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America’s Economy Is Taking Another Hit As Coronavirus Cases Surge And Businesses Shut Down Again

TOPLINE

A growing wave of new coronavirus cases in the United States—which brought a record 60,000 new cases on Tuesday alone—and the new restrictions that are accompanying the resurgence of the virus have the potential to derail an economic rebound until the fall, analysts from Goldman Sachs say. 

KEY FACTS

Tighter restrictions—like the closure of bars and gyms—and voluntary social distancing measures are already having a “noticeable impact on economic activity,” analysts from Goldman Sachs said this week. 

States with the worst coronavirus outbreaks, like Texas, Arizona, and California, saw declines in activity in June that the bank projects will continue this month.

Notable exceptions are manufacturing and construction, two industries that are less dependent on consumer spending. 

The new virus situation prompted analysts to revise down their GDP forecast for the third quarter by eight percentage points, from 33% to 25% from the same quarter last year. 

All told, however, Goldman’s analysts expect the U.S. economy to “get back on track” in September based on how other major economies have performed while containing the virus and on the fact that U.S. authorities have showed willingness to adapt to the changing conditions (Texas, for instance, enacted a mask mandate earlier this month).

Crucial quote

Many officials have said a complete shutdown of state economies for the second time will be a last resort. “Closing down Texas again will always be the last option,” Gov. Greg Abbott said last month. Treasury Secretary Steven Mnuchin shares that same sentiment: “We can’t shut down the economy again,” he told CNBC last month. “I think we’ve learned that if you shut down the economy, you’re going to create more damage.”

Big number 

$1 trillion, or 5% of GDP. That’s the economic loss that Goldman Sachs analysts say could be prevented by a national mask mandate

Key background

As U.S. coronavirus cases soar, record rises in new cases and rapidly dwindling hospital capacity are prompting some places to pause or roll back their reopening plans altogether. Bars and movie theaters have been closed in 19 California counties, for instance, and bars are closed in Florida and Texas, where Gov. Greg Abbott has also enacted a statewide mask mandate.

What to watch for

Thursday’s jobs report. Jobless claims for the week ending July 4 will be the most up-to-date indicator of whether the labor market is continuing its upward trend or beginning to stall out. 

Further reading

‘Bar Lives Matter’ Vs. Close The Beaches: Some Americans Protest New Coronavirus Rules, Others Plead For More (Forbes)

Trump Takes Victory Lap On Economy As Cases Surge Across U.S. (Forbes)

It’s Official: Trump Wants A Second Round Of Stimulus Checks In ‘Larger Numbers’ Than Democrats (Forbes)

The Great Coronavirus Rollback: California The Latest State To Abandon Reopening Plans Amid Record Coronavirus Surge (Forbes)

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