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Newsletter: China Bounces but Isn’t Back

YOUR BEST NEWS!

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Don’t Call it a Comeback

An official gauge of China’s manufacturing activity rebounded strongly in March as work resumption picked up, though economists warned that business remains far from normal following a devastating coronavirus outbreak. China’s manufacturing purchasing managers index jumped to its highest level since 2017 from a record low in February, the National Bureau of Statistics said. A separate nonmanufacturing PMI, also released Tuesday, showed service and construction activity similarly bouncing back. But the reversal merely shows activity is better than it was a month earlier, not that it’s back to pre-coronavirus levels. Economists widely forecast the Chinese economy will post a year-over-year contraction in the first quarter of the year, Jonathan Cheng reports.

WHAT TO WATCH TODAY

The S&P/Case-Shiller home-price index for January is out at 9 a.m. ET.

The Chicago purchasing manager index for March is expected to fall to 40.0 from 49.0 a month earlier. (9:45 a.m. ET)

The Conference Board’s consumer confidence index for March is expected to drop to 110.0 from 130.7. (10 a.m. ET)

The Bank of Japan’s quarterly tankan survey of business sentiment is out at 7:50 p.m. ET.

The China Caixin manufacturing index for March is out at 9:45 p.m. ET.

Note: This is a partial listing of key economic events and subject to change.

TOP STORIES

The New Normal

Underscoring the relative economic rebound, traffic levels in Beijing are back close to normal during the workweek, according to an index of congestion developed by TomTom NV, a transportation data provider.

But traffic in Wuhan, the epicenter of the coronavirus outbreak, is still well below levels from a year earlier. 

Induced Coma

The coronavirus has produced something new in economic history. Never before have governments tried to put swaths of national economies in an induced coma, artificially maintain their vital organs, and awaken them gradually. If it works cleanly, it will be a testament to the flexibility of modern capitalism and the ingenuity of modern government. More likely, much will go wrong. Marcus Walker writes about how it all might come together.

Will it be another Great Recession? What matters is not the depth, but the duration: Greg Ip says businesses need to believe the pandemic disruption, like a hurricane, is transitory. That will help keep temporary job loss from becoming permanent.

Macy’s, Gap and other retailers will furlough tens of thousands of employees beginning this week, highlighting the limits of the $2 trillion rescue package for U.S. businesses that have been cut off from their customers. The furloughs add to the swelling ranks of unemployed and the economic damage resulting from the fast-spreading coronavirus, Suzanne Kapner reports.

Layoffs and furloughs are only part of the employment equation. Hiring, another key component, also appears to be suffering as hospitality and tourism jobs dry up. Data from jobs site Indeed suggests employers aren’t looking for workers at anything near the same pace as previous years.

The Treasury Department urged airlines to submit applications for grants and loans by Friday to begin receiving funds as soon as possible.

New details from the IRS on tax deadlines and audit relief.

Beware of coronavirus scams.

The federal government will begin sending out stimulus payments to households in the next three weeks.

Commodity Crunch

Consumers are loading up on pasta, rice and bread. Farm supply lines are disrupted. Countries are restricting agricultural exports. The result: Prices of wheat and rice, two of the world’s staple grains, are rising sharply. Difficulties moving grain within countries and across borders, coupled with frenzied buying, could exacerbate the impact of the pandemic on the global food market, Kirk Maltais and Joe Wallace report.

The oil crash deepened on Monday, sending prices to an 18-year low. U.S. crude-oil futures ended the day at their lowest level since February 2002. Typically when fuel prices plummet, consumers drive more, helping the energy sector recover. But restrictions on travel and movement are altering that dynamic, leaving traders to project a massive surplus of oil and even lower prices ahead. A price war between Saudi Arabia and Russia has made the rout even more painful, Amrith Ramkumar and David Hodari report.

2 Fast, 2 Furious

The novel coronavirus sideswiped the economy so fast and hard that government economic data quickly became outdated even before it was published. Enter the Weekly Economic Index. The New York Fed’s Daniel Lewis, the Dallas Fed’s Karel Mertens and Harvard’s Jim Stock developed the measure from seven high-frequency time series—including government jobless claims but also private measures of retail sales, temp staffing and steel production. It’s not looking good: “Developments in the past week saw the index fall to a level unseen since 2008.”

The Swedish Approach

Sweden’s radically different approach to the coronavirus: No lockdown, no quarantines, just voluntary advice and a big dose of hope. Businesses, kindergartens and schools remain open. Stockholm’s street cafes and outdoor bars swelled with people over the weekend. The only mandatory rules are a ban on meetings of more than 50 people and an order forcing bars and restaurants to only serve seated customers so as to avoid overcrowding. It is too early to assess whether Sweden’s approach will have a benign or catastrophic outcome, but so far, the virus hasn’t spread widely there. The next two weeks may determine whether Sweden’s approach can succeed or if authorities bend to the reality of a rash of new cases, Bojan Pancevski reports.

WHAT ELSE WE’RE READING 

Working from home? You might not have have as much company as you think. “Our classification implies that 34% of U.S. jobs can plausibly be performed at home. We obtain our estimate by identifying job characteristics that clearly rule out the possibility of working entirely from home, neglecting many characteristics that would make working from home difficult. Our estimate is therefore an upper bound on what might be feasible and greatly exceeds the share of jobs that in fact have been performed entirely at home in recent years,” the University of Chicago’s Jonathan Dingel and Brent Neiman write.

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Newsletter: Fastest Reallocation of Labor Since World War II

YOUR BEST NEWS!

