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A lost decade looms for America's economy – CNN

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.
The CBO warns in a new analysis that the pandemic will reduce cumulative economic output over the next 10 years by $7.9 trillion, or 3% of GDP during the decade, compared to its projections from January. Without accounting for inflation, the damage totals $15.7 trillion, or 5.3% of GDP.
The CBO said the revisions reflect expectations of reduced consumer spending caused by business closures and social distancing. In addition, the recent drop in energy prices is expected to “severely” curtail investment in that sector, the CBO warned.
Recent legislation, which includes more than $2 trillion in stimulus, will only partially mitigate the economic fallout caused by the pandemic, the CBO said.
The big caveat: The CBO cautioned that there is an unusually high degree of uncertainty around its forecasts because the course of the pandemic is unknown and it’s not clear how the economy will respond.
The report from the highly respected government number crunchers further challenges hopes for a speedy economic recovery from the pandemic, which had been a common talking point in the early days of the crisis.
More than GDP: If recent history is a guide, it could take even longer for the labor market and household wealth to recover.
The 2008 global financial crisis took a much smaller bite out of GDP than what experts expect to see as a result of the pandemic. But 10 years after the Great Recession began, labor force participation rates for prime-age workers remained depressed in the United States, and household wealth had only started to recover.
Neil Shearing, the group chief economist at Capital Economics, said that most major economies are in a similar position — at least in the medium term —despite the recent pick up in high frequency data such as road traffic and electricity consumption.
“While the slump in output caused by the virus seems to have bottomed out, the recovery is likely to be slow going and uneven. Most economies are still likely to be below their pre-virus paths of GDP by the end of our central forecast horizon in 2022,” he wrote in a research note on Monday.
He cited three big reasons why a recovery in high frequency data doesn’t tell the whole story.
Reason 1: The recovery follows an extreme economic chock. “The fact that activity is recovering needs to be seen in this context of the huge loss of output incurred during lockdowns. Output in most major economies is still running at somewhere between 15% and 25% of pre-virus levels,” he said.
Reason 2: High frequency data doesn’t tell us much about what’s going on with demand —one of the biggest factors in any rebound. “The fact that more journeys are taking place is encouraging, but the extent to which this will translate into a recovery in consumer spending is unclear,” he said.
Reason 3: Governments and central banks still need to figure out how to transition from crisis mode to recovery, and to reopen their economies in ways that don’t do more damage.
“Policy needs to shift from combatting a crisis to supporting the recovery,” said Shearing. “Making this transition will not be easy. One of the biggest risks in the near-term is that governments move too quickly to embrace a new round of austerity.”

A walkout at Facebook

Some Facebook employees staged a virtual walkout on Monday to protest CEO Mark Zuckerberg’s decision not to take action on a series of controversial posts from President Donald Trump.
As part of the walkout, employees took the day off work. Managers at Facebook have been told by the company’s human resources department not to retaliate against staff who are planning to protest, or to make them use paid time-off, a source told CNN Business.
The public pushback from employees comes after growing scrutiny of Facebook’s inaction following controversial posts from the president. Trump and Zuckerberg spoke on the phone Friday.
What employees are saying: Jason Stirman, a design manager at Facebook, said he disagreed with Zuckerberg’s decision to do “nothing” about Trump’s recent posts. “I’m not alone inside of FB. There isn’t a neutral position on racism,” he wrote in a tweet on Saturday.
Andrew Crow, head of design for Facebook’s Portal devices, said on Twitter: “Giving a platform to incite violence and spread disinformation is unacceptable, regardless who you are or if it’s newsworthy.” “I disagree with Mark’s position and will work to make change happen,” he added.
Katie Zhu, an Instagram employee, tweeted that she was taking Monday off and that she’s “deeply disappointed” and “ashamed” with “how the company is showing up.” Zhu encouraged others who work for Facebook’s apps to join her and “organize.”
While only a small number of Facebook employees are currently speaking out compared to Facebook’s overall workforce of about 48,000, the protests underscore the company’s difficult position.
Taking action on Trump’s posts risks angering the White House and conservatives, who have long complained of alleged bias on the platform and are threatening new regulations, but doing nothing could alienate some of Facebook’s top talent.

What black CEOs are saying

Just four Fortune 500 companies in America have black CEOs. Three of them are speaking out following the death of George Floyd.
Jide Zeitlin, CEO of the luxury goods brand Tapestry, which owns Kate Spade, Coach, and Stuart Weitzman, posted a personal message on LinkedIn to his employees.
“I sat down several times to write this letter, but stopped each time. My eyes welling up with tears. This is personal,” Zeitlin wrote.
“We can replace our windows and handbags, but we cannot bring back George Floyd, Ahmaud Arbery, Breonna Taylor, Eric Garner, Trayvon Martin, Emmett Till, and too many others,” he added.
Lowe’s CEO Marvin Ellison posted a letter to his team on Saturday.
“I grew up in the segregated south and remember stories my parents shared about living in the Jim Crow South,” he wrote. “So, I have personal understanding of the fear and frustration that many of you are feeling.”
Merck CEO Ken Frazier told CNBC on Monday that he could have just as easily been George Floyd.
“What the African American community sees in that videotape is that this African American man, who could be me or any other African American man, is being treated as less than human,” Frazier told CNBC.
Frazier said that “huge opportunity gaps” exist in America.
“It is the responsibility of corporate America to bridge those gaps,” Frazier said. “If we don’t try to create opportunities for these people to be employed — joblessness creates hopelessness.”
Dick’s Sporting Goods will publish earnings before the opening bell.
Also today: CrowdStrike and Zoom earnings are up after the close
Coming tomorrow: ADP private employment report; US services data; Campbell Soup earnings

