WASHINGTON —
The U.S. economy plunged by a record-shattering 32.9% annual rate last quarter, and the coronavirus pandemic is still cutting a path of destruction, forcing millions out of work and shuttering businesses.
The economy’s stunning contraction in the April-June quarter came as the viral outbreak pushed already struggling businesses to close for a second time in many parts of the country, sending unemployment surging to nearly 15%. The government’s estimate Thursday of the second-quarter fall in the gross domestic product was the sharpest such drop on records dating to 1947. The previous worst quarterly contraction, a 10% drop, occurred in 1958 during the Eisenhower administration.
Soon after the government issued the bleak economic data, President Donald Trump diverted attention by suggesting a “delay” in the Nov. 3 presidential election, based on his unsubstantiated allegations that widespread mail-in voting will result in fraud. The dates of presidential elections are enshrined in federal law and would require an act of Congress to change.
So steep was the economic fall last quarter that most analysts expect the economy to to produce a sharp bounce-back in the current July-September period. Yet with the rate of confirmed coronavirus cases having surged in a majority of states, more businesses being forced to pull back on reopenings and the Republican Senate proposing to scale back government aid to the unemployed, the economy could worsen in the months ahead.
In a sign of how weakened the job market remains, more than 1.4 million laid-off Americans applied for unemployment benefits last week. It was the 19th straight week that more than 1 million people have applied for jobless aid. Before the coronavirus erupted in March, the number of Americans seeking unemployment checks had never exceeded 700,000 in any one week, even during the Great Recession.
An additional 830,000 people applied for unemployment benefits under a new program that extends eligibility for the first time to self-employed and gig workers. All told, the government says roughly 30 million people are receiving some form of jobless aid, though that figure might be inflated by double-counting by some states.
The pain could soon intensify: A supplemental $600 in weekly federal unemployment benefits is expiring, and Congress is squabbling about extending the aid, which will probably be done at some reduced level of payment.
Last quarter’s economic drop followed a 5% fall in the January-March quarter, during which the economy officially entered a recession triggered by the virus, ending an 11-year economic expansion, the longest on record in the United States.
The grim economic news deepened losses on Wall Street. The Dow Jones Industrial Average was down more than 300 points in late-morning trading.
The economic harm from the virus is extending well beyond the United States. On Thursday, Germany reported that its GDP tumbled 10.1% last quarter. It was the biggest such drop on records dating to 1970. And Mexico’s GDP sank 17.3% last quarter, also a record.
The U.S. contraction was driven by a deep pullback in consumer spending, which accounts for about 70% of economic activity. Spending by consumers collapsed at a 34.6% annual rate as travel all but froze and shutdown orders forced many restaurants, bars, entertainment venues and other retail establishments to close.
The plunge in GDP “underscores the unprecedented hit to the economy from the pandemic,” said Andrew Hunter, senior U.S. economist at Capital Economics. “We expect it will take years for that damage to be fully recovered.”
A resurgence of viral cases in the South and the West has forced many bars, restaurants, beauty salons and other businesses to close again or reduce occupancy. Between June 21 and July 19, for example, the proportion of Texas bars that were closed shot up from 25% to 73%. Likewise, 75% of California beauty shops were shuttered July 19, up from 40% just a week earlier, according to the data firm Womply.
And many states have imposed restrictions on visitors from states that have reported high level of virus cases, thereby hurting hotels, airlines and other industries that depend on travel.
Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said the job numbers were disheartening.
“A resurgence in virus cases has resulted in a pause or rollback of re-openings across states, and the pace of layoffs is likely to pick up just as expanded unemployment benefits are expiring,” Farooqi said. “The risk of temporary job losses becoming permanent is high from repeated closures of businesses. That could result in an even slower pace of recovery.”
The picture looks dim for many of the jobless. Since she was laid off by a tech industry non-profit in mid-May, Miranda Meyerson has been trying to find another job and to sign up for unemployment benefits.
“It’s just incredibly frustrating and demoralizing,” she said. Potential employers seem to be delaying hiring decisions.
“Nobody gets back to you,” said Meyerson, 38. “You feel like there’s only so long you can submit (applications) into a void.”
Meyerson and her partner had moved from New York to Oakland, California, in March, just as the virus began to spread rapidly across the United States. The move complicated her efforts, so far futile, to collect benefits from a swamped California unemployment benefits system.
“They’re obviously totally overwhelmed,” she said. “You can’t even get on the phone to talk to anybody.”
Many economists note that the economy can’t fully recover until the pandemic is defeated — a point stressed Wednesday at a news conference by Federal Reserve Chair Jerome Powell. The Fed chairman warned that the viral epidemic has been endangering a modest economic recovery and that as a result, the Fed plans to keep interest rates pinned near zero well into the future.
“A poorly managed health situation and depressed incomes means the economy risks a double-dip recession without urgent fiscal aid,” said Gregory Daco, chief U.S. economist at Oxford Economics.
“Fiscal aid is a must pass,” Daco said. “Without further fiscal assistance, many households across the country are going to be left without much of an income stream and will react by severely cutting back on spending.”
Daco said the expiration of the $600 in federal unemployment aid means that many households could suffer a loss of income in the range of 50% to 75%.
“The economy,” Daco said, “is going to be running on very little fuel at a point when the recovery has really stalled.”
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.
