Jerome Powell must perform a high-stakes balancing act this week when he’s expected to urge U.S. lawmakers to back more spending for an economy reeling from the impact of the coronavirus pandemic.
The Federal Reserve chairman is scheduled to appear via video conference along with Treasury Secretary Steven Mnuchin before the Senate Banking Committee at 10:00 a.m. ET on Tuesday. They’re testifying on the US$2.2-trillion virus rescue package passed by the Congress in March.
The trick for Powell will be to make his case delicately, not overstepping his role as an unelected central banker and not appearing to take sides in the partisan battle over how much more Washington should do. Overplaying his hand could hurt the credibility of the Fed. Failing to argue persuasively may contribute to insufficient additional support and even deeper economic harm.
“Everything is risky for him right now, but not doing it is risky,” said Julia Coronado, president of MacroPolicy Perspectives. “He’s got to instill a sense of urgency in the Senate.”
Republicans have defended their reluctance to swiftly provide more aid say Powell has not specified the need is imminent. Senate majority leader Mitch McConnell told Fox News on Thursday the Fed chief didn’t say how quickly more money was required, giving lawmakers time to judge the impact of what has already been done.
Mnuchin Cheerleader
Meanwhile Mnuchin’s key role will be as a cheerleader for the recovery. His views may contrast with Powell, whose role is to provide a more frank assessment of the economy, even if the message is gloomy.
The Treasury boss’s job will be to defend his boss’ economy a mere five months before President Donald Trump vies for re-election. So far, while Mnuchin has conceded that there will be some “very, very bad quarters,” he has said that by “next year, we’ll be back to having a great economy just like we had before.”
Mnuchin will also face the heat for some failings of his rapidly executed stimulus programs. Some economic impact payments were sent to the deceased. And US$669 billion in aid to small businesses was plagued with glitches, with money going to public companies and private schools serving wealthy families, while mom-and-pop firms faced website crashes and muddled rules for obtaining the funds.
Powell Focus
Coronado, like other Fed watchers, predicted Powell will mainly rely on the economic data. Despite record federal support already approved by Congress, and a host of emergency Fed lending programs now or soon to be operating, the economy is looking more crippled with each week.
More than 36 million Americans have lost their jobs since February. Countless companies, especially small businesses, are hurtling toward bankruptcy, while states and cities are confronting gaping budget shortfalls that could provoke a massive second wave of layoffs from the public sector.
The news keeps getting grimmer. Government data on Friday showed U.S. retail sales plunging in April, shattering the prior record set just a month earlier, as the virus shuttered businesses and kept Americans at home.
Powell has already been clear about the limits of Fed lending and remarkably outspoken on the likely need for more fiscal action. In a May 13 webinar hosted by the Peterson Institute for International Economics, he made an argument he’s likely to repeat this week.
“The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” he said. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
He was also asked during a press conference April 29, if concerns about mounting government debt should make Congress pause over its next move. His answer was unequivocal.
‘Not the Time’
“This is not the time to act on those concerns,” he said. “This is the time to use the great fiscal power of the U.S.”
Democratic Senators at the hearing are likely to ask Powell to repeat those remarks. House Speaker Nancy Pelosi already pounced on Powell’s words to cast him as supportive of the Democrats’ proposal for a new US$3-trillion relief bill.
Republicans have dismissed that package as a left-wing wish list stuffed with unnecessary extras unrelated to the current crisis and begun raising alarms over the deficit. Trump has also said he’s in “no rush” for a new stimulus.
That could put Powell — who was picked to lead the central bank by Trump — in an awkward position if he comes across as falling too hard on the side of Democrats. But he’s well positioned to take that risk.
Bipartisan Outreach
Powell has worked hard since becoming Fed chair at building strong relationships on Capitol Hill on both sides of the aisle, an effort that could help him avoid being painted as partisan. The Fed’s fast actions at the outset of the crisis have also lent the central bank some newfound public support that may help.
A Gallup Poll in April, just as the Fed was responding aggressively to the sudden slowdown, showed public confidence in the Fed chair was at its highest since Alan Greenspan was in charge 15 years ago.
“His approval ratings are getting better and better,” said Carl Tannenbaum, chief economist at Northern Trust Corp. “He’s leveraging that new standing to be much more forceful.”
Still, Powell will know when to stop, said William English, an economics professor at Yale University and a former senior official at the Fed.
Stop Shy
“He’s already clearly on the record saying the situation is pretty bad and they’ll probably have to do more,” English said. “But he’ll stay away from saying what exactly they have to do.”
In other words, he won’t endorse any dollar amounts, or say where Congress should direct the aid.
He will also, Coronado predicted, make it clear that spending taxpayer money is not his job. That power lies with Congress.
“He’ll tell them, if you want to sit there and do nothing when we’re looking at the greatest disruption to the economy any of us has ever seen, that truly is up to the Senate,” she said.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
