Should We be More Worried About the Economy?

We are really in an unprecedented period where the economy is trying to recover from the shutdowns of April and May while being faced with partial shutdowns due to the resurgence of the pandemic in large parts of the country. We are struggling to make sense of data, which often has a substantial lag. We are still getting data from July even as we are in the last weeks of August. Furthermore, when we have large monthly changes, the picture at the end of July could have been very different than the beginning of the month.

The Opportunity Insights program at Harvard University is trying to help navigate the storm with its Economic Tracker. This provides much more current data on a variety of measures by relying on various industry sources. The latest picture is not good.

Starting with the one I find most troubling, their source on job posting shows a huge falloff in August. Nationally, we are almost back to the lows reached in May.

There is the qualification that these are posting at small businesses, so perhaps the story would look different if we included and mid-sized and large businesses, but still, this picture is not encouraging. Their data on small businesses that are open and revenue are also not good.

The other very disturbing item is their data on consumer spending, which is derived from credit and debit card spending.

The data show a healthy bounce back in June, but then spending levels off in July. Then, spending begins to trail off at the end of the month and start of August. Note that this is just as unemployment insurance supplements are ending.

These are new data sources that I and most other economists are not familiar with. That means that there can be quirks that explain the plunge in job postings and falloff in spending that we do not know about. But on its face, these data suggest a recovery that is stalling, with many businesses closing and millions of workers not being able to go back to their jobs.

That should make the case for a new rescue package more urgent and also again remind us of the importance to the economy of bringing the pandemic under control.