The Latest Batch of Economic Data and More Pandemic Uncertainty

By at 25 June, 2020, 2:39 pm

by Raymond J. Keating-

On the morning of June 25, entrepreneurs, business owners, managers, investors, policymakers and economists received three reports on the state of the economy. More information, of course, is welcome to hopefully gain greater clarity. At the same time, though, uncertainty regarding the coronavirus is working against clarity and in favor of cloudiness.

Waiting on GDP. On the data front, the Bureau of Economic Analysis provided another update to its first quarter GDP estimate. Little changed from the previous estimate. Real GDP was still measured as declining by 5 percent in the first quarter. However, the extremely bad numbers on private investment improved ever so slightly.

Rather than shrinking by 7.9 percent, fixed nonresidential investment (i.e., business investment) fell by 6.4 percent. But in general, the changes weren’t significant, and the numbers were still atrocious. And we are all left looking ahead to the end of July for the first estimate on GDP for the second quarter, and hoping that the economy bottomed in April.

A Turn Up for Durable Goods Orders. Along those lines, the U.S. Census Bureau released its latest durable goods orders report. After huge drops in orders in March and April, May orders jumped by 15.8 percent. In terms of capital goods, again, after major declines in March and April, May new orders increased by 25.8 percent. And new orders for nondefense capital goods excluding aircraft – a measure of private investment in equipment and software – grew by 2.3 percent, after falling by 6.5 percent in April and by 1.3 percent in March.

The turn to the positive, hopefully, lines up with other economic indicators suggesting that the economy might have bottomed in April.

High Initial Unemployment Claims Persist with Some Improvement. As for unemployment, the Department of Labor reported that initial jobless claims registered 1.48 million during the week ending June 20. That showed the slightest of improvement compared to previous weeks (e.g., 1.54 million for the week ending June 13 and 1.57 million for the week ending June 6). These numbers remain incredibly high, compared to 224,000 in the same week last year and 211,000 for the week ending March 7, 2020. However, it is down notably from the peak of 6.87 million hit for the week ending March 28.

Source: Federal Reserve Bank of St. Louis, FRED


Meanwhile, small improvement was seen in continuing unemployment claims, with the number coming in at 19.5 million for the week ending June 13, compared to 20.3 million for the week ending June 6, and 20.6 million for the week ending May 30. The 19.5 million for June 13 compared to 1.7 million a year earlier, as well as 1.7 million on March 7, 2020. The peak, though, was hit on the week ending May 9 at 24.9 million.

These unemployment numbers also offer some hope that the economy might have bottomed in April, or early May (employment trends lag the broader economy).

Coronavirus Spreading. All of this, of course, must be placed alongside the latest information regarding the cause for the economy shutdown, i.e., the coronavirus. As widely reported, such as in The Wall Street Journal, the U.S. is experiencing a resurgence in daily reported cases (though, fortunately so far, not a resurgence in daily deaths reported). In turn, that has resulted in certain states re-introducing restrictions on business, as well as various businesses deciding for themselves to hold off on reopening or expanding activities. In a Journal analysis of results and testing, it was noted:

“Public health officials say the new coronavirus that causes Covid-19 will likely continue to spread across the U.S. in rolling, uneven waves, as municipalities adopt disparate approaches to business closures, testing strategies, tracing close contacts of infected people and mitigation measures such as mask-wearing.” The continued spread of the pandemic internationally also must be kept in mind.

Individuals, entrepreneurs, businesses, and policymakers face continued uncertainty regarding this pandemic – though the more data and information we have about the virus, its spread, counter measures, and the economy, the better, as we learn more and can improve decision-making when it comes to both business and policymaking.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.



News and Media Releases