The Economics of Reopening

The virus situation continues to improve with COVID cases beginning to decline, mortalities remaining at low levels and growth in hospital admissions flattening. In the week ending June 20, there was a daily average of 82.6k cases, a 19% decline from the prior week.¹ This decline may be partially due to delayed reporting, however, other data on the virus also suggest there is limited economic risk. Indeed, mortalities have not increased during the latest virus wave and new hospital admissions should peak soon.

Consumer spending data continue to point to strong aggregate spending, partially due to elevated spending on gasoline. Both Redbook same store sales and Bureau of Economic Analysis (BEA) card transaction data continue to record double digit growth rates. The BEA data also point to moderating spending on furniture, electronics and clothing. There were mixed signals on demand for leisure services. On the one hand, air passenger throughput and hotel occupancy levels were below 2019 levels in the latest data. On the other hand, seated diners on the OpenTable network were 7.5% above 2019 levels in the week ending June 20, and movie box office receipts were boosted by two large movie releases.^2,3

Initial jobless claims are starting to climb with three consecutive weekly readings above 220k.⁴ This still leaves claims at historically low levels but potentially points to a slight uptick in layoffs. Continuing claims, meanwhile, remain near historical lows at 1,312k in the week ending June 4, underscoring the tightness of the labor market.⁴ Year-to-date business applications remain 23% above the same period in 2019 as of the week ending June 11.⁵ We continue to expect this to support labor demand in the near and medium term. 

Overall, the virus and economic activity data largely continues to tell the same story we’ve seen over the past several weeks. Activity is moderating from its earlier blistering pace and COVID poses a low economic risk. Initial jobless claims have trended higher recently but remain low by historic standards.

Data Sources:

1. Centers for Disease Control and Prevention (CDC), Data through June 20, 2022
2. Transportation Security Administration (TSA), Data through June 20, 2022
3. OpenTable, Data through June 20, 2022
4. Department of Labor, Initial claims data through June 11, 2022; Continued claims data through June 4, 2022
5. Bureau of Economic Analysis, Data through June 11, 2022