U.S. central bankers saw the coronavirus pandemic posing a severe threat to the economy when they met last month and were also concerned by the risks to financial stability.
Officials agreed the “economic effects of the pandemic created an extraordinary amount of uncertainty and considerable risks to economic activity in the medium term,” minutes published Wednesday of the April 28-29 Federal Open Market Committee meeting showed. “A number of participants commented on potential risks to financial stability. Participants were concerned that banks could come under greater stress.”
Fed officials left interest rates near zero when they gathered in late April. In their post-meeting statement, they said the ongoing public health crisis posed “considerable risks to the economic outlook over the medium term,” playing down the notion the U.S. could expect a rapid recovery.
Fed Chairman Jerome Powell also followed the meeting with a somber press conference. He warned the coronavirus pandemic could leave permanent scars on the U.S. economy unless policy makers of all stripes did more to limit the damage.
The minutes reinforced that gloomy assessment. The committee listened to a staff presentation that projected, at best, a weak recovery beginning in the second half of this year, while acknowledging the risk of a more disappointing result.
Policy makers then spent considerable time discussing multiple scenarios. As a base case, they acknowledged that consumer spending in the hardest hit sectors of the economy would “likely not return quickly to more normal levels.” They also expressed concern that a large number of small businesses may fail, or may not be able to adapt successfully to new business models even if they survive the enforced shutdowns.
From there the discussion of potential scenarios grew darker.
“A number of participants judged that there was a substantial likelihood of additional waves of outbreak in the near or medium term,” the minutes said. “In such scenarios, it was believed likely that there would be further economic disruptions.”
A number of participants also warned of the possibility of business and household insolvencies mounting to the point of threatening financial stability. While the Fed’s regulatory powers lie with the Board of Governors, a number of FOMC participants weren’t shy about recommending action.
“The upcoming financial stress tests for banks were seen as important for measuring the ability of large banks to withstand future downside scenarios,” the record of the meeting stated. “A number of participants emphasized that regulators should encourage banks to prepare for possible downside scenarios by further limiting payouts to shareholders, thereby preserving loss-absorbing capital.”
The committee agreed the Fed should continue its purchases of Treasuries and mortgage-backed securities, as well as large-scale overnight and term repo operations, to support smooth market functioning.
Yield Curve Control
There was also a debate about clarifying Fed monetary policy intentions “at upcoming meetings,” including some limited discussion of targeting yields for some Treasury maturities, a policy known as yield-curve control.
“A few participants also noted that the balance sheet could be used to reinforce the committee’s forward guidance regarding the path of the federal funds rate through Federal Reserve purchases of Treasury securities on a scale necessary to keep Treasury yields at short- to medium-term maturities capped at specified levels for a period of time,” the minutes said.
Some officials also talked about making Fed forward guidance more explicit by spelling out certain economic outcomes “such as a certain level of the unemployment rate or of the inflation rate—that must be achieved before the committee would consider” raising rates.
Such a move would recall the guidance used by the Fed in 2012 when it said it would hold rates low until inflation rose and unemployment fell, dubbed the “Evans Rule” after Chicago Fed President Charles Evans who had argued for the strategy.
The minutes provided no mention of policy makers discussing the option of negative interest rates.
More than 36 million Americans have lost their jobs as the contagion forced thousands of businesses to close their doors across the country. Economic activity plunged by 4.8 per cent on an annualized basis in the first quarter. Economists have estimated it will collapse by a staggering 34 per cent in the second quarter.
The Fed has scrambled to prepare a host of emergency lending programs since mid-March, first to smother a selling panic that gripped short-term money markets, then to mobilize credit for distressed U.S. households and businesses — as well as state and local governments. It’s launched five programs so far. Four more, including a US$600 billion Main Street Lending Program, are expected to begin operating later this month.
The April 28-29 FOMC meeting was held via video conference. It was the first regularly scheduled session for the panel since January. The meeting planned for March 17-18 was canceled after the committee held two emergency sessions on March 3 and 15 at which the FOMC lowered the target range for the Fed’s benchmark interest rate by a total of 1.5 percentage points. The range remains at zero to 0.25 per cent.
