The coronavirus pandemic is the greatest challenge that the U.S. economy and financial system have faced in more than a decade.
As the U.S. braces for cases of the coronavirus to rise through the country, Americans are preparing to hunker down and withdraw from society in a bid to avoid infection — or at least buy time for a medical system that may be stretched beyond its limits.
Financial markets have suffered their worst losses since the 1987 stock market crash, wiping out nearly three years of gains and prompting crisis-level action from the Federal Reserve.
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Concerts, professional and student sporting events, music and film festivals, parades, and other gatherings across the U.S. have been canceled or suspended, depriving vulnerable service workers, small businesses and the economy at large of crucial consumer spending.
Widespread school and office closures have sapped profits for businesses dependent on steady flows of workers or students through their doors. And the earliest industries affected by the outbreak have already laid off hundreds of workers, a number likely to grow as businesses shutter.
“In the financial crisis, most people kept their jobs. Many people maintained their spending. Now everyone is cutting their spending,” Furman continued. “Lots of people, if they don’t lose their jobs, are going to get substantial pay cuts in a potentially much more widespread way than the financial crisis.”
The sudden advancement of the coronavirus seems almost certain to derail the record stretch of steady economic growth and job creation.
The U.S. economy has added workers and expanded in each month since July 2009, defying the expectations of economists, shattering half-century records in unemployment and driving stocks to historic highs.
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Despite a series of government funding crises, widespread political unrest, a variety of economic shocks and a global trade war, the economy remained resilient and even appeared to accelerate toward the start of 2020.
As the coronavirus traveled beyond China, reached the U.S., and began spreading throughout the country, however, stocks plunged and the Treasury bond market seized as the scale of social disruption to mitigate the outbreak became apparent.
The Federal Reserve sought to stabilize financial markets and restore investor confidence with an emergency interest rate cut on March 3 and the issuance this week of up to $1.5 trillion in short-term loans to banks meant to boost Treasury market liquidity. The Fed is likely to slash interest rates to 0 percent next week and could take further dramatic steps to provide liquidity beyond the financial sector.
Even so, economists warn that the sudden synchronized shutdown of nearly every sector of the consumer economy will likely pull the U.S. into a steep downturn — and potentially a recession.
A slew of policymakers and economists have called for a titanic economic rescue package designed to carry laid-off or underscheduled workers and cash-strapped small businesses through the impending slowdown.
“Any kind of social activity just stops on a dime, and that means that the associated revenue and income for workers and revenues for firms just stops, but their obligations don’t stop,” Julia Coronado, founder and president of research firm MacroPolicy Perspectives and a former Federal Reserve economist, said in a Friday interview.
“Policymakers need to get really creative really fast to keep this from escalating from what’s already a public health crisis into a deep economic recession.”
Trump announced earlier that he would declare a national emergency, allowing state and local governments to tap into federal funding as they fight the pandemic.
Economists warn that while mitigating the spread of the virus is the most important step to protect the economy, a much larger burst of stimulus and financial relief is essential to prevent the U.S. from falling into a deep recession.
Michael Feroli, chief economist at JPMorgan Chase, said in a Thursday research note that the U.S. economy would likely shrink by 2 percent of gross domestic product (GDP) annualized in the first quarter and by 3 percent of GDP annualized in the second quarter even with a $500 billion stimulus plan.
“We believe at least that much [is] warranted to make up the lost demand,” Feroli wrote.
Furman and economists across the ideological spectrum have called on the U.S. to send cash directly to Americans, akin to the checks deployed by former President Bush during the 2008 downturn.
“It’s more money for people at the bottom, less money for people at the top,” Furman said.
“It’s money for people who have lost their jobs and [are] not getting a paycheck. And it’s lots of money upfront rather than having it dribble out over time.”
While the House is still on track to leave Washington, D.C., for a planned congressional recess, senators are expected to huddle next week on an economic rescue plan that could earn Trump’s support.
Trump and GOP senators have grown anxious about the impact of the pandemic — and their handling of it — on the 2020 election, raising the political pressure to pass an ambitious economic package. The president had sought to ride the strong economy to another term before the pandemic emerged as the greatest international crisis he has faced in office.
“I would be willing to say we are in a recession right now,” Cohn continued, adding that “when we get done with this public health crisis … the market will be resilient enough to recover.”
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
