Carney: America’s Economy Slowly Comes Back to Life

The U.S. economy is on the mend.

The coronavirus and shutdown orders were devastating for the U.S. economy, sending unemployment to record highs and output crashing at the fastest pace in modern history. But there are several signs that the worst hits from the shutdowns are in the rearview mirror and that the economy has begun to recover.

It’s not exactly off to the races, however. We were laid low and now we’re up again, limping but moving ahead.

Forget the debate over what alphabetical symbol or piece of athletic equipment the recovery will resemble. Unlike a V or a W or even hockey stick, the economy is a process without an end. The gauges we use to measure the economy, such as gross domestic product, are at best rough outlines that attempt to describe conditions created through an endless series of exchanges of products and services through the mediums of currencies and credit.

But by looking at various measures of activity, we can get a sense for whether our economic activity is contracting further, stagnating, or expanding. And many of those available to us as “high frequency” or “real-time” data suggest recovery has already begun.

Rail traffic, for instance, has been climbing for five weeks after tumbling dramatically in mid-February and then falling through the following 10 weeks. The upswing has not been anywhere near as sharp as the downturn, however, which suggests the recovery is proceeding slowly and, perhaps, deliberately.

Data on driving and walking provided by Apple, based on requests for directions from its map application, also indicates increased activity. A week ago or so, requests for driving routes moved up beyond the mid-January baseline Apple uses to represent pre-coronavirus America. It dropped off again, below the baseline, and returned this weekend. What’s more, walking directions are up above the baseline for the first time. Transit requests are still below the norm.

Some of this recovery is seasonal. More people are out driving and walking because the weather has turned far nicer in much of the country.

People are not sheltering in place, staying home, as much as they did in March and April, when it was unseasonable cool in much of the country. But seeing some regular seasonal behavior is a sign that the economy is on the mend.  We still do not know if warmer weather will temper the rate of coronavirus infections but we do know it has decreased the propensity for Americans to avoid venturing out.

That’s very important. It suggests that many Americans will be willing to return to work and return to other forms of economic activity, such as shopping in non-essential stores, even if we do not have a vaccine or certainty on how to treat the virus. Hotel reservations have been rising for a few weeks now.

And there is evidence that this is more than a seasonal effect. All forms of mobility requests from Apple maps are now 16 percent above the January baseline in the U.S. But that is not true everywhere else we would expect to see a similar seasonal boost. Germany is down 8 percent. Italy is down 25 percent. The U.K. is down 35 percent.

Air travel is up. The daily tracking of people passing through TSA checkpoints rose to 348,673 on Friday, the highest point since the outbreak hit. A month earlier, less than 100,000 people flew. The latest figures are still far below the 2.7 million who flew a year ago.

Restaurant reservations have picked up from almost non-existent in early May, according to data from OpenTable. As the month opened, reservation volumes were down 99.9 percent compared with a year prior. Now they are down 87.8 percent. That’s better than Canada, U.K., Ireland, an Australia. Germany, however, has seen a massive recovery from 100 percent in early May to a 54 percent decline this weekend.

Home sales tumbled in April but did not melt away completely as some expected. Applications for building permits were well above expectations in April, as were housing starts.

There will be an avalanche of negative news in the weeks to come. Jobless numbers are likely to show layoffs continue, with millions losing their jobs every week. But the pace of layoffs has slowed, with each week coming in lower the last. But the official unemployment rate, already at a record, will likely climb higher before it begins to moderate. Most forecasters seeing it remaining elevated into early next year.

And the GDP numbers for the second quarter will likely confirm that we are in a deep recession. Most forecasters think the economy will shrink at an annualized rate of 40 percent in the second quarter after contracting at a 4.8 percent rate in the first quarter. But it is expected to bounce back in the third and fourth quarters, although the economy will likely end the year 6 to 7 percent smaller than it was at the end of 2019.

But those quaterly figures can conceal the fact that the real economy doesn’t really have quarters. It has months, weeks, days, and moments. And while April and May were horrendous in many ways, the second half of May looks better than the first half and June looks even more promising.