President Joe Biden is paying a steep price for high inflation — a problem that festered during his first year in office instead of fading away as he suggested it would.
His $1.9 trillion coronavirus relief package, enacted in March, drove what will probably be the fastest economic growth since 1984 and pulled the unemployment rate down to 3.9% at a quicker pace than experts predicted.
But after unprecedented government interventions and supply chain problems, inflation is running at a nearly 40-year high of 7%. And that has soured Americans’ feelings about the president. It’s left Biden trying to retrofit a policy agenda about winning the future into one that can fix inflation, a problem that did not exist when he took office.
The mix of a strong economy and high inflation has created a paradox for his presidency: Most U.S. households feel confident about their own finances, yet they’re worried about the state of the national economy in ways that have been a drag on Biden’s popularity.
“We need to get inflation under control,” Biden acknowledged at a news conference Wednesday wrapping up his first year. He allowed that “it’s going to be painful for a lot of people in the meantime.”
There is a clear contradiction in people believing that they’re doing well but that the economy is doing poorly. White House officials are now trying to reconcile this paradox, as Biden’s future may depend on making people feel good about not just their bank accounts but also the broader economy.
Metrics like Langer Associates’ Consumer Comfort Index encapsulate the problem. It shows a worsening gap between people’s optimism about their own situations and their pessimism about the national economy and the climate for buying goods.
A December poll from the AP-NORC Center for Public Affairs Research found that just 35% of Americans described the national economy as good, down from 45% in September. The percentage calling their personal financial situation good — 64% — has barely budged in AP-NORC polling since before the pandemic.
And an AP-NORC poll this month found that a mere 37% of Americans approve of Biden’s economic leadership, a sign that they’re blaming him for overall economic conditions and not crediting him for their personal circumstances.
The White House view is that families recognize their own economic circumstances have improved, but there’s this sense that everything else in society is not working. They point to the decrease in institutional trust and political polarization as a possible explanation for this trend.
Republicans have used inflation to hammer Biden, while West Virginia Sen. Joe Manchin, a Democrat in a GOP state, has refused to back the president’s $2 trillion tax and social programs agenda because of inflation concerns, leaving the president trying to pass a scaled-down version.
Renewing positive public sentiment, the White House believes, could hinge on whether inflation eases.
The Federal Reserve expects that inflation rates will fall in the second half of this year as it raises interest rates, though inflation would still be above the Fed’s 2% annual target. The White House is pinning its hopes on the idea that the direction of inflation tends to matter more to voters when prices are elevated, which suggests that Biden could benefit if prices stabilize and people put a greater emphasis on their own wellbeing.
The administration has noted that inflation is a global problem, though it also speaks to the blowback from an unprecedented amount of government aid to the U.S. economy. Prominent economists such as Larry Summers, a former U.S. treasury secretary, and Olivier Blanchard, former chief economist at the International Monetary Fund, warned early on that the coronavirus relief package was so large that it would fuel higher inflation. And Summers said inflation could make it harder for Biden to achieve the rest of his agenda, a prediction that anticipated his recent legislative struggles.
The administration responded at the time that it was not dismissive of inflation, but was balancing the risks of higher inflation against a slow economic recovery from the pandemic.
“We’ve constantly argued that the risks of doing too little are far greater than the risk of going big, providing families and businesses with the relief they need to finally put this virus behind us,” Jared Bernstein, a White House economist, said at a February 2021 briefing. “This is risk management.”
Shortly after the relief package became law, a Chicago Fed analysis in April suggested that inflation could run high if there were “resource pressures” — a statement that became prophetic as ships waited to dock, overseas factories shut because of the pandemic and demand outstripped the world’s ability to supply goods.
The president signed an executive order on Feb. 24 to bolster supply chains, but it was aimed at implementing a longer term series of repairs rather than addressing immediate needs. Biden didn’t mention inflation in his remarks. Prices at the time were increasing at an annual rate of just 1.7%. Yet Biden referred to an old story about how a single break in the supply chain could bring down an entire country.
