WASHINGTON — Home sales are booming. Stocks are setting record highs. Industrial production is clambering out of the ditch it fell into early this year.
And yet the U.S. economy is nowhere close to regaining the health it achieved, with low unemployment, free-spending consumers and booming travel, before the coronavirus paralyzed the country in March. Not while the viral outbreak still rages and Congress remains deadlocked over providing more relief to tens of millions of people thrown out of work and to state and local governments whose revenue has withered.
Every week, roughly 1 million new Americans are applying for unemployment benefits — a depth of job insecurity not seen in any single week during the depths of the 2007-2009 Great Recession.
Economists say that as many businesses have reopened and consumers have begun shopping and spending more, the picture is beginning to brighten, if only fitfully. Most say the economy is growing again. Yet scars are sure to remain from the catastrophic April-June quarter, when, according to the government, the economy collapsed at a 31.7% annual rate — by far the worst quarterly contraction since such record-keeping began in 1947.
Some industries, notably those involving travel and hotels and restaurants, could struggle for years. And while the number of confirmed viral infections has been declining, the threat of a major resurgence remains, especially as students increasingly return to schools and colleges. The consumers whose spending drives the bulk of the economy and the economists who analyze it are decidedly downbeat about the prospects for a return to prosperity.
“As long as we continue to see infection flare-ups, disruptions to activity — especially in sectors that are exposed to social distancing rules — will be ongoing,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “The risk of business failures from repeated closures is high, and the probability of permanent job losses rises with each successive shutdown which could result in permanent damage to the labour market and the economy.’’
The Conference Board, a business research group, reported this week that consumer confidence has tumbled to its lowest level since 2014.
And in survey results released this week by the National Association for Business Economics, two-thirds of the economists who were polled said they thought the U.S. economy remains in recession. Nearly half said they didn’t expect it to return to pre-pandemic levels until mid-2022. Eighty per cent put the likelihood that any recovery will give way to a “double-dip’’ recession at 25% or more.
Early this spring, the economy went into free-fall as millions of businesses suddenly closed and consumers stayed home to avoid infection. Employers slashed more than 22 million jobs — a record total, by far — in March and April.
Since then, the job market and the economy have been rebounding as businesses slowly reopened. Efforts by the Federal Reserve to keep interest rates ultra-low have helped fuel a record-busting binge in the stock market. Home sales have surged, thanks to super-low mortgage rates and pent-up demand. And a resurgence in auto production has lifted American industry.
Altogether, employers added nearly 9.3 million jobs in May, June and July. Still, that hiring surge has replaced just 42% of the jobs lost in March and April. More than 27 million people are still receiving some form of unemployment aid.
Moreover, a summertime resurgence of confirmed COVID cases in the South and West forced many businesses to close again in July. The data firm Womply reports that business closures have mostly stabilized in the past four weeks. Still, 70% of Texas bars and 71% of California health and beauty shops were closed as of mid-August, Womply found.
After enacting a massive financial rescue package in March, congressional Republicans and Democrats have failed to agree on allocating more aid to the unemployed and to struggling states and localities. The expiration of a $600-a-week federal unemployment benefit — a lifeline to help the jobless survive the crisis — is leaving many families desperate.
“My income is basically cut in half,’’ said Taylor Love, a 34-year-old unemployed massage therapist in Austin, Texas. “Paying our mortgage is going to be a struggle. We’re going to have to dip into what little savings we have.’’
President Donald Trump signed an executive order Aug. 8 offering a stripped-down version of the expanded unemployment benefits. At least 39 states have accepted or said that they would apply for federal grants that let them increase weekly benefits by $300 or $400. But questions remain about how soon that money will actually get to people or how long it will last.
In a question-and-answer session after a speech Thursday, Fed Chair Jerome Powell said that “if we can keep the disease under control, the economy can improve fairly quickly.” But he cautioned that sectors of the economy that have been hardest hit, notably travel and tourism, will take longer to recover.
“That is a lot of workers — we need to support them,” Powell said.
James Marple, senior economist at TD Economics, said he expects GDP growth to snap back from the second-quarter disaster. But in a research note Thursday, he cautioned that “this will not be enough to make the economy whole, and it will likely be well into 2021 and quite possibly later before the level of economic activity recaptures its pre-crisis level.
“Much will depend,” Marple said, “on the speed and effectiveness of a vaccine as well as the continuation of fiscal supports to bridge incomes until activity can return to normal.’’
AP Economics Writer Martin Crutsinger contributed to this report.
Paul Wiseman, The Associated Press
Why falling immigration isn't that bad for the economy during COVID-19 – Yahoo Canada Finance
COVID-19 travel restrictions have put a big dent in immigration, widely seen as something the economy relies on, but the negative effects aren’t as bad as they might seem.
The latest government numbers show 13,645 fewer permanent residents came to Canada in July, down 63 per cent from the same month last year. April and June were similarly weak periods, making the likelihood of reaching the federal government’s target of 341,000 less likely.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.” data-reactid=”18″>For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada. ” data-reactid=”19″>“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada.
