Bank of America wrote in a note to clients Wednesday. “It is clear that the path of the economic recovery cannot be disentangled from the path of the virus.”

No vaccine, no recovery?

That’s not to say all real-time indicators are negative right now. For instance, Jefferies said one of the last metrics to bottom out, a US job listing index that the bank created with alternative data platform Thinknum, continued to improve even last week.
Still, the New York Federal Reserve’s weekly economic index, which is composed of metrics on the labor market, consumer behavior and goods production, dropped for the first time since hitting the pandemic low point in late April.
All of this raises stakes in the race to develop a vaccine that is effective against Covid-19.
Vaccine hopes, on top of unprecedented easy money from the Federal Reserve, have helped catapult the stock market. The S&P 500 has spiked 46% since the March 23 low and is now positive for the year.
Real progress is being made on the vaccine front, underscored by a $1.95 billion deal announced Wednesday for Pfizer (PFE) to produce millions of Covid-19 vaccine doses for the US government.
Yet healthcare execs remain more cautious than Wall Street. Seventy-three percent of healthcare industry leaders polled by Lazard estimate that a vaccine won’t be widely available until at least the second half of 2021.
“It is becoming quite clear that absent an accessible and widely distributed vaccine,” RSM’s Brusuelas said, “there will be no complete economic recovery.”

 

 

Initial Unemployment Claims Rise For First Time in 16 Weeks; Air Travel, Restaurant Reservations, and Retail Businesses Face Declines and Closures

https://www.cnn.com/2020/07/23/economy/coronavirus-unemployment-benefits/index.html

Travel fears at their highest since 9/11 due to coronavirus - Axios

On Thursday, for the first time in 16 weeks, the Department of Labor reported an increase in initial unemployment claims, with 1.4 million Americans filing for the first time during the week of July 20. First-time claims peaked in late March with 6.9 million claims, and have fallen each week since until last week. Continued claims for the week were at 16.2 million, showing a drop in almost 1 million claims from the previous week. As unemployment claims look to be increasing, the additional $600 in weekly unemployment benefits is set to expire on July 31 (CNN).

Additional economic indicators point to uncertainty. Air travel continues to drop as cases surge nationwide, with 70 percent fewer passengers traveling through security lines compared to a year ago. As we have previously reported, airlines including United and American Airlines have prepared for massive job cuts, and companies including Southwest and United have cut flight schedules by as much as 65 percent (WSJ).

Restaurant reservations have also plummeted, dropping an additional 15 percent from mid-June to late July. Retail and small businesses are also taking a hit as cases continue to rise, with more than 24 percent of small businesses in the U.S. closed as of Sunday, down from 19 percent in late June (CNN).

 

 

 

500 Delta Airline Staff Test Positive for Coronavirus, 10 Dead

https://www.newsweek.com/500-delta-airline-staff-test-positive-coronavirus-10-dead-1513016

Coronavirus Travel: What Happens to Planes Grounded by Covid-19 ...

Hundreds of staff at Delta Air Lines have tested positive for the novel coronavirus. Ten workers have died after contracting the virus, the company confirmed.

According to a transcript of the company’s latest shareholders meeting held on a phone conference June 18, Delta’s Chief Executive Officer Ed Bastian said: “We have had approximately 500 employees that have tested positive for COVID-19. The vast majority have recovered, thankfully. Unfortunately, we have lost 10 employees to the disease.”

Speaking to Newsweek, a spokesperson for Delta noted the latest tally of infected employees is “inclusive of all positive cases reported to us since March out of our 90,000 employees worldwide.

“Since initial reporting in March, Delta has seen a significant reduction in positive employee COVID-19 tests and is currently tracking at a rate five times lower than the national average.”

Bastian said: “We have recently announced that we are going to be testing all of our employees. In fact, we started this week in Minneapolis for both the blood serology, as to whether they have already been exposed to the disease and have antibodies, as well as the active test to see if they, indeed, are carrying the virus. And that test is being led by Mayo Clinic.”

“And we are also working very closely with Quest Diagnostics in that we will have all 90,000 of our employees available to be tested. And from getting a good baseline, we will be able to provide better protection for our people and then, eventually, certainly, our customers as we go forward,” Bastian confirmed on the call.

