The U.S. retail sales figures for July will be released on Friday morning by the Commerce Department. After months of precipitous drops, the numbers bounced back the past two months and analysts are predicting that sales rose again, though not at the rate they did in May or June.
With the coronavirus still keeping some stores closed and many people home around the country, online sales have been a driving force. Some of the recovery has been helped by the $600 a week in unemployment assistance, which expired at the end of July. If Congress fails to extend the emergency benefit, it could derail the retail rebound in coming months.
And there are certain sectors of the industry that may never truly return until a vaccine is approved and widely distributed, allowing people to shop and dine indoors again without fear.
Foot traffic to brick-and-mortar stores selling primarily discretionary goods, including apparel retailers, remains down by as much as 43 percent from last year, according to Morgan Stanley’s research.
The U.S. economy struggled to shake off the last recession, with historically slow growth and a labor market that took more than six years to recover its earlier employment levels. A big part of the reason: state and local governments, which cut spending and fired workers amid widespread budget shortfalls.
The same dynamic poses one of the biggest threats to America’s recovery from the pandemic downturn. State governments are again experiencing extreme budget problems as they pay out increasing sums to cover unemployment and health costs caused by the coronavirus crisis while revenues from sales taxes and corporate and personal income tax payments plummet. States could face a gap of at least $555 billion through the 2022 fiscal year, according to one estimate.
Economists warn that the long-term risk coming from struggling states could prove even more damaging this time than the recession of 2007-9 unless Congress steps in. Yet providing more aid to state and local governments has become one of the biggest political battles in the fight over another pandemic rescue package.
The Senate formally adjourned on Thursday until early September, all but ending any chance that an agreement could be reached soon. House members had already left Washington.
While many governments entered the downturn with solid tax revenues and billions of dollars in their rainy-day funds, those coffers are quickly dwindling. State revenues “could fall as much as or more than they did in the worst year of the Great Recession and remain depressed in following years,” according to the Center on Budget and Policy Priorities, a progressive think tank.
Wall Street was set to open lower, as investors awaited fresh data on retail sales in the United States and considered new economic figures out of China.
Futures for the S&P 500 pointed to a modest dip at the start of trading. On Thursday, the S&P dropped less than half a percent, though it was still close to a record high.
The Euro Stoxx 600 benchmark index was 1.7 percent lower. Earlier in Asia, Chinese indexes had a good day, propelled by some positive economic data.
Oil futures were trading about 1 percent lower, and U.S. 10-year Treasuries were rising in price as investors looked for a safe haven.
Britain on Friday announced that people arriving from France, the Netherlands and Malta would need to self-isolate for 14 days, following a rise in coronavirus cases in those countries. The new rules threw a wrench into many vacation plans, and called into doubt efforts to relax lockdowns. Travel businesses felt an immediate impact, including airlines (EasyJet shares fell 7 percent, and the parent company of British Airways fell more than 6 percent) and tour operators (TUI tumbled more than 5 percent).
Underscoring the concerns, France on Friday declared Paris and the Marseille region to be high-risk zones, granting local authorities powers to impose new restrictions aimed at containing the spread of the coronavirus.
In the United States, investors were awaiting data on retail sales for July. Consumer spending is a primary driver in the American economy, and it was flattened earlier in the spring. Spending was revived in May and June as businesses reopened, and the July figures are expected to show another increase, although the rise expected to be less robust because some states and cities tightened shutdown rules again as the virus flared.
In China, economic data showed industrial output rose nearly 5 percent in July from a year earlier, while retail sales slumped 1.1 percent over the same period. It was a further sign that while China’s factories are humming, its residents are holding back from making purchases.
The federal aid to unemployed workers that President Trump announced last weekend looks likely to be smaller than initially suggested — and it remains unclear when the money will start flowing, how long it will last or how many workers will benefit.
Mr. Trump said Saturday that he was taking executive action to provide unemployed workers with $400 a week in extra payments, with states picking up one-quarter of the cost. He did so after talks on a new round of pandemic relief stalled in Congress.
States are scrambling to figure out how to carry out the plan. Here’s what we know so far:
The benefit will be $300 for most workers, not $400. Rather than adding $100 a week on top of existing unemployment benefits, states can count existing benefits toward their share.
It could take weeks for the money to start flowing. States will need to adjust their processing systems to the new provisions when they are already overwhelmed by unemployment filings.
The money won’t last long. Mr. Trump’s executive action caps spending on the program at $44 billion, enough to cover five or six weeks of benefits, assuming all states sign up.
Workers are left in limbo. For unemployed workers, the uncertainty hangs over mounting credit card debts and looming rent payments. And those who collect less than $100 a week in state jobless benefits do not qualify for the new supplement.