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Increased Virus Spread Curtails Nascent Recovery

A partial recovery in some economic data was offset this week by a resurgence in new Covid infections, which is curtailing efforts to reopen the American economy. Stock markets slumped on the virus spread while bond prices rose, pushing yields to new lows. The week's new home sales and durable goods orders releases offered the prospect of a more rapid economic recovery. However, the surging virus spread appears likely to nip those prospects in the bud.

The week's labor market data did not show signs of improvement, as another 1.5 million new claims for unemployment insurance were filed. The number of those continuing to receive jobless benefits did decline, but still remains very elevated at 19.5 million. Taken in combination, the near-term outlook for the US economy is decidely negative, prompting renewed discussion of additional federal stimulus. The current unemployment stimulus has successfully stabilized average household incomes, but is scheduled to end on July 31.

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