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China broke with more than a quarter-century of tradition by not issuing an economic growth target for 2020, a stark acknowledgment of the challenges facing the world’s second-largest economy. The unusual move—it’s the first time a formal target has been omitted since the practice began in 1994—suggests Beijing’s leaders aren’t eager to unleash a large-scale stimulus after China’s sharpest contraction in four decades. It foreshadows more economic pain for a world that has become increasingly reliant on China as an engine of growth, Jonathan Cheng reports.
WHAT TO WATCH TODAY
The European Central Bank releases minutes from its April 29-30 meeting at 7:30 a.m. ET.
The Baker Hughes rig count is out at 1 p.m. ET.
Note: Real Time Economics is off Monday for Memorial Day. We’ll be back May 26. For news and analysis over the long weekend, visit wsj.com/economy.
U.S. and global business activity and labor markets suffered a little less in May than in prior months, offering signs that damage to the global economy from the coronavirus pandemic is easing. Surveys of purchasing managers showed private-sector activity in the U.S., Europe and Japan fell for the third straight month—though not as sharply as in April, Paul Hannon and Sarah Chaney report.
In the U.S., workers filed another 2.4 million claims for unemployment insurance last week, down significantly from a peak of nearly 7 million at the end of March. While layoffs appear to have subsided, the number of people without work remains at record-high levels: The number of people receiving benefits—a proxy for overall levels of unemployment—increased to 25.1 million.
Separate surveys from the New York Fed and Philadelphia Fed tell a similar story: It’s bad but the worst may be over. Even so, recovery will likely take some time as continued job cuts and a rise in unemployment cause households to cut back on spending.
Sales of previously owned homes in April posted their biggest monthly decline since 2010. Stay-at-home orders prevented real-estate agents from showing homes in person in some states, and widespread job losses and tightening credit requirements have made it more difficult for buyers to qualify for loans. While the number of transactions declined, prices continued to rise. The median existing-home price rose 7.4% from a year earlier to $286,800, Nicole Friedman reports.
In another sign the worst may be past, U.S. applications for mortgages to purchase a home have risen for five weeks straight, according to a Mortgage Bankers Association survey. That’s no guarantee the market will continue to gain ground, but it does suggest activity has stabilized.
Close to Home
Facebook CEO Mark Zuckerberg announced plans to enable up to half of its 45,000 employees to work from home. Twitter last week said it would allow employees to work from home indefinitely. E-commerce company Shopify also said it plans to let most employees work remotely in the future. From the open office to agile development, trends in the tech sector have a way of percolating into the broader corporate world. Some companies outside tech are following suit in the move to permanent remote work, Angus Loten reports.
Expedia dropped a small nugget of hope for the travel industry. The travel website said business in May has been looking “considerably better” than late March and early April, citing “really markedly better” performance in its homestay business, Vrbo. Families looking to get out of densely populated cities for the summer—driving, not flying—may be behind the trend, Laura Forman writes.
The Covid Surcharge
Companies from major retailers and package carriers to local restaurants and hair salons are awakening to a new economic reality in the age of the new coronavirus: Being open for business is almost as hard as being closed. Facing higher costs to keep workers and customers safe and an indefinite period of suppressed demand, businesses are navigating an ever-narrower path to profitability. To make the math work, some businesses are cutting services and jobs. Others are raising prices, including imposing coronavirus-related fees aimed at getting customers to share some of the expenses, Matt Grossman reports.
British retail sales in April recorded their biggest monthly drop on record. Sales at clothing stores, household goods stores and department stores tumbled between 25% and 50%. Online sales grew 18% as Britons stocked up at home for a lockdown that’s still in force. Alcohol sales also rose, Jason Douglas reports.
WHAT ELSE WE’RE READING
Don’t stand so close to me. “To gain insight into the economic impact of the pandemic, the Dallas Fed developed a Social Distancing Index based on geolocation data collected from a large sample of mobile devices. Our Social Distancing Index (SDI)…spiked dramatically in mid-March, coinciding with a large drop in economic activity. Recently, the index has started to decline, even prior to the relaxation of stay-at-home orders. The drop suggests economic activity may have bottomed out and could begin to improve,” Dallas Fed economists write.
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