“So, even a complete shutdown of immigration would (roughly) shave 1 percentage point from growth (or a bit less). Not small by any means, but that compares with what could be a 6 per cent drop in GDP (OECD said -5.8 per cent for this year, we are looking at -5.5 per cent).”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.” data-reactid=”21″>Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.
“Overall, given the realities of COVID and the now-soft demand for labour, the cool down in immigration by itself will not be particularly harmful — and certainly less so than it would have been say a year ago.” said Porter.
Long term effects without immigration
Pedro Antunes, the Conference Board of Canada’s chief economist, also thinks the effects are mitigated in the short-term but that doesn’t mean the economy will be totally unscathed.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.” data-reactid=”25″>“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.
However, he believes it’s more important to look at the long term repercussions of reduced immigration.
“Canada’s underlying capacity is dependent on private and public investment, adoption of technology and the number of workers (and the skills of those workers). We know from our prior research that without immigration, our labour force would be flat or declining (since exiting baby-boomers outnumber school leavers),” said Antunes.
“If immigration levels are reduced over a few years (we think 2020 and 2021 at least) the result is a long-lasting impact on our potential (or productive capacity).”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.” data-reactid=”29″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for Apple and Android.” data-reactid=”30″>Download the Yahoo Finance app, available for Apple and Android.
EU looks to fast 5G, supercomputers to boost virus-hit economy – TheChronicleHerald.ca
By Foo Yun Chee
BRUSSELS (Reuters) – The European Commission on Friday urged the 27-country bloc to work together to speed up the rollout of fibre and 5G networks to boost the region’s virus-hit economy and secure its technology autonomy.
EU countries should develop a best practices toolbox by March 30 with the aim of cutting cost and red tape, provide timely access to 5G radio spectrum and allow for more cross-border coordination for radio spectrum for 5G services, the EU executive said.
The coronavirus outbreak showed how important internet services and 5G are, European digital chief Margrethe Vestager said.
“We have seen the current crisis highlight the importance of access to very high-speed internet for businesses, public services and citizens, but also to accelerate the pace towards 5G,” she said in a statement. “We must therefore work together towards fast network rollout without any further delays.”
The Commission also proposed a recommendation to boost research and activities to develop new supercomputing technologies.
“Keeping up in the international technological race is a priority, and Europe has both the know-how and the political will to play a leading role,” Internal Market Commissioner Thierry Breton said in a statement.
The Commission is investing 8 billion euros($9.46 billion)in the next generation of supercomputers.
(Reporting by Foo Yun Chee; Editing by Tomasz Janowski)
Charting the Global Economy: Fed Signals Rates on Hold for Years – BNN
(Bloomberg) — The Federal Reserve signaled it will keep its benchmark interest rate near zero through 2023 to help the world’s largest economy recover from the coronavirus pandemic.
Cheap borrowing costs are fueling demand for U.S. housing and leaving builders brimming with optimism in the process. In China, retail sales and industrial output are on the mend, while in the U.K., the virus-related shutdowns are having a large negative impact on youth employment.
Here are some of the charts that appeared on Bloomberg this week, offering insight into the latest developments in the global economy:
The global economic slump won’t be as sharp as previously feared this year, though the recovery is losing pace and will need support from governments and central banks for some time yet, according to the OECD.
The Federal Reserve’s so-called dot plot, which the central bank uses to signal its outlook for the path of interest rates, shows that officials expect no change in policy this year and borrowing costs near zero through 2023.
Homebuilder optimism rose to a record in September, with low mortgage rates driving a housing boom that has boosted the pandemic economy, National Association of Home Builders data show.
The U.K.’s lockdown hit young workers particularly hard, with employment in the 16-24 age category falling by 156,000. That may reflect the share of young workers in hotels, restaurants and bars, a sector devastated by the pandemic.
China’s economic recovery from Covid-19 accelerated, spurred by a rebound in consumption as virus restrictions eased and larger-than-expected gains in industrial output. Retail sales rose for the first time this year in August, by 0.5% from a year earlier, while industrial production expanded 5.6%, against a forecast of 5.1%.
Scoring 75 emerging-market and frontier economies, Bloomberg Economics finds that Asia leads in getting closer to pre-outbreak norms, with some countries in Africa and Eastern Europe also outperforming. Latin America is still struggling to contain the pandemic, with 18 of the bottom 25 in the ranking in Latin America or the Caribbean.
Saudi Arabia’s crude exports dropped to the lowest since at least 2016 in the second quarter as it led a campaign alongside Russia to curb oil production following a coronavirus-induced price crash. While the effort yielded a stark turnaround in prices in May and June, Saudi revenue from oil sales still plunged almost 62% in the three-month period from a year earlier.
South Africa is among the countries with the highest percentage of smokers globally, with almost one in every three adults lighting up. So when the government banned cigarette sales for about five months of the nation’s Covid-19 lockdown, some 90% found a workaround.
©2020 Bloomberg L.P.
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