“Remember that old proverb: ‘For want of a nail, the shoe was lost. For want of a shoe, the horse was lost,’” he said. “And it goes on and on until the kingdom was lost, all for the want of a horseshoe nail. Even small failures at one point in the supply chain can cause outside impacts further up the chain.”
That scenario unfolded in the months after Biden signed his March relief package.
The computer chip shortage was already hurting the auto sector. But shortages emerged for household appliances, furniture, towels, clothing and a whole range of basic goods. Products that once shipped in hours took weeks or months to arrive.
Inflation wasn’t bad enough to lose a kingdom, just to undermine public trust in Biden at the precise moment when other data showed that his relief package had succeeded at bringing back jobs.
Yet Biden called the inflation fleeting, saying the bottlenecks and high prices would vanish as the economy regained its footing after being shut down because of the pandemic.
“These disruptions are temporary,” Biden said in a July 19 speech. The spikes in prices for autos, lumber, airline tickets and other items were the result of “transitory effects” that accounted for the bulk of inflation, he explained.
Annual inflation was at 5.4% by then. And the figure got worse toward the end of the year as oil prices rose and the impact of higher housing costs began to filter into inflation. The administration brokered an agreement for the Port of Los Angeles to operate all hours of all days of the week to relieve shipping congestion. It launched initiatives to increase the number of truckers and worked with retail CEOs to ensure Christmas gifts arrived.
Summers, the original inflation Cassandra of the Biden era, rejected supply chain bottlenecks as the primary driver of inflation.
He told the American Economics Association this month that Fed policy is too loose and the labor market is historically tight, a sign that Biden might be the victim of his own success in bringing jobs back as quickly as he did.
“We are running the economy in an unsustainable way,” Summers said.
EDITOR’S NOTE — Josh Boak covers the White House and has written about the U.S. economy for AP since 2013.
Josh Boak, The Associated Press
Long COVID fuelling brain health crisis disrupting workforce, economy – Financial Post
An estimated 10 to 30 per cent of COVID-19 survivors are currently experiencing a range of long COVID symptoms, which means that more than one million Canadians, or about five per cent of the Canadian labour force, could be affected.
Though long COVID affects the entire body, many of the most persistent symptoms are linked to brain health. These symptoms include headaches, “brain fog,” chronic fatigue, impaired memory or concentration, anxiety, depression and insomnia. Such symptoms directly limit a person’s ability to work or be productive at their former, pre-pandemic levels. That has implications for the economy. Knowledge-based economies rely on optimal “brain capital” for economic prosperity, and so without brain health, we compromise our wealth.
What’s more, long COVID is striking people in their prime working years. According to a survey conducted in May 2021 by Viral Neuro Exploration (VINEx), the COVID Long Haulers Support Group Canada and Neurological Health Charities Canada, nearly 60 per cent of the more than 1,000 long haulers polled are between the ages of 40 and 59. Their top symptoms include fatigue and “brain fog,” which have impacted their work. Nearly 70 per cent of long-haulers said they were forced to take a leave from their jobs and more than half had to reduce their hours. Over one quarter had to go on disability, but nearly 44 per cent were unable to access disability insurance.
Long COVID brain health symptoms have persisted, and so have its impacts. In a follow-up survey and report conducted this spring, more than 80 per cent of respondents said the virus has negatively or very negatively affected their brain health. More than 70 per cent had to take a leave from work, which in some cases stretched beyond a year. Still others had to leave the workforce altogether. Troublingly, more than 30 per cent of survey respondents felt they weren’t believed when initially describing their symptoms to a health-care professional.
Women appear to be bearing the brunt of long COVID symptoms; more than 87 per cent of the survey respondents identify as female. This is consistent with other studies showing women are disproportionately affected by as much as a four-to-one ratio to men, impacting women’s labour participation rate and further aggravating gender inequalities.
The brain health crisis in Canada isn’t new. Even before COVID-19, one in three people were estimated to have been directly impacted by a disease, disorder or injury of the brain, with indirect costs to families, the workplace, economy and society. But the pandemic, which led to shutdowns that caused social isolation and anxiety about an uncertain future, along with the virus itself and its lasting effects on long-haulers, only increased the prevalence of neurological and psychiatric disorders, putting additional stress on overall brain health.