It is unknown whether the infected staff members are cabin crew or ground-level workers and which flights they may have been operating. The majority of Delta’s employees are reported to be flight attendants, pilots and airport agents, while less than 10,000 are administrative staff, most of whom are working from home, according to Bastian.

“Given that we are a frontline customer service business, the majority of our employees need to be at work to conduct business,” Bastian said.

On Monday, Delta announced it will resume flights between the U.S. and China. The carrier will operate a service between Seattle and China’s Shanghai Pudong International Airport via South Korea’s Incheon International Airport twice a week from June 25.

From July, the airline will operate weekly flights from Seattle and Detroit to Shanghai, also via Incheon International Airport. Delta is the first U.S. airline to resume services between the U.S. and China since the temporary suspension of flights in February following the outbreak.

Earlier this month, Delta announced it will be suspending flights to 11 U.S. airports from July 8 while “customer volume is significantly reduced,” the carrier confirmed in a statement.

These airports make up five percent of the airline’s domestic operations. “All of these airports will continue to receive service from at least one other carrier after Delta suspends its operations,” the statement added.

The 11 airport locations include Aspen in Colorado (ASE), Bangor in Maine (BGR), Erie, PA (ERI), Flint in Michigan (FNT), Fort Smith in Arkansas (FSM), Lincoln in Nebraska (LNK), New Bern/Morehead/Beaufort in North Carolina (EWN), Peoria in Illinois (PIA), Santa Barbara, California (SBA), Scranton/Wilkes-Barre, Pennsylvania (AVP) and Williston in North Dakota (XWA).

“Delta has announced an 85 percent reduction in our second-quarter schedule, which includes reductions of 80 percent in U.S. domestic capacity and 90 percent internationally,” including service to Canada’s Ottawa International Airport in the province of Ontario which was suspended indefinitely from June 21, the statement confirmed.

Last month, Delta also announced the temporary suspension of operations at airports in locations with “more than one Delta-served airport to allow more frontline employees to minimize COVID-19 exposure risk while customer traffic is low.”

“Delta will continue providing essential service to impacted communities via neighboring airports,” the statement said.

The 10 airports where operations were temporarily suspended include Chicago Midway International Airport (MDW) in Illinois, Oakland International Airport (OAK), Hollywood Burbank Airport (BUR) and Long Beach Airport (LGB) in California, T. F. Green International Airport (PVD) in Rhode Island, Westchester County Airport (HPN) and Stewart International Airport (SWF) in New York, Akron-Canton Airport (CAK) in Ohio, Manchester-Boston Regional Airport (MHT) in New Hampshire and Newport News/Williamsburg International Airport (PHF) in Virginia.

Services at Canada’s Saskatoon International Airport were also temporarily suspended last month.

Delta extended its waiving of change fees and the flexibility to travel through September 30, 2022, to customers with canceled flights through September 2020.

“Eligible customers include those who have upcoming travel already booked between now and September 30 as of April 17, 2020,” and those with “canceled travel on flights between March 2020 and September 2020,” the airline said.

From May 4, Delta has required all passengers to wear a face mask or other appropriate face covering on its flights. Other safety measures introduced include sanitizing all aircraft with electrostatic spraying before departure and disinfecting all high-touch points throughout the aircraft interior.

Aircraft are also equipped with “state-of-the-art air circulation systems with HEPA [high efficiency particulate absorbing] filters that extract more than 99.99 percent of particles, including viruses,” the company said in a statement Monday.

Last week, American Airlines flight crew asked a passenger to disembark a plane after the man refused to wear a mask on board a flight.

In the same week, a survey by the International Air Transport Association (IATA) found that 45 percent of travelers said they would fly within two months after the novel coronavirus is no longer seen as a threat, down from 60 percent in April.

The novel coronavirus, first reported in Wuhan, China, has infected more than 9.2 million people across the globe, including over 2.3 million in the U.S. More than 477,800 have died following infection, while over 4.6 million have reportedly recovered from infection, as of Wednesday, according to the latest figures from Johns Hopkins University.