U.S. spending, virus cases after reopenings cloud outlook

National

Relatives carry the coffin of a suspected COVID-19 victim at the Nueva Esperanza cemetery on the outskirts of Lima, Peru, Thursday, May 28, 2020. (AP Photo/Rodrigo Abd)

WASHINGTON (AP) — Plummeting U.S. consumer spending and rising coronavirus cases in some parts of the country that are reopening businesses highlighted Friday the rough road ahead for a hoped-for economic rebound during the pandemic.

The bad economic news was echoed in Europe, where an extensive social welfare net was showing signs of fraying, as protests erupted for a second day in Spain against layoffs by French carmaker Renault and Italy’s chief central banker warned that “uncertainty is rife.”

New U.S. Commerce Department statistics showed a record-shattering 13.6% drop in spending in April, a day after a federal jobs report showed another 2 million-plus Americans went out of work last week. The depth of the spending drop is particularly damaging because consumer spending is the primary driver of the economy.

While some U.S. states were moving ahead with steps to reopen businesses and leisure activities needed to spur spending and restore jobs, some were finding relaxed safety measures have been followed by upticks in new cases.

Arkansas over the past week has seen a steady rise in its active coronavirus cases, following moves by Gov. Asa Hutchinson to reopen businesses shuttered during the pandemic.

Health officials on Thursday announced the number of cases, excluding people who have recovered or died, hit a new high of 1,830 in the state. which has had a total of 6,538 cases. Arkansas also hit a record for a one-day increase in infections in the community, meaning ones that don’t include the incarcerated.

“We’re not going to go back, but we want people to follow those guidelines, make sure they do everything they can to avoid the spread and we can get through this,” Hutchinson said.

Friday’s U.S. Commerce Department figures showed that consumers are unable or reluctant to spend, even as incomes soared 10.5% in April, reflecting billions of dollars in government payments in the form of unemployment aid and stimulus checks.

However, wages and salaries — normally the key component of overall income — sank by an annualized $740 billion in April. By contrast, income in the form of government support jumped by an annualized $3 trillion. That form of income will likely fade in coming months as government aid programs expire.

Until Friday’s spending report for April, a revised 6.9% decline in March had been the record for the steepest one-month fall in records dating to 1959.

Debate in Congress over whether to extend $600 a week in federally provided benefits to the unemployed looks sure to intensify, with the number of people receiving the aid now topping 30 million — one in five workers. The money, included in a government relief package enacted in March, is set to expire July 31.

The latest job-loss figures, released Thursday by the U.S. Labor Department, brought to 41 million the running total of Americans who have filed for unemployment benefits since the coronavirus shutdowns took hold in mid-March.

Adam DuPaul, owner of City Barber Shop in Keene, New Hampshire, said he applied for unemployment benefits as soon as the state expanded eligibility to include self-employed workers in mid-March, but still hasn’t “gotten a dime.”

Though hair salons and barber shops were allowed to reopen earlier this month, he wanted to wait due to safety concerns, but he’s feeling he has no choice now.

“I truly feel like I’m forced to open this coming Monday,” DePaul said. “I really want to get back to what I love, but I don’t want to feel unsafe doing it.”

Elsewhere, New Zealand has all but eradicated the coronavirus with just one person in the nation of 5 million known to be infected. But developments were grim in other nations, with India reporting a record increase in cases, and Pakistan and Russia a record number of deaths.

In the first major increase since it started gradually reopening on May 11, France reported more than 3,000 new daily virus infections. It was not immediately clear if the spike was due to a greater availability of testing.

Strong safety-net programs in many European countries have been underwriting the wages of millions of workers and keeping them on the payroll instead of adding them to the ranks of the unemployed. But the limits were starting to show.

In Britain, Treasury chief Rishi Sunak was expected to tell employers that starting in August, they’ll have to share the costs of a program that has effectively placed furloughed workers on the government payroll.

The governor of the Bank of Italy, Ignazio Visco, said Europe’s fourth-largest economy could contract by as much as 13% this year.

“Today uncertainty is rife, not only about the course of the pandemic but also about the repercussions on behavioral patterns, on consumption and on investment decisions,” Visco said, adding that “after the pandemic wanes, the world will be a different place.”

In a reflection of that uncertainty, the 27 EU nations this week started discussing what was once unthinkable — the notion of the EU pooling debt and raising some 750 billion euros to fund the recovery from the pandemic.

Even as it sought a government loan from France, struggling carmaker Renault announced 15,000 job cuts worldwide as part of a 2 billion-euro cost-cutting plan over three years, as demand for cars plunged around the globe.

In Spain, Nissan was rolling back production in a move Madrid said would mean 3,000 direct job cuts and as many as 20,000 additional jobs in the supply chain. Spanish workers took to the streets for a second day to protest the closure of three Barcelona plants.

Worldwide, the virus has infected more than 5.8 million people and killed about 360,000, according to a tally by Johns Hopkins University. The true dimensions of the disaster are widely believed to be significantly greater, with experts saying many victims died without ever being tested.

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Sewell reported from Cincinnati. Associated Press writer Holly Ramer contributed from Concord, New Hampshire, with Associated Press reporters from around the world also contributing.

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