A senior Federal Reserve official has warned that the rebound in the world’s largest economy is in danger of stalling as a result of the recent spike in coronavirus infections across several large US southern and western states. In an interview with the Financial Times, Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, whose district covers some of the regions hardest hit by the current outbreaks, including Florida, said high-frequency data had shown a “levelling off’ of economic activity both in terms of business openings and mobility.
“There are a couple of things that we are seeing and some of them are troubling and might suggest that the trajectory of this recovery is going to be a bit bumpier than it might otherwise,” Mr Bostic said.”And so we’re watching this very closely, trying to understand exactly what’s happening.”
US jobs data released for the last two months have shown that American employers have added back 7.5m of the 22.2m positions lost since the outset of the coronavirus crisis, sparking hopes of a faster rebound in the labour market. But the Junefigures were collected before a surge of infections in several large US states, including Florida, Texas, Arizona and California, which have caused local officials to reimpose some restrictions introduced during the initial lockdowns.
‘The longer this goes without them getting relief, the more likely that they’re not going to be able to survive
Raphael Bostic, Atlanta Fed president, on small businesses
Jefferies, the investment bank, said on Monday that its index of US economic activity had “clearly flatlined ” after two months of improvement. “The loss of momentum is broad-based, spanning small business activity, discretionary footfall, restaurant bookings, traffic congestion and web traffic to state unemployment portals,” it said, referring to data sources that update with greater frequency than official statistics.
“Regional data show particular weakness in virus-hit states, where V-shaped recoveries are morphing into Ws,” Aneta Markowska and Thomas Simons, Jefferies economists, wrote in a note. Mr Bostic said the Atlanta Fed was “trying to figure out whether this levelling off is something that is a more sustained pattern, or just a pause”. His “biggest concern in this whole period “, he said, “is to what extent are business losses permanent, are job losses permanent”?
His comments were accompanied by a call for Congress to offer more fiscal support for the US economy, since a big chunk of the $3tn in aid to businesses and households approved earlier in the year to fight the coronavirus shock is now fading or expiring.