Pressures on US economy deepen

Basic cause

The downturn in economic activity is unlike any other in US history and has a basic cause: The government-ordered shutdown of the economy to contain the spread of the coronavirus.

Workers nationwide were directed to stay home from nonessential jobs, an order that sent the unemployment rate to a post-Depression high of 14.7 percent.

Continuing claims, or individuals receiving unemployment benefits for at least two consecutive weeks, increased by 867,000 to 17 million.

Continuing claims had been declining as the economy appeared to stabilize. An increase in the number of workers receiving benefits for an extended period could signal a weakening of the economy and raise fears of a further decline.

Data compiled by JPMorgan Chase showed that credit and debit-card transactions increased in May and early June but then remained generally flat through last week.

Consumer spending represents about two-thirds of the US economy.

The US Census Bureau's weekly Household Pulse Survey showed that 51.1 percent of households reported a loss of job income for the week ended July 21, up from 48.3 percent four weeks ago.

A 34.6 percent annualized decline in consumer spending underscored the second-quarter drop in GDP, the US Commerce Department said.

Personal spending declined in clothing, footwear and at restaurants. Car dealers cut inventory and companies reduced spending on new equipment, the Commerce Department said.

On Wednesday, Boeing announced further production cuts and layoffs as airlines cut flights and demand for new aircraft collapsed during the pandemic.

Congress is debating the extension of an extra $600 a week in unemployment benefits. Democrats say the money is needed to help people with household expenses, but Republicans argue that the extra benefit discourages some from returning to work and therefore will slow the recovery.