On The Money: Economists warn new COVID-19 surge may kneecap recovery | Fed officials fear second wave will cause deeper recession | US, Mexico set for new post-NAFTA trade era

On The Money: Economists warn new COVID-19 surge may kneecap recovery | Fed officials fear second wave will cause deeper recession | US, Mexico set for new post-NAFTA trade era
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Happy Wednesday and welcome back to On The Money, where we’re also wishing you a Happy Bobby Bonilla Day. I'm Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL — Economists warn new COVID-19 surge may kneecap recovery: The June jobs report may be the last piece of good news for the economy this summer as surging coronavirus cases threaten to dampen the burgeoning recovery.

The U.S. is expected to show another month of steady job growth when the Labor Department releases the June figures on Thursday morning, with economists predicting a gain of 1 million to 3 million jobs.

  • Two consecutive months of employment growth following the loss of 21 million jobs would be a welcome sign for the U.S. as it navigates the worst downturn since the Great Depression. 
  • But economists warn that the June report may paint a misleading picture of a fragile economy as surging COVID-19 cases cut into the ground gained since the depression started in February.

“Given the likelihood that states may have to re-shutter parts of their economies with the rise in cases, the job gains we saw last month may not last,” wrote Elise Gould, senior economist at the progressive Economic Policy Institute, in a preview of the jobs report. I explain why here.

Risks and rewards: 

  • The piecemeal reopening of the economy helped 2.7 million furloughed workers return in May, for a net gain of 2.5 million jobs. 
  • The rebound also carried over into the start of June and helped private businesses add nearly 2.4 million workers to their payrolls, according to a monthly report released Wednesday by the ADP Research Institute and Moody’s Analytics.

Mark Zandi, chief economist at Moody’s Analytics, told reporters Wednesday that the federal jobs report—which includes government workers as well as private sector employees—would likely show a gain of 3 million jobs and push the unemployment rate down from 13.3 percent in May to roughly 11.5 percent.

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Even so, Zandi warned that the June numbers would not reflect the steep rise in coronavirus cases across the South and Sun Belt. 

  • That surge, he said, happened largely after the jobs report surveys were taken during the week of June 12. 
  • Two weeks after that, more than a quarter-million Americans tested positive for the coronavirus and more than 40,000 tested positive on three consecutive days over the past weekend.

“This is a real threat to the nascent recovery,” Zandi said. “A healthy population is a necessary condition for a strong economy.”

Read more: Federal Reserve officials expressed fears in a meeting last month that a second wave of the novel coronavirus could send a reeling U.S. economy deeper into an unprecedented recession, according to minutes released by the central bank Wednesday.

LEADING THE DAY

US, Mexico set for new post-NAFTA trade era: The United States-Mexico-Canada Agreement (USMCA) came into effect on Wednesday in a political and diplomatic environment radically different from the one that brought the three countries together under the North American Free Trade Agreement (NAFTA) in 1994.

  • Unlike its predecessor, the USMCA will come into force four months before the U.S. presidential election, granting whomever prevails in November the power to enforce its novel labor, environmental, auto industry, digital commerce and dairy provisions.
  • The deal puts in new rules around digital trade, makes changes in point of origin rules that determine what products can be traded across borders without tariffs, and rewrites labor enforcement mechanisms.
  • It is expected to boost the U.S. auto and agricultural industries, among others.

The Hill’s Niv Elis and Rafael Bernal tell us more about what will change—and what may not—under USMCA here.

Minimum wage increases go into effect in three states, major cities: Higher minimum wages will go into effect for workers in Illinois, Nevada and Oregon, as well as a handful of major cities, starting July 1.

  • In Illinois, the hourly minimum will increase from $9.25 to $10 an hour. 
  • In Nevada, where workers who don't receive health benefits have an extra dollar added to their hourly minimum, the lowest wage will also rise by 75 cents an hour to $8 for workers with benefits and $9 for those without.
  • Oregon's minimum will rise the same amount, from $11.25 to $12, though the increase is higher in the metropolitan Portland area, and lower for rural counties.
  • Several major cities will also put in place higher minimum wages, including Washington, D.C., ($15), Chicago ($14), San Francisco, ($16.07), Los Angeles ($14.25 or $15, depending on employer size), Minneapolis ($11.75 or $13.25, depending on employer size), and St. Paul ($9 to $12.50 depending on employer size).

Niv Elis has more here.

GOOD TO KNOW

  • Senate Democrats on Wednesday unveiled legislation to extend a generous federal increase of weekly unemployment benefits that would continue as long as the coronavirus pandemic affects the economy.
  • The manufacturing sector grew in June, a comeback from a severe contraction in May as the coronavirus pandemic hit the economy hard.
  • The NASDAQ composite index closed at a record high on Wednesday, even as other indexes erased earlier gains to close relatively flat.
  • Facebook published an open letter Wednesday saying it does not benefit from hateful content as a campaign for advertisers to boycott the platform for its failure to moderate racist, sexist and otherwise objectionable content builds steam.
  • House Democrats on Wednesday passed a $1.5 trillion green infrastructure plan that would surge funding to repair the nation’s crumbling roads and bridges while setting aside funds for broadband, schools and hospitals.