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US economy faces protracted recovery from coronavirus lockdowns

Jonathan Garber

The U.S. economy is slowly awakening from the deep slumber induced to slow the spread of the COVID-19 pandemic.

All 50 states and Washington D.C. have taken steps to reopen from lockdowns and return to normal, but the stay-at-home mindset is limiting progress, investment bank research shows.

A composite scale constructed by Goldman Sachs, which assesses the performance of a wide swath of data in both “stay-at-home” and “back to normal” categories, reached 54 in the week ended June 17 after bottoming in late March and early April at 36. A score of 100 represents a return to normal. Overall, the bank gives the reopening a “2” on a scale of 10. 

“Although we continue to see improvement in underlying metrics in the hardest-hit categories like dining and retail, much of this week’s improvement came from moderating growth in e-commerce, streaming media and declines in food delivery,” wrote a Goldman Sachs equity research team led by Heath Terry.

Stay-at-home orders, which forced the temporary closing of nonessential businesses and the elimination of most travel, caused U.S. gross domestic product to shrink by an annualized 5 percent during the first quarter and is expected to cause a contraction of at least 30 percent in the three months through June.

More than 44 million Americans have lost their jobs since the shutdowns began in March.

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With most of America remaining under partial lockdown, Goldman says stay-at-home segments of the economy continue to see massive demand.

Usage of video chat apps is up 613 percent from a year ago while grocery apps and at-home fitness are seeing traffic gains of 66 percent and 60 percent, respectively, according to the firm.

Movie theaters, meanwhile, remain shuttered; Transportation Security Administration screenings at airports are down 82 percent year-over-year, restaurant reservations through the app OpenTable have dropped 72 percent and gasoline demand is down 20 percent, Goldman said.

“The success of the reopening process is largely dependent on the progress of the virus,” wrote Jonathan Golub, chief U.S. equity strategist at Credit Suisse.

States like Arizona, Florida and Texas, which were among the first to reopen, saw economic activity outpacing the national average, according to Goldman Sachs, which found some evidence that recently acquired behaviors may be tough to change.

"Food for at-home-consumption (as reflected by grocery store sales) remains elevated versus history even in early reopening states, suggesting that people are maintaining their COVID-19 quarantine behaviors well into the reopening," Heath wrote.

States among the earliest to reopen have seen a spike in new infections, too, but it isn't clear if those cases are the result of reopening too quickly or the protests that occurred following the death of George Floyd, a black man who died in police custody in Minneapolis. A murder charge has been filed against the arresting officer.

Even with some places seeing a spike in new infections, the bounceback in the U.S. economy is likely to continue, according to the research firm Capital Economics.

The firm noted that while there are “clear signs” that the virus is spreading in a handful of states, the rise in infections is “nothing like the national surge” in March and April.

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“Even if the recovery loses a bit of vigor in these states, that is unlikely to be big enough to derail the national rebound evident in the May retail sales figures, especially with states in the densely populated Northeast just beginning to ease restrictions,” wrote Michael Pearce, senior U.S. economist at Capital Economics.

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