The coronavirus continues infecting economic data. The GDP collapse in the second quarter was as extraordinary as it was expected when it was released last week.
The focus turns again to employment in the week ahead, and whether or not a sharp rebound in hiring extended for a third month even as COVID-19 infections surged in many parts of the country in July.
Employers added over 7 million jobs in May and June combined. Hotels, restaurants, bars and casinos calling back laid-off workers led the job gains. Retailer rehiring was also strong.
Impressive, but perspective is necessary here. Less than half the jobs lost in April as large parts of the American economy were shut to slow the spread of COVID-19 have returned. Simply put, there were 14.7 million fewer jobs in America in June compared to February. The springtime hopes of closing that gap quickly are evaporating.
More than 20 states have paused or reversed some of their reopening efforts, including populous states like California, Texas and Florida. Congressional negotiations have failed to produce a new compromise stimulus as the $600 a week federal unemployment booster expires for tens of millions of people. And the Federal Reserve has warned the virus "poses considerable risks to the economic outlook over the medium term." While the central bank doesn't define how long the "medium term" is, various Fed officials have used the phrase to mean about two years.
These developments erode confidence in a V-shaped economic recovery that the stock market has been reflecting. Sure, economic indicators like the GDP and monthly jobs data are lagging, but they are important confirmations to the natural optimistic bias of shareholders.