We are now facing a global mental health crisis. In the United States, “an overwhelming majority of Americans believe the U.S. is in the grips of a full-blown mental health crisis,” according to a USA Today/Suffolk University poll. President Joe Biden also announced a strategy to address national mental health issues as part of his first state of the union address. In Canada, the federal government created a cabinet position dedicated to mental health. The minister of mental health and addiction has a mandate to create a comprehensive, evidence-based plan “to address the crisis in mental health,” and establish a Canada Mental Health Transfer to help expand the delivery of mental health services, including for prevention and treatment.
These investments in mental health are to be lauded, as is the the greater awareness of long COVID. But they fall short of what is needed for people living with persistent COVID symptoms, mental health impacts from the pandemic, and for those whose brain health is otherwise not optimal.
Lost productivity and increased insurance payouts have resulted from this accelerated brain health crisis. The Centre for Addiction and Mental Health estimates poor mental health costs the Canadian economy more than $50 billion annually, of which more than $6 billion is due to lost productivity. And according to the Canadian Life and Health Insurance Association’s latest data, Canadian insurers paid out $420 million in psychology claims in 2020, a staggering 24 per cent increase from 2019.
Much of the discussion about the “new normal” at the workplace has focused on how we will work. But we need to pay more attention to ensuring people are able to fully participate in the labour market. We are already facing labour shortages thanks to a shift in demographics and as workers choose to retire earlier or leave the workforce because of the pandemic.
Long COVID: The invisible public health crisis fuelling labour shortages
Why the fight against COVID-19 won’t end with a high vaccination rate
Don’t let the two-dose summer fool you — there is a long battle ahead against COVID-19
There is a way forward: we need to treat the post-pandemic brain health crisis with the same urgency as the pandemic crisis. The development and deployment of vaccines bridged existing technology and research from basic to clinical trials; showed us the power and potential of global collaboration across disciplines, institutions, sectors, and countries; and brought together business and science leadership. We can apply these lessons to both research and care, beginning with long COVID. Governments and funders must move away from traditional silos, and think differently about how these may link to a bigger story about brain health. Here’s what that looks like:
- We need to continue the work to develop a concise definition of long COVID and develop a single test for diagnosing long COVID. This will allow us to better understand the size and impact of the problem;
- We need to bring attention to the stories of people with lived experience and counter the stigma being faced by those who are not believed because the illness is not well-defined and not always properly diagnosed. Beyond the mental health stress, this has an impact on the ability to access unemployment benefits and disability insurance;
- We need to establish more multidisciplinary care clinics to be able to treat the different dimensions of long COVID;
- We need to increase funding for multidisciplinary research and longitudinal studies, in order to advance our understanding of what causes long COVID, how to treat it, and the potential long-term impacts, which may include contributing to the development of neurodegenerative diseases in the future. This is not just up to governments. Businesses and the private sector have a role to play and a stake in funding such research; and
- Finally, from a workplace perspective, employers need to provide more flexibility and a gradual return to work for those ready to come back.
We cannot leave long-haulers behind and let long COVID mine the full potential of up to a million Canadians who may be in their prime working years. Brain health is our most precious asset; the health of our workplaces and of our labour force is a function of our brain health. Acting now to ensure it remains optimal will yield higher productivity, and a more dynamic, creative and resilient workforce.
— Inez Jabalpurwala is global director of VINEx.
For more stories about the future of work, sign up for the FP Work newsletter.
U.S. economy shrank by 1.5% in first-quarter but consumers kept spending – The Globe and Mail
The U.S. economy shrank in the first three months of the year even though consumers and businesses kept spending at a solid pace, the government reported Thursday in a slight downgrade of its previous estimate for the January-March quarter.
Last quarter’s drop in the U.S. gross domestic product – the broadest gauge of economic output – does not likely signal the start of a recession. The contraction was caused, in part, by a wider trade gap: The nation spent more on imports than other countries did on U.S. exports.
Also contributing to the weakness was a slower restocking of goods in stores and warehouses, which had built up their inventories in the previous quarter for the 2021 holiday shopping season.
Analysts say the economy has likely resumed growing in the current April-June quarter.
