Where there is smoke, there is fire, the old saying goes. And the record outbreak of coronavirus cases is generating a lot of smoke.
Wall Street DJIA,
will get more clues next week on the scale of the fires caused by the raging virus – and how badly it is burning the U.S. economy. A certain flare is already evident.
New jobless claims rose for the first time in five weeks, signaling an increase in layoffs. Restaurant reservations have declined amid new government restrictions and fears of catching the virus. Drivers bought less gasoline. And consumer confidence fell in early November.
A wave of new data in an abbreviated Thanksgiving week will likely show the economy remained on track in October, but that finding has already been ruled out. The surge in coronavirus cases took place largely outside the scope of reporting, towards the end of the month and into November.
See: MarketWatch Economic Calendar
The most up-to-date new information is likely to be found in an obscure pair of reports covering the services and manufacturing economy in early November. These surveys of business leaders, conducted by IHS Markit, are one of the first warning signs of the economy.
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Markit surveys have shown steady and at times surprisingly strong growth since the summer. Manufacturers fared better because they were largely shielded from government restrictions.
The much larger service sector that employs most Americans has been more uncertain.
Technology and finance companies, for example, have done very well, but restaurants, hotels and airlines have suffered a sharp decline in customer base. They cannot fully recover until the virus is overcome by pending vaccines or the disease goes away.
“The good news is the end of the coronavirus nightmare is in sight,” said chief economist Robert Dye of Comerica Bank in Dallas. “The bad news is that the ground in front of us is unstable. “
See: MarketWatch Coronavirus Recovery Tracker
New unemployment claims are to be watched. The report comes out weekly and is as close as possible to real-time monitoring of the health of the labor market. If layoffs are on the rise again, another increase in claims could be in sight.
Lily: Unemployment claims rise for first time in 5 weeks as number of coronavirus cases skyrockets
Consumer sentiment rounds out the trio. The preliminary reading earlier this month declined even though Democrats were thrilled with Joe Biden’s presidential victory. The final reading, covering the end of the month, is likely to erode further.
Its severity will depend on the trajectory of the pandemic and the actions governments take to try to slow the spread.
Most cities and states have much more stringent restrictions in place than last spring. And some, like Texas and Florida, say they won’t take any further action.
“Even the toughest new restrictions appear to be designed to keep most stores open as much as possible,” noted chief economist Stephen Stanley of Amherst Pierpont Securities.
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For now, most economists envision small growth in the fourth quarter, with a bigger recovery next year when vaccines are expected to be widely available.
Some even warn the economy could slide back into recession, but the latest outbreak is likely to get worse.