The U.S. economy is showing more coronavirus cracks and the fissures are growing

The U.S. economy has suffered another setback from the coronavirus pandemic and the toll is mounting with the Christmas shopping season in full swing, but it’s still unclear how deep the damage will extend.

A number of economic signposts for November and early December suggest the harm will be considerable, but not anywhere close to as bad as it was at the onset of the pandemic earlier this year.

Nearly all states have avoided broad lockdowns of business and consumer activity for one thing in favor of targeted strategies that have left most businesses untouched. And most Americans are trying to go about their lives as normally as possible.

Read: Democratic euphoria after Biden win drives consumer sentiment close to pandemic high

A new round of indicators this coming week, nonetheless, is likely to show further erosion in the economic recovery: weaker retail sales, lower manufacturing production, and perhaps more layoffs tied to restrictions on indoor dining and other business activities.

Wall Street

forecasts sales at U.S. retailers to decline in November for the first time since April, when the coronavirus shut down most of the economy.

A chief reason: fewer auto sales. Vehicle purchases at car dealers account for about 20% of overall retail sales.

Even if autos are excluded, however, sales are likely to be tepid.

Bars and restaurants, for example, saw a drop off in foot traffic as the weather cooled in the fall, coronavirus cases exploded, and new government rules were imposed. Gas sales, another big retail category, also probably declined.

“The rise in Covid cases started to weigh on retail sales growth in October, and likely resulted in a drop in total sales in November,” wrote economist Katherine Judge of CIBC Capital Markets in a note to clients.

The key part of the retail sales report to watch is online sales. Internet retailers led by Amazon

have posted strong sales this year as consumers switched to online shopping during the pandemic.

Some letdown is likely after Amazon’s Prime Day in October, but if sales at internet stores are weak or fall outright, it would be a cause for worry.

A pair of manufacturing surveys by the New York and Philadelphia Federal Reserve banks will also bear close watching. They tend to give early-warning signs when manufacturing takes a turn for the worse.

See: MarketWatch Economic Calendar

The health of the labor market has also come under the microscope again after a disappointing increase in hiring in November and a surge in jobless claims in early December to a nearly three-month high.

The number of people applying for unemployment benefits might be on the rise again if government restrictions and slower economic growth are forcing businesses to lay off workers again.

“The increase in continuing claims, the first pickup since August, suggests a significant slowdown in rehiring activity,” said chief economist Lewis Alexander of Nomura Securities.

A big unknown, though, is how much the recent Thanksgiving holiday contributed to the surge in jobless claims last week. It will be telling if claims stay above 800,000 or fall back toward the low 700,000s in next Thursday’s data.

Against that backdrop, Federal Reserve leaders plan to meet for the final time of 2020 on Dec. 15 – 16. The central bank has this year taken a number of steps— some unprecedented — to prop up the economy.

The Fed is probably inclined to leave policy unchanged though as it waits to see if Congress finally passes another major package of financial aid for the economy after months of stalemate.

Yet there’s a slim chance the Fed could announce additional steps to support the economy if Washington fails to act.

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