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

Going Mobile

The coronavirus pandemic is forcing the fastest reallocation of labor since World War II, with companies and governments mobilizing an army of idled workers into new, urgently needed activities. Former hotel, restaurant and airline staff are moving to grocers, online retailers and hospitals as parts of the economy are shuttered to prevent the spread of the disease—and essential goods and services are strained, Ruth Bender and Matthew Dalton report.

In the U.S., the pool of potential workers has exploded. A record 3.28 million people applied for unemployment benefits. Though at the same time, big companies that have seen pandemic-fueled spikes in demand, including Walmart and CVS, are seeking nearly 500,000 new staff members in the coming weeks. In Europe—where social safety nets mean fewer workers have lost their jobs—governments are trying to move workers to where they are most needed.

WHAT TO WATCH TODAY

U.S. pending home sales for February are expected to rise 0.5% from the prior month. (10 a.m. ET)

The Dallas Fed’s manufacturing survey for March is out at 10:30 a.m. ET.

The Atlanta Fed’s Raphael Bostic delivers remarks by video to the National Association of Housing and Redevelopment at 12:30 p.m. ET.

The White House coronavirus task force holds a press briefing at 5 p.m. ET.

Japan’s industrial production figures for February are out at 7:50 p.m. ET.

China’s official manufacturing index for March is expected to rebound to 51.5 in from a record low of 35.7 in February, reflecting the government’s push for work resumption following widespread coronavirus-related closures. (9 p.m. ET)

Note: This is a partial listing of key economic events and subject to change.

TOP STORIES

It’s Over

Yes, some laid off workers will quickly find employment. But many won’t. Economists surveyed by The Wall Street Journal expect the March employment report, out Friday, to show a net loss of jobs, snapping a record 113-month stretch of job creation. And that figure doesn’t capture the depth of the crash: The March payroll report, like nearly all such Labor Department employment reports, is based on surveys asking about the week or pay period that includes the 12th day of the month. As a result, it will primarily reflect the labor market in the first two weeks of the month, before the number of virus-related infections and deaths jumped and several governors ordered nonessential businesses to close. If the shutdowns continue for a few more weeks, the April jobs report could show the greatest one-month deterioration of the labor market on record, Eric Morath and Paul Kiernan report.

2020 graduates were set to enter a hot job market. But the coronavirus pandemic has caused opportunities nationwide to evaporate, leaving soon-to-be grads unsure of what’s next.

It’s a big week for America. Bills are coming due for companies and millions of laid-off workers: payrolls, rent, utilities, credit cards, mortgages. The decisions made in the next few days—what to pay and what to put off—will shape how the pandemic affects the economy, Ruth Simon, Esther Fung, Suzanne Kapner and Heather Haddon report.

President Trump on Sunday said he was extending the administration’s social-distancing guidelines for another 30 days through the end of April. Mr. Trump said the peak of the death rate from the new coronavirus was expected to hit in two weeks.

U.S. lawmakers last week completed a record-shattering economic-rescue package estimated at $2 trillion. Now, legislators from both parties, administration officials, economists, think tanks and lobbyists are already roughing out the contours of yet another emergency-spending package—perhaps larger than the last,  Jacob M. Schlesinger and Joshua Jamerson report.

Who’s left out of the most recent stimulus package? Anyone who isn’t a child and who can be claimed as someone else’s dependent. That includes some high-school students, college students and some disabled and elderly people, many of whom show up on the tax returns of the people they live with who provide most of their support. They won’t get money directly, and no one will get money for them, Richard Rubin reports.

More information on stimulus payments.

The Federal Reserve quickly deployed a half-dozen emergency lending programs over the past two weeks to ensure cash keeps coursing through the U.S. financial system. Now, Congress wants it to go much further, approving $454 billion to reload the Fed’s own ability to lend. The economic-rescue legislation President Trump signed on Friday asks the Fed to charge headlong into credit and fiscal policy, by financing businesses, states and cities. The move to entrust the Fed with more responsibility marks an about-face for both Congress and Mr. Trump, who has unsparingly criticized the central bank and the man he picked to lead it, Jerome Powell, for keeping rates too high, Nick Timiraos reports.

The economic shutdown caused by the coronavirus is testing America’s safety net. In Seattle, among the first U.S. cities where the virus was detected, a flood of people have flocked to homeless shelters, slammed suicide hotlines and packed food pantries. The economic shutdown is hitting the poor and working class with the most force, Douglas Belkin and Kate King report.

Economic sentiment in the European Union posted its sharpest drop on record. It could have been worse. The data would normally have been collected between Feb. 26 and March 23. But fieldwork effectively stalled in some countries amid coronavirus containment efforts. “In many countries, the vast majority of survey responses were collected before such strict containment measures were enacted,” the European Commission said. 

U.S. crude-oil futures dropped to their lowest level in over 18 years.

WHAT ELSE WE’RE READING 

Lock down or let it loose? Chicago Booth offered its Initiative on Global Markets economic experts panel the following statement: “Abandoning severe lockdowns at a time when the likelihood of a resurgence in infections remains high will lead to greater total economic damage than sustaining the lockdowns to eliminate the resurgence risk.” The responses: 41% strongly agree, 39% agree, 14% uncertain and 0% disagree, strongly or otherwise. “But containment doesn’t mean complete elimination. May be optimal to stagger return to work for low-risk groups once peak-disease is gone,” said MIT’s Daron Acemoglu.

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Real Time Economics has launched a downloadable calendar with concise previews forecasts and analysis of major U.S. data releases. To add to your calendar please click here.

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