Rising coronavirus infections threaten US economic recovery

Published 5:03 pm Thursday, July 16, 2020

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BALTIMORE (AP) — 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 as the virus slashes through the heavily populated Sunbelt.

Economists fear that any positive momentum could come to a halt later this summer if infections and deaths rise and more businesses close.

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“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. Prior to the pandemic, just 200,000 people sought unemployment assistance in a typical week.

The Labor Department data emerged as the nation saw more troubling infections. Florida reported a single-day record of 156 deaths, along with nearly 14,000 new cases, mirroring a broader trend this week that has seen the national death rate spike. The seven-day rolling average for new deaths has risen to 730, a more than 21 percent increase from a week ago.

Infections are now climbing in 40 states, and 22 states have either paused or reversed efforts to reopen their economies, according to Bank of America.

Businesses and consumers alike are adjusting to the perpetual risk of outbreaks.

Cash payments are out. Deliveries are in. Skeleton crews are keeping retailers afloat. It’s a moment of both caution and innovation that will likely produce lasting changes in how Americans spend. Business as usual may never return because the steps to improve safety also enable companies to streamline and operate with fewer workers.

At the R. House food hall in Baltimore, all orders and payments now go through an app, Toast TakeOut. Customers gather on an outdoor patio instead of venturing inside what had previously been an auto dealership. That reduces the hall’s potential capacity to 100 eaters from 350 before the outbreak and makes the business more reliant on take-out.

But the payment app has become a convenience for customers, who no longer need to wait in lines for cash registers and can settle into their seats while ordering from the local eateries on site that range from from authentic tacos to Korean BBQ to Hawaiian poke bowls to fried chicken sandwiches.

“Absolutely we’re going to keep using this technology,” said Peter DiPrinzio, director of food and beverage at the food hall.

Dedric Richardson, 45, and his wife opened Creole Soul at R. House in December, serving po’ boys, gumbo and shrimp and grits. Sales are rebounding after the shutdown, but they are still down by half, and his staff has shrunk from 10 to four. Noting that he served in the Navy, Richardson is still optimistic that he can steer through the difficult times.

“That’s the nature of the beast we’re living in,” he said. “I feel like I’m the cashier, the chef, the everybody.”

Consumers are shifting their spending patterns in ways that could make it hard for jobs to return to a retail sector that employed 15.7 million people before the pandemic. Even with the June rebound, sales at eateries and clothiers are down more than 20% from a year ago. Meanwhile, spending on an annual basis has picked up at building material stores, online outlets and merchants in the sporting goods, musical instrument, books and hobbies categories.

Adding to all this pressure are signs that the recovery in consumer spending began to stall at the end of last month, according to analysis of credit cards by the bank JPMorgan Chase.

“This is my biggest nightmare that we would open and reclose small businesses,” said Sandy Sigal, president and CEO of NewMark Merrill Companies, which operates a total of 85 outdoor lifestyle centers in California, Colorado and Illinois. Sixty of the centers are located in California, which has now reclosed gyms and nail salons among other businesses.

The total number of people receiving jobless benefits nationwide dropped 400,000, to 17.3 million, last week, the government said, suggesting that hiring in some regions could offset some of the mounting job losses seen last week in Florida, Georgia, California, Arizona and South Carolina.

But huge U.S. companies continue to announce layoffs. American Airlines warned workers Wednesday that it may have to cut up to 25,000 jobs in October because of sharply reduced air travel. United Airlines warned 36,000 of its employees last week that they may lose their jobs.

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.

The government’s small-business loan program will stop taking applications Aug. 8. More than $500 billion has already been loaned, and more than half of small companies that got loans say they have spent all the money, according to a survey by the National Federation of Independent Business. Nearly a quarter say they have laid off workers or expect to do so once the funds run out.

And an extra $600 in weekly unemployment benefits provided by the federal government on top of regular aid from the states will expire this month, unless replaced or extended. Those funds, along with the $1,200 relief checks sent out in April, enabled millions of Americans to stay current on housing costs and bills.

Meghan McGowan, 30, lost two jobs when the pandemic intensified in mid-March, one as a full-time librarian in Detroit and a second as a substitute at a different library system to help bring in some extra cash.

The looming expiration of the $600 is nerve-wracking for her 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.