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Economy

Britain's economy went into recession last year, official figures confirm – The Globe and Mail

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People walk over London Bridge, in London, on Oct. 25, 2023.SUSANNAH IRELAND/Reuters

Britain’s economy entered a shallow recession last year, official figures confirmed on Thursday, leaving Prime Minister Rishi Sunak with a challenge to reassure voters that the economy is safe with him before an election expected later this year.

Gross domestic product shrank by 0.1 per cent in the third quarter and by 0.3 per cent in the fourth, unchanged from preliminary estimates, the Office for National Statistics (ONS) said on Thursday.

The figures will be disappointing for Mr. Sunak, who has been accused by the opposition Labour Party – far ahead in opinion polls – of overseeing “Rishi’s recession.”

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“The weak starting point for GDP this year means calendar-year growth in 2024 is likely to be limited to less than 1 per cent,” said Martin Beck, chief economic adviser at EY ITEM Club.

“However, an acceleration in momentum this year remains on the cards.”

Britain’s economy has shown signs of starting 2024 on a stronger footing, with monthly GDP growth of 0.2 per cent in January, and unofficial surveys suggesting growth continued in February and March.

Tax cuts announced by finance minister Jeremy Hunt and expectations of interest-rate cuts are likely to help the economy in 2024.

However, Britain remains one of the slowest countries to recover from the effects of the COVID-19 pandemic. At the end of last year, its economy was just 1 per cent bigger than in late 2019, with only Germany faring worse among Group of Seven nations.

The economy grew just 0.1 per cent in all of 2023, its weakest performance since 2009, excluding the peak-pandemic year of 2020.

GDP per person, which has not grown since early 2022, fell by 0.6 per cent in the fourth quarter and 0.7 per cent across 2023.

Sterling was little changed against the dollar and the euro after the data release.

The Bank of England (BOE) has said inflation is moving toward the point where it can start cutting rates. It expects the economy to grow by just 0.25 per cent this year, although official budget forecasters expect a 0.8-per-cent expansion.

BOE policy maker Jonathan Haskel said in an interview reported in Thursday’s Financial Times that rate cuts were “a long way off,” despite dropping his advocacy of a rise at last week’s meeting.

Thursday’s figures from the ONS also showed 0.7 per cent growth in households’ real disposable income, flat in the previous quarter.

Thomas Pugh, an economist at consulting firm RSM, said the increase could prompt consumers to increase their spending and support the economy.

“Consumer confidence has been improving gradually over the last year … as the impact of rising real wages filters through into people’s pockets, even though consumers remain cautious overall,” Mr. Pugh said.

Britain’s current account deficit totalled £21.18-billion ($36.21-billion) in the fourth quarter, slightly narrower than a forecast of £21.4-billion ($36.6-billion) shortfall in a Reuters poll of economists, and equivalent to 3.1 per cent of GDP, up from 2.7 per cent in the third quarter.

The underlying current account deficit, which strips out volatile trade in precious metals, expanded to 3.9 per cent of GDP.

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How will a shrinking population affect the global economy? – Al Jazeera English

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Falling fertility rates could bring about a transformational demographic shift over the next 25 years.

It has been described as a demographic catastrophe.

The Lancet medical journal warns that a majority of countries do not have a high enough fertility rate to sustain their population size by the end of the century.

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The rate of the decline is uneven, with some developing nations seeing a baby boom.

The shift could have far-reaching social and economic impacts.

Enormous population growth since the industrial revolution has put enormous pressure on the planet’s limited resources.

So, how does the drop in births affect the economy?

And regulators in the United States and the European Union crack down on tech monopolies.

The gender gap in tech narrows.

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John Ivison: Canada's economy desperately needs shock treatment after this Liberal government – National Post

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Lack of business investment is the main culprit. Canadians are digging holes with shovels while our competitors are buying excavators

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It speaks to the seriousness of the situation that the Bank of Canada is not so much taking the gloves off as slipping lead into them.

Senior deputy governor, Carolyn Rogers, came as close to wading into the political arena as any senior deputy governor of the central bank probably should in her speech in Halifax this week.

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But she was right to sound the alarm about a subject — Canada’s waning productivity — on which the federal government’s performance has been lacklustre at best.

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Productivity has fallen in six consecutive quarters and is now on a par with where it was seven years ago.

Lack of business investment is the main culprit.

In essence, Canadians are digging holes with shovels while many of our competitors are buying excavators.

