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Real Time Economics |
Good morning. Jeff Sparshott here with the latest on the economy. You can send questions, comments and suggestions by replying to this email. I read them all. |
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U.S. manufacturers aced the shutdown of their factories and warehouses last spring in response to Covid-19. They’re botching the recovery. After carrying out an orderly retreat from assembly lines as the pandemic arrived in the U.S., many manufacturers pulled out the playbook they followed in past recessions, cutting costs and preserving cash. That left them unprepared for the sharp rebound in consumer demand that began just weeks later and never let up. Without restaurants to visit and trips to take, Americans bought out stocks of cars, appliances, furniture and power tools. Manufacturers have been trying to catch up ever since, Bob Tita and Austen Hufford report. |
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Supply chains typically get beaten up during recessions. As sales decline, companies draw down inventories to conserve cash instead of purchasing more parts and materials. Entire pipelines of supplies get cleaned out. When demand improves, even modestly, suppliers respond with an outsize increase in production to restock empty warehouses and assembly plants. The so-called bullwhip effect ripples all along supply chains. This time, the bullwhip effect is even more pronounced because demand for consumer products has been extraordinarily high. At the same time, companies are placing supersize orders to compensate for the extra time it takes to procure supplies from factories and freight operators constrained by global efforts to contain the coronavirus. |
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🎧 WSJ podcast: Reporter Bob Tita discusses why U.S. manufacturers were unprepared for a surge in demand for consumer products—and are still struggling to catch up. Listen here. |
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The S&P CoreLogic Case-Shiller 20-city home-price index for December is expected to climb 9.9% from a year earlier. (9 a.m. ET) Federal Reserve Chairman Jerome Powell delivers the central bank’s semi-annual report on the economy and monetary policy during two days of testimony on Capitol Hill starting today. Livestream here. (10 a.m.) The Conference Board's consumer confidence index for February is expected to rise to 91 from 89.3 a month earlier. (10 a.m. ET) The Richmond Fed's February manufacturing survey is expected to increase to 16 from 14 a month earlier. (10 a.m. ET) Bank of Canada Gov. Tiff Macklem speaks at 12:30 p.m. ET. |
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Harder, Better, Faster, Stronger |
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More evidence that manufacturers are trying to make up ground lost early on in the pandemic: regional Federal Reserve factory surveys. The latest report from the Dallas Fed—which probably doesn't reflect the full effects of winter storms—beat expectations. Earlier readings from New York and Philadelphia did the same, suggesting another strong print when nationwide data comes out next week. 🎧 WSJ podcast: Reporter Sarah Chaney Cambon on how demand for some blue-collar jobs has exceeded pre-pandemic levels. Listen here. |
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The pandemic is forcing hotel and restaurant workers to reinvent themselves. Since February 2020, the leisure-and-hospitality sector has shed nearly four million people, or roughly a quarter of its workforce. As of January 2021, 15.9% of the industry’s workers remained unemployed; more than any other industry. As a result, millions of hospitality workers are trying to launch new careers. Reporter Kathryn Dill profiles a head waiter who became a grocery manager, the conference coordinator now working at a software company, and the hotel-sales boss now in marketing. |
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Many American households aren’t prepared for retirement, but Black Americans are even further behind than whites, according to academic and government data. The recent economic turmoil is likely widening the disparity. Many Black Americans are hampered in saving for retirement by such factors as less intergenerational wealth, more college debt, lower incomes and lower homeownership rates than white Americans. Even before the pandemic hammered the economy, Black families on average had roughly one-sixth the savings set aside for retirement compared with white families, Anne Tergesen and Heather Gillers report. |
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New York City movie theaters can reopen at limited capacity on March 5, Gov. Andrew Cuomo said, after being closed for nearly a year because of the Covid-19 pandemic. Last weekend only 38% of North American theaters opened their doors, according to media measurement company Comscore. Pre-pandemic, New York state represented nearly 7% of the domestic theatrical market, Ben Chapman and Joseph De Avila report. |
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Keep an Eye on Bond Markets |
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A key short-term bond spread hits lowest level in nearly a year. The spread between the two-year Treasury yield and a key interest rate set by the Federal Reserve is the narrowest since the depths of the coronavirus market selloff, a potential sign of financial-system stress. The shrinking reflects investors' appetite for short-term debt, as they gobble up safe assets and park their cash, Julia-Ambra Verlaine reports. |
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Unemployment in the U.K. rose at the end of 2020 as the country reeled from a deadly second wave of the coronavirus. Companies added jobs in January, however, and the number of people claiming out of work benefits fell. The data overall suggest the labor market is still weak, but not as sickly as it was at the height of the pandemic in spring last year, Jason Douglas reports. |
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The U.K.’s rapid vaccine rollout contributed to a substantial drop in infections, hospitalizations and deaths from Covid-19, according to data that add to a growing body of evidence that the shots provide significant protection against the disease. The new information from the U.K. is preliminary and hasn’t been reviewed by other scientists, but provides reasons for optimism that vaccines offer a route out of a pandemic that has claimed at least 2.5 million lives world-wide and sickened tens of millions, Jason Douglas and Max Colchester report. |
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Real Time Economics offers a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here. |
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