Where there’s smoke, there’s fire, the old saying goes. And the record surge of coronavirus cases is generating plenty of smoke.
will get more clues next week on how much fire the raging virus is causing — and how much it’s scorching the U.S. economy. Some singeing is already evident.
New jobless claims rose for the first time in five weeks, signaling an increase in layoffs. Restaurant reservations tapered off amid new government restrictions and fear of catching the virus. Drivers bought less gas. And consumer confidence slipped in early November.
A flurry of new data in an abbreviated Thanksgiving week will likely show the economy remained on a solid track in October, but that result has already been discounted. The surge in coronavirus cases took place largely outside the scope of the reports, toward the end of the month and well into November.
It’s likely the most up-to-date bits of new information will be found in an obscure pair of reports covering the service and manufacturing sides of the economy in early November. These surveys of business executives, produced by IHS Markit, are one of the early warning signs for the economy.
The Markit surveys have been showing steady and sometimes surprisingly strong growth since the summer. Manufacturers have fared better since they have been largely shielded from government restrictions.
The much larger service sector that employs most Americans has been more hit and miss.
Technology and finance companies, for example, have done just fine, but dine-in restaurants, hotels and airlines have suffered deep declines in customers. They can’t make a full recovery until the virus is vanquished by pending vaccines or the disease fades away.
“The good news is that the end of the coronavirus nightmare is in sight,” said chief economist Robert Dye of Comerica Bank in Dallas. “The less-than-good news is that the ground in front of us is shaky. “
New jobless claims are a must-watch. The report comes out every week and is as close as it gets to monitoring the real-time health of the labor market. If layoffs are on the rise again, another increase in claims could be in the offing.
Consumer sentiment completes the trifecta. The preliminary reading early in the month declined even though Democrats were thrilled by Joe Biden’s victory in the presidential election. The final reading, covering the end of the month, is likely to erode even further.
How bad it gets will depend on the path of the pandemic and the actions governments take to try to slow the spread.
Most cities and states have put in place much narrower restrictions than they did last spring. And some, such as Texas and Florida, say they will take no new measures at all.
“Even the most stringent new restrictions appear to be designed to let most stores stay open as much as is safe,” noted chief economist Stephen Stanley of Amherst Pierpont Securities.
For now most economists are penciling in small growth in the fourth quarter, with a bigger recovery next year when vaccines are supposed to be widely available.
Some even warn the economy could stumble back into recession, but the latest outbreak would probably have to get a lot worse.