“You’ve seen those signs that say, ‘in emergency, break glass.’ Well, it’s time to break the glass,” Rogers said.

She was explicit that government policy is partly to blame, pointing out that businesses need more certainty to invest with confidence. Government incentives and regulatory approaches that change year to year do not inspire confidence, she said.

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The government’s most recent contribution to the competitiveness file — Bill C-56, which made a number of competition-related changes — is a case in point. It was aimed at cracking down on “abusive practices” in the grocery industry that no one, including the bank in its own study, has been able to substantiate. Rather than encouraging investment, it added a political actor — the minister of industry — to the market review process. The Business Council of Canada called the move “capricious,” which was Rogers’s point.

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While blatant price-fixing is rare, the lack of investment is a product of the paucity of competition in many sectors, where Canadian companies protected from foreign competition are sitting on fat profit margins and don’t feel compelled to invest to make their operations more efficient. “Competition can make the whole economy more productive,” said Rogers.

The Conservatives now look set to make this an election issue. Ontario MP Ryan Williams has just released a slick 13-minute video that makes clear his party intends to act in this area.

Using the Monopoly board game as a prop, Williams, the party’s critic for pan-Canadian trade and competition, claims that in every sector, monopolies and oligopolies reign supreme, resulting in lower investment, lower productivity, higher prices, worse service, lower wages and more wealth inequality.

(As an aside, it was a marked improvement on last year’s “Justinflation” rap video.)

Williams said that Canadians pay among the highest cell phone prices in the world and that Rogers, Telus and Bell are the priciest carriers, bar none. The claim has some foundation: in a recent Cable.co.uk global league table that compared the average price of one gigabyte, Canada was ranked 216th of 237 countries at US$5.37 (noticeably, the U.S. was ranked even more expensive at US$6).

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Williams noted that two airlines control 80 per cent of the market, even though Air Canada was ranked dead last of all North American airlines for timeliness.

He pointed out that six banks control 87 per cent of Canada’s mortgage market, while five grocery stores — Sobeys, Metro, Loblaw, Walmart and Costco — command a similar dominance of the grocery market.

“Competition is dying in Canada,” Williams said. “The federal government has made things worse by over-regulating airlines, banks and telecoms to actually protect monopolies and keep new players out.”

So far, so good.

The Conservatives will “bring back home a capitalist economy” — a market that does not protect monopolies and creates more competition, in the form of Canadian companies that will provide new supply and better prices.

That sounds great. But at the same time, the Conservative formula for fixing things appears to involve more government intervention, not less.

Williams pointed out the Conservatives opposed RBC buying HSBC’s Canadian operations, WestJet buying Sunwing and Rogers buying Shaw. The party would oppose monopolies from buying up the competition, he said.

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The real solution is to let the market do its work to bring prices down. But that is a more complicated process than Williams lets on.

Back in 2007, when Research in Motion was Canada’s most valuable company, the Harper government appointed a panel of experts, led by former Nortel chair Lynton “Red” Wilson, to address concerns that the corporate sector was being “hollowed out” by foreign takeovers, following the sale of giants Alcan, Dofasco and Inco.

The “Compete to Win” report that came out in June 2008 found that the number of foreign-owned firms had remained relatively unchanged, but recommended 65 changes to make Canada more competitive.

The Harper government acted on the least-contentious suggestions: lowering corporate taxes, harmonizing sales taxes with a number of provinces and making immigration more responsive to labour markets.

But it did not end up liberalizing the banking, broadcasting, aviation or telecom markets, as the report suggested (ironically, it was a Liberal transport minister, Marc Garneau, who raised foreign ownership levels of air carriers to 49 per cent from 25 per cent in 2018).

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The point is, Canada has a competition problem but solving it requires taking on vested interests. Conservative Leader Pierre Poilievre has indicated he is willing to do that, calling corporate lobbyists “utterly useless” and saying he will focus on Canadian workers, not corporate interests.

“My daily obsession will be about what is good for the working-class people in this country,” he said in Vancouver earlier this month.

Even opening up sectors to foreign competition is no guarantee that investors will come. There are no foreign ownership restrictions in the grocery market (in addition to the five supermarkets listed above, there is Amazon-owned Whole Foods). When the Competition Bureau concluded last year that there was a “modest but meaningful” increase in food prices, it recommended Ottawa encourage a foreign-owned player to enter the Canadian market. It was a recommendation adopted by Industry Minister Francois-Philippe Champagne, to no avail thus far.

But it is clear from the Bank’s warning that the Canadian economy requires some shock treatment.

Robert Scrivener, the chairman of Bell and Northern Telecom in the 1970s, called Canada a nation of overprotected underachievers. That is even more true now than it was back then.

It’s time to break the glass.

jivison@criffel.ca

Get even more deep-dive National Post political coverage and analysis in your inbox with the Political Hack newsletter, where Ottawa bureau chief Stuart Thomson and political analyst Tasha Kheiriddin get at what’s really going on behind the scenes on Parliament Hill every Wednesday and Friday, exclusively for subscribers. Sign up here.

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