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V-Recovery Looking Tired

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Global Economics – August 7, 2020


Rather than the big V-recovery that is widely expected, a little v-recovery may be playing out. Monetary policy has already been exhausted and it may turn out that fiscal policy has also been exhausted, unless a deal in the US is reached to extend crisis benefits. For economic data, the easy comparisons against the depth’s of April and May are in the past making for slowing month-over-month improvement and underscoring what was a week of less-than-spectacular reports.

The global economy

The labor market

The US labor market extended its recovery into July though not all the details show acceleration, far from it. Nonfarm payrolls, up 1.763 million, beat expectations with government payrolls lifting the total by a sizable 301,000 excluding which private payrolls, at 1.462 million, came in below expectations. Though the unemployment rate, at 10.2 percent, came in 3 tenths better than Econoday’s consensus, the number of employed, at 143.5 million, was still more than 15 million below February and still only 90 percent of its pre-crisis size. The participation rate reflects the lack of progress, down 1 tenth in July to 61.4 percent. The slowing wasn’t anything like what ADP signaled on Wednesday, two days before the Friday report, with its estimate for private payroll growth of only 167,000 — but slowing was definitely the theme. Continued recovery for the US labor market will obviously depend on the course of infections and to what extent restrictions are lifted.

US Labor force: employed and unemployed

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