The Commerce Department estimated that the economy contracted at a 1.5% annual pace from January through March, a slight downward revision from its first estimate of 1.4%, which it issued last month. It was the first drop in GDP since the second quarter of 2020 – in the depths of the COVID-19 recession – and followed a robust 6.9% expansion in the final three months of 2021.
The nation remains stuck in the painful grip of high inflation, which has caused particularly severe hardships for lower-income households, many of them people of colour. Though many U.S. workers have been receiving sizable pay raises, their wages in most cases haven’t kept pace with inflation. In April, consumer prices jumped 8.3% from a year earlier, just below the fastest such rise in four decades, set one month earlier.
High inflation is also posing a political threat to President Joe Biden and Democrats in Congress as midterm elections draw near. A poll this month by the Associated Press-NORC Center for Public Research found that Biden’s approval rating has reached the lowest point of his presidency – just 39% of adults approve of his performance – with inflation a frequently cited contributing factor.
Still, by most measures, the economy as a whole remains healthy, though likely weakening. Consumer spending – the heart of the economy – is still solid: It grew at a 3.1% annual pace from January through March.
And a strong job market is giving consumers the money and confidence to spend. Employers have added more than 400,000 jobs for 12 straight months, and the unemployment rate is near a half-century low. Businesses are advertising so many jobs that there are now roughly two openings, on average, for every unemployed American.
The economy is widely believed to have resumed its growth in the current quarter: In a survey released this month, 34 economists told the Federal Reserve Bank of Philadelphia that they expect GDP to grow at a 2.3% annual pace from April through June and 2.5% for all of 2022. Still, their forecast marked a sharp drop from the 4.2% growth estimate for the current quarter in the Philadelphia Fed’s previous survey in February.
Considerable uncertainties, though, are clouding the outlook for the U.S. and global economies. Russia’s war against Ukraine has disrupted trade in energy, grains and other commodities and driven fuel and food prices dramatically higher. China’s draconian COVID-19 crackdown has also slowed growth in the world’s second-biggest economy and worsened global supply chain bottlenecks. The Federal Reserve has begun aggressively raising interest rates to fight the fastest inflation the United States has suffered since the early 1980s.
The Fed is banking on its ability to engineer a so-called soft landing: Raising borrowing rates enough to slow growth and cool inflation without causing a recession. Many economists, though, are skeptical that the central bank can pull it off. More than half the economists surveyed by the National Association for Business Economics foresee at least a 25% probability that the U.S. economy will sink into recession within a year.
“While we still expect the Fed to steer the economy toward a soft landing, downside risks to the economy and the probability of a recession are increasing,” economists Lydia Boussour and Kathy Bostjancic of Oxford Economics cautioned Thursday in a research note.
“A more aggressive pace of Fed rate hikes, a tightening in financial conditions, the ongoing war in Ukraine and China’s zero-Covid strategy increase the risk of a hard landing in 2023,” they added.
In the meantime, higher borrowing rates appear to be slowing at least one crucial sector of the economy – the housing market. Last month, sales of both existing homes and new homes showed signs of faltering, worsened by sharply higher home prices and a shrunken supply of properties for sale.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Fed officials signal rates may head to ‘restrictive’ levels to stabilize economy – PBS NewsHour
WASHINGTON (AP) — Federal Reserve officials agreed when they met earlier this month that they might have to raise interest rates to levels that would weaken the economy as part of their drive to curb inflation, which has reached a four-decade high.
At the same time, many of the policymakers also agreed that after a rapid series of rate increases in the coming months, they could “assess the effects” of their rate hikes and, depending on the economy’s health, adjust their policies.
After their meeting this month, the policymakers raised their benchmark short-term rate by a half-point — double the usual hike. According to minutes from the May 3-4 meeting released Wednesday, most of the officials agreed that half-point hikes also “would likely be appropriate” at their next two meetings, in June and July. Chair Jerome Powell himself had indicated after this month’s meeting that half-point increases would be “on the table” at the next two meetings.
All the officials believed that the Fed should “expeditiously” raise its key rate to a level at which it neither stimulates or restrains growth, which officials have said is about 2.4 percent. Some policymakers have said they will likely reach that point by the end of this year.
