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The ‘Rocket Ship’ Economic Recovery Is Crashing

The nascent restart of America’s economy has begun to stall as a surge in new coronavirus cases dampens consumer and business activity across states like Florida, Texas and Arizona.

After weeks of a pandemic-induced contraction, the economy had begun rebounding faster than many economists expected from mid-April into June, as infection rates stabilized or fell across much of the country and the federal government injected trillions of dollars in the economy. States began to reopen, shoppers increased their spending and employers started to hire back furloughed workers.

But there were signs in late May and early June that the pace of recovery was beginning to slow, even before another wave of infections swept through states that had moved quickly to ease limits on public gatherings. In recent weeks, as that wave intensified, real-time economic data began to show the economy moving backward as rising infection fears spooked consumers.

The national jobs report, scheduled to be released on Thursday by the Labor Department, is expected to obscure that reversal. Forecasters expect the report, drawn from data compiled in the middle of the month, to show the economy added about three million jobs in June. That would represent progress, but nowhere close to victory against the more than 20 million jobs shed at the trough of the recession.

Recent detailed data tell a more sobering story. New job postings on the employment platform ZipRecruiter fell in June after rising sharply in May. Data on small business openings and employment from Homebase, which provides scheduling and time tracking software for businesses, show that small business employment and openings worsened over the past week, after plateauing for much of June. The Homebase data showed a nearly 40 percent improvement for small business activity in May; across all of June, that fell to 6 percent.

States suffering infection surges, like Texas, began to see layoffs and business closings even before officials moved to reimpose some restrictions on economic activity, such as closing bars.

Foot traffic to retailers and other businesses declined in the third week of June in Houston, Orlando, Jacksonville, Phoenix and other large cities across the southern states where infections have spiked, according to an analysis of data by researchers at the American Enterprise Institute in Washington. Data from 40 million households compiled by the financial firm Commerce Signals shows that after weeks of improvement, credit and debit card spending declined at the end of May across most states.

That is a pattern economists have been dreading, and a departure from the “rocket ship” recovery that President Trump promised in June. Federal Reserve officials have warned publicly that recovery appears perilous and highly dependent on public health. “The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” Fed Chair Jerome H. Powell told a House committee on Tuesday. “A full recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.”

The next few months of recovery could be rocky even if the current infection surge abates. Job losses have slowed but remain at levels higher than in any previous recession, and a growing share of workers now report they have been laid off permanently, rather than temporarily furloughed. A significant share of small businesses have still not reopened, even as states increasingly lift restrictions on their operations, suggesting some of them may be shuttered for good. By many measures, business activity and employment remains down by a quarter or more from pre-crisis levels.

Child care constraints are keeping many workers, particularly Black and Hispanic women, from returning to work, according to weekly census survey data analyzed by Ernie Tedeschi, an economist at Evercore ISI.

Some economists say the slowdown was predictable — and a natural reaction to Americans attempting to rush back toward normalcy before the virus was under control.

When it comes to the recovery, “the virus is the boss, not the governor, not the mayor, not the president,” said Austan Goolsbee, a former top economist for President Barack Obama and the author of a recent study that found fear of infection — and not government lockdown policies — drove nearly all of the contraction in economic activity this spring.

Mr. Goolsbee, who is a professor at the University of Chicago’s Booth School of Business, and his colleague Chad Syverson used cellular phone records to track visits to businesses during the pandemic.

The research found that just over one-tenth of the drop was attributable to lockdowns themselves, a share that held constant as areas began to lift restrictions in May. The authors say that suggests that if infections accelerate, public officials will not be able to avoid another economic shock simply by refusing to shut down activity. Consumers will make that decision for them.

When cases of the virus first began rising earlier this year, many economists hoped that, with the right set of policies, the United States could avoid most long-term economic damage. The idea was that by providing trillions of dollars in support for households and businesses, the federal government could, in effect, keep the economy in stasis until the health crisis had passed.

There are signs that those efforts were at least partly successful. Nearly a third of the people who lost jobs during the pandemic have already returned to work, according to a poll conducted for The New York Times in early June by the online research platform SurveyMonkey. Another quarter expected to return to their old jobs within the next month.

But that still leaves close to half of all those who have lost jobs still out of work, with no immediate prospects for a return. That group is disproportionately Black and Hispanic, and concentrated in low-wage service industries, the survey found. Perhaps unsurprisingly, those respondents are far less sanguine about the direction of the economy than Americans overall.

  • Frequently Asked Questions and Advice

    Updated June 30, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How many people have lost their jobs due to coronavirus in the U.S.?

      The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.