By Harriet Torry and Josh Mitchell
Truck loads are growing again. Air travel and hotel bookings are
up slightly. Mortgage applications are rising. And more people are
applying to open new businesses.
These are among some early signs the U.S. economy is, ever so
slowly, creeping back to life.
Plenty of data show the country was still mired in a severe
downturn in April and May, with overall business activity falling
and layoffs rising -- though more slowly than in the early weeks of
the coronavirus crisis. Current projections have the economy
contracting by 6% to 7% this year and unemployment lingering in
double-digit percentages for a while. But, for the first time since
the pandemic forced widespread U.S. business closures in March, it
appears conditions in some corners of the economy aren't getting
worse, and might even be improving.
"If this is the only wave [of coronavirus], it looks like we've
bottomed out and the normalization process has begun," said Beth
Ann Bovino, U.S. chief economist at S&P Global Ratings.
Spending on hotels, restaurants, airlines and other industries
hurt by social distancing remains low, but appears to be picking
up. The number of travelers passing through Transportation Security
Administration security screening checkpoints fell to 87,534 on
April 14, 96% below the same day a year earlier. But by May 22, the
figure had more than tripled to 348,673, although that is still
down 88% from the same day a year earlier. Meanwhile, data from
online restaurant-booking company OpenTable shows diners are
beginning to return in several states.
"We're past the trough in terms of peak damage," said Gregory
Daco, chief U.S. economist at Oxford Economics, with high-frequency
indicators showing "a burgeoning rebound in terms of how much
people are spending."
"You can see that turn in the data, which is encouraging," he
said, "but you have to be cautious that we're rebounding from
extremely depressed levels."
The shipping industry illustrates the trend. The numbers remain
low by historical standards but suggest the carriers have turned a
corner.
Truckstop.com, which measures demand in trucking's spot market,
says its weekly index has improved for four straight weeks and that
available loads were up 27% in the week ended May 18.
DAT Solutions LLC, which matches freight shipments to available
trucks, says its index for available loads rose 22% the week ended
May 10 from the previous week.
Old Dominion Freight Line Inc., one of the largest truckers in
the U.S., said its volumes fell sharply at the start of April, but
Chief Executive Greg Gantt said in an earnings call that demand
"has remained fairly steady since then."
"We'd like to think that the worst is behind us," Mr. Gantt
said.
It is a view echoed by the Trump administration. White House
economic adviser Kevin Hassett said Sunday that there are nascent
signs the U.S. economy has begun to recover from the damage done
from shutdowns caused by the coronavirus pandemic, even though he
said the unemployment rate could move above 20% in May.
"I think we're very, very close to an inflection point in terms
of business activity, and probably about a month away in terms of
employment," he said on CNN's "State of the Union."
The beginning of April marked a trough for real-estate activity,
according to data from ShowingTime, a real-estate software
provider. With cities across the U.S. shut down, property showings
scheduled throughout the country -- a measure of buyer demand --
were down nearly 50% in mid-April but picked up this month. Showing
activity, measured as a rolling weekly average in 100 top markets,
was up 27% as of May 23, according to ShowingTime. Meanwhile,
Mortgage Bankers Association data shows a recent rebound in
mortgage applications.
Justin Fichelson, a San Francisco real-estate agent, said the
market went into standstill in mid-March when the shelter-in-place
orders took effect, but activity started improving six weeks
later.
"People have spent more time in their home than ever before," he
said. "People are realizing, 'I need a great place to call home,' "
-- in some cases, with a home office or gym.
Low interest rates are attracting first-time buyers, a normally
risk-averse group, he said. "The fact that they're feeling
confident says something to me, that they see [the virus-related
shutdowns] as a short-term issue," Mr. Fichelson said.
U.S. auto makers resumed limited work at most of their factories
last week, although they faced supply-chain disruptions.
Much of the pickup in activity reflects states' decisions to
start opening up segments of their economies that had been shut
down to prevent the spread of infection, including Florida, Georgia
and Ohio. This is expected to boost consumer spending as Americans
venture out to restaurants and shops.
Still, the economic outlook remains highly uncertain. The latest
hopeful signs coincide with a surge in emergency spending from
Congress, a decline in the daily number of newly reported Covid-19
cases in the U.S. and the slow reopening of several states -- all
factors that could prove temporary.
The effects of government aid such as enhanced unemployment
benefits could ease in coming months. Federal Reserve officials
warn conditions could deteriorate again if a second outbreak
emerges as more Americans come out of their homes and return to a
more normal life.
Consumer spending provides the most fuel for U.S. economic
growth, accounting for about two-thirds of output. Its prospects
hinge on whether the businesses that cut millions of jobs since
mid-March will be able to bring back workers as the economy
reopens. People are likely to spend if they have steady paychecks
and feel economically secure.
Rehiring, in turn, will depend on how quickly states reopen,
whether consumers feel comfortable venturing out and whether a
second wave of the virus hits.
About 2.4 million Americans applied for first-time jobless
benefits in the week through May 16, down from the record of nearly
seven million who applied in the last week of March, Labor
Department data show. The number of people receiving benefits in
the week ended May 9 -- a proxy for overall levels of unemployment
-- increased to 25.1 million from 22.5 million a week earlier.
Job losses often persist for months after a recovery begins. The
2007-09 recession ended in June 2009, according to the National
Bureau of Economic Research. But the unemployment rate didn't peak
until months later, at 10% in October 2009, and remained above 9%
for nearly another two years.
New York Fed President John Williams said Thursday that April's
unemployment rate of 14.7% -- the highest since the Great
Depression -- was "a figure I hoped that I would never see in my
lifetime, and one that is sure to get worse before it gets
better."
For economic activity overall, however, "we're seeing some
positive signals in household spending, in the real-estate market,
and in the stock market," said University of Chicago economist
Constantine Yannelis, who worked in the Obama administration
Treasury Department. "But I don't think we can predict whether
those are going to continue and this is going to be a V-shaped
recovery or this is going to be a sustained, prolonged depression.
Really, the answer to that is going to come from the health
situation."
--Paul Page contributed to this article.
Write to Harriet Torry at harriet.torry@wsj.com and Josh
Mitchell at joshua.mitchell@wsj.com
(END) Dow Jones Newswires
May 25, 2020 08:14 ET (12:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.