The minutes suggest, though, that there may be a sharp debate among policymakers about how quickly to tighten credit after the June and July meetings. The economy has showed more signs of slowing, and stock markets have dropped sharply, since the Fed meeting.
Government reports have shown, for example, that sales of new and existing homes have slowed sharply since the Fed meetings, and there are signs that factory output is growing more slowly. Gennadiy Goldberg, senior rates strategist at TD Securities, suggested that the minutes released Wednesday might reflect a more “hawkish” Fed — that is, more focused on rate hikes to restrain inflation — than may actually be the case now.
Some officials, particularly Raphael Bostic, president of the Federal Reserve Bank of Atlanta, have indicated since this month’s meeting that the Fed could reconsider its pace of rate hikes in September.
At the meeting, Fed officials agreed to raise their benchmark rate to a range of 0.75 percent to 1 percent, their first increase of that size since 2000. The officials also announced that they would start to shrink their huge $9 trillion balance sheet, which has more than doubled since the pandemic.
The balance sheet swelled as the Fed steadily bought about $4.5 trillion in Treasury and mortgage bonds after the pandemic recession struck to try to hold down longer-term rates. On June 1, the Fed plans to let those securities start to mature, without replacing them. That should also heighten the cost of long-term borrowing.
Powell has said the Fed is determined to raise rates high enough to restrain inflation, leading many economists to expect the sharpest pace of rate hikes in three decades this year. Powell says the central bank is aiming for a “soft landing,” in which higher interest rates cool borrowing and spending enough to slow the economy and inflation. But most economists are skeptical that the Fed can achieve such a narrow outcome without causing an economic downturn.
Stock prices have plunged on fears that the Fed’s rate hikes will send the economy into recession. The S&P 500 has fallen for seven straight weeks, the longest such stretch since the aftermath of the dot-com bubble in 2001. The stock index nearly fell into bear-market territory last week — defined as a 20 percent drop from its peak — but rallied Wednesday.
The minutes also showed that some policymakers decided it was appropriate to consider selling some of its holdings of mortgage-backed securities, rather than simply letting them mature. Sales would make it easier for the Fed to transition to a portfolio composed mainly of Treasurys, the minutes said. The Fed did not mention any timing of such sales but said they would be “announced well in advance.”
The Fed has said that by September it would allow up to $30 billion of mortgage-backed securities to mature each month, along with $60 billion in Treasurys. Many analysts doubt that the cap will be reached for mortgage-backed bonds, because mortgage rates having jumped more than 2 percentage points since the start of the year. That means that fewer homeowners will refinance their mortgages because their current loan rates are lower than what is now available in the mortgage market.
Fewer refinancings would force the Fed to sell mortgage-backed securities to maintain its plans to reduce its balance sheet.
Supreme Court of Canada to rule on sentencing for Quebec City mosque shooter
Minke whale carcass found northeast of Montreal is likely one seen near city: expert
Murray Sinclair honoured with Order of Canada at Rideau Hall ceremony
Silver investment demand jumped 12% in 2019
Europe kicks off vaccination programs | All media content | DW | 27.12.2020 – Deutsche Welle
Global Media Markets, 2015-2020, 2020-2025F, 2030F – TV and Radio Broadcasting, Film and Music, Information Services, Web Content, Search Portals And Social Media, Print Media, & Cable – GlobeNewswire
News23 hours ago
Malema: France should leave Africa alone
Health22 hours ago
Monkeypox: Cases in Canada climb to 16, PHAC says – CTV News
News9 hours ago
The Gender War amongst Us
Science23 hours ago
Boeing capsule returns from space station after test flight with no crew – CBC News
News19 hours ago
UK’s Kendal Nutricare to deliver 2 million cans of baby formula to the US by June
Politics9 hours ago
Your Promises Are empty and Similar
Media22 hours ago
Evening Update: Texas gunman posted on social media about attacking a school minutes before shooting – The Globe and Mail
News21 hours ago
Trudeau cancels appearance at Surrey fundraiser over protest-related safety concerns – CBC.ca