Newsletter: Powell Urges Support for Economy

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

Jeopardy!

Federal Reserve Chairman Jerome Powell said recent economic improvement could be jeopardized if Congress curtailed support to workers displaced and businesses shuttered by the coronavirus pandemic. Despite a gain in payrolls last month, Mr. Powell said 25 million workers remain dislodged from their jobs. “It would be a concern if Congress were to pull back from the support that it’s providing too quickly,” he said during a virtual hearing before the House Financial Services Committee.

Congress faces deadlines this summer over how to address expiring provisions of relief measures for businesses and unemployed workers, after allocating nearly $3 trillion in emergency spending earlier this year. That spending appears to have boosted the economy in recent weeks, though some Republicans have said they are worried about the long-term impact on deficits, and many have said they want more time to see which parts of the economy will need more support, Nick Timiraos reports.

WHAT TO WATCH TODAY

The Bank of England releases a policy statement at 7 a.m. ET.

U.S. jobless claims for the week ended June 13 are expected to fall to 1.3 million from 1.542 million a week earlier. (8:30 a.m.)

The Philadelphia Fed’s manufacturing survey for June is expected to rise to minus-20.0 from minus-43.1 a week earlier. (8:30 a.m. ET)

The Conference Board’s leading economic index for May is expected to rise 2.4% from a month earlier. (10 a.m. ET)

Cleveland Fed President Loretta Mester discusses the coronavirus pandemic at 12:15 p.m. ET, St. Louis Fed President James Bullard speaks on the economy and monetary policy at 2 p.m. ET and San Francisco Fed President Mary Daly gives a commencement address at 7 p.m. ET.

The Bank of Japan releases minutes from its April 27 and May 22 meetings at 7:50 p.m. ET.

TOP STORIES

Out of Work

Applications for unemployment benefits have decreased substantially since an early spring peak amid signs the labor market and broader economy are recovering from the coronavirus-induced shock. Jobless claims topped out at 6.9 million in late March and have fallen each week since. Economists expect that to continue, with 1.3 million new applications last week, though that is still well above the highest mark on record prior to this year—695,000 in 1982, Eric Morath reports. Jobless claims data are out today at 8:30 a.m. ET.

U.S. consumers are skipping loan payments. Americans have missed payments on more than 100 million student loans, auto loans and other forms of debt since the coronavirus hit, suggesting that the flood of layoffs has left many without the means to keep up with their debts, AnnaMaria Andriotis reports.

If You Build It…

Permits to build new homes in the U.S. jumped more than 14% in May, mortgage applications to buy a home rose to the highest level in 11 years during the second week of June, and home-builder optimism has rebounded this month. But actual building remained muted, with new construction posting only a modest gain last month. That all suggests a bounce in construction this summer, though the longer-term outlook will depend on the pace of recovery for the labor market and broader economy.

Circle the Wagons

A united front on China is starting to take shape. What two years ago was mostly a confrontation between China and the U.S. is becoming a broader showdown with advanced democracies. Australia, Britain, Japan and the European Union have all risked retaliation as they confront China on trade, Covid-19, Hong Kong and Huawei. No U.S. ally wants to “decouple” from China, or to drastically cut economic ties, as some in the U.S. advocate. China is far more important to most of their economies than it is to the U.S. But neither do they want to let China’s assertiveness go unchecked, which brings them into closer alignment with the U.S., Greg Ip writes.

The European Union plans to tighten its defenses against subsidized foreign companies, marking a sharp increase in the bloc’s effort to assert “strategic autonomy” from China and the U.S.  The latest proposals aim to prevent foreign companies that have received significant grants, loans, tax credits or other forms of state aid from acquiring European companies or competing with them for certain contracts inside the EU, Valentina Pop reports.

Hiring Goals

Google announced a new hiring goal to dramatically boost the number of black executives at the search giant. Chief Executive Sundar Pichai said he aimed to increase the proportion of “leadership representation of underrepresented groups” overall by 30% at the company by 2025, Rob Copeland reports.

New research suggests banning salary history questions for job applicants provides considerable benefits for African-Americans and women. Researchers at Boston University found that after states implemented salary history bans—which limit employers’ ability to ask applicants about their past earnings—pay for job switchers increased 5% more on average than for comparable job changers not covered by such a ban. The benefits were even greater for African-Americans and women, who saw increases that were respectively 13% and 8% higher. The thinking is that employers who don’t know how much a worker is earning at their old job can’t use that to offer less than they would otherwise, Amara Omeokwe reports.

Penny for Your Thoughts

U.S. coins are in short supply because of the coronavirus pandemic. “With the partial closure of the economy, the flow of coins through the economy has gotten all…it’s kind of stopped,” Fed Chairman Jerome Powell said Wednesday. “We are well aware of this and are working with the Mint and we are working with the reserve banks. And as the economy reopens, we are seeing coins begin to move around again.”

WHAT ELSE WE’RE READING

The consumer-price index has barely budged during the pandemic. But the official inflation gauge doesn’t account for changing spending patterns. “I find that the Covid inflation rate is higher than the official CPI in the U.S., for both headline and core indices. … The difference is significant and growing over time, as social distancing rules and behaviors are making consumers spend relatively more on food and other categories with rising inflation,” Harvard’s Alberto Cavallo writes in a working paper.

SIGN UP FOR OUR CALENDAR

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.