Unemployment rate hits new record even as economy adds jobs – CP24 Toronto's Breaking News
Jordan Press, The Canadian Press
Published Friday, June 5, 2020 5:18AM EDT
Last Updated Friday, June 5, 2020 3:25PM EDT
OTTAWA – Canada’s employment minister says the federal government is rethinking a key COVID-19 benefit so workers have more incentive to get back on the job, in an effort to maintain a surprising boost in job numbers from May.
Statistics Canada reported that the country got back 289,600 jobs in May – which mirrored a similar bump in the U.S. – after three million jobs were lost over March and April and about 2.5 million more people had their hours slashed.
Provincially, Quebec led the way, gaining 231,000 jobs as it became one of the first provinces to ease restrictions, doing so just before Statistics Canada collected data the week of May 10. Ontario was the only province with losses, albeit at a slower pace than in March and April.
Combined with more people reporting getting regular hours, the agency said Canada had recovered only 10.6 per cent of employment losses and absences related to the COVID-19 pandemic.
Friday’s jobs report showed the unemployment rate in May rose to 13.7 per cent, the highest level in more than four decades of comparable data. But that’s because more people started looking for work – meaning the rate shouldn’t be taken as a sign of underlying weakness, said CIBC senior economist Royce Mendes.
The unemployment rate is a measure of the people looking for work who can’t find it, meaning it can actually decline if job-seekers give up, or increase as formerly discouraged seekers see new signs of hope.
Still, the monthly labour force survey showed that men gained back more jobs than women, resulting in a wider gender gap in employment losses as a result of COVID-19, and that the pandemic continued to disproportionately affect lower-wage workers.
To keep gains going, business and labour groups called for a revamp of the Canada Emergency Response Benefit and the employment insurance system.
The first cohort of recipients of the $500-a-week payment will max out their 16 weeks of benefits in early July. Some may qualify for employment insurance, while others may not have any work available, meaning significant drops in income that could hamper the path to recovery, said TD senior economist Brian DePratto.
The Canadian Labour Congress and Canadian Chamber of Commerce separately called for reforms to the decades-old EI system, which the Liberals determined early on in the crisis couldn’t handle the influx of jobless claims.
Employment Minister Carla Qualtrough suggested all ideas are on the table when it comes to EI, and the future of the CERB.
“As we look into the months coming … we’ve got a different goal in mind: People need to get back to work safely,” she said at a midday press conference.
“So our thinking moving forward is how do we balance a need to continue to support workers, while not disincentivizing work?”
The most recent federal figures show 8.37 million people applied for the CERB, with $43.18 billion in payments as of June 2. Qualtrough said 1.2 million recipients no longer require it, although it wasn’t immediately clear why.
The Canada Revenue Agency also said this week that almost 190,000 payments of wrongfully received benefits had been made as of June 3.
Economists had been watching the CERB numbers as a proxy for Friday’s jobs report, which set up expectations for another round of job losses.
CERB figures will continued to be watched to track possible job losses and compare it to areas where there are signs of progress, said Brendon Bernard, an economist at the Indeed Hiring Lab.
“The strength of this rebound is going to depend to a significant degree on what happens with layoffs,” he said in an interview. “We could see some areas of the economy bounce-back as shuttered sectors reopen, but if layoffs continue, then it’s going to be tough for net job gains to be particularly strong.”
The total number of unemployed Canadians doubled from February to April, a surge driven by temporary layoffs that the vast majority of workers expected to last less than six months.
At the same time, there was a spike in the number of people who wanted to work but weren’t actively looking for jobs, likely because the economic shutdown has limited job opportunities. People not actively seeking work aren’t counted in unemployment figures.
The unemployment rate for May would have been 19.6 per cent had the report counted among the unemployed those who stopped looking for work – largely unchanged since April.
Statistics Canada said lower-wage workers recovered just over one-10th of the losses they experienced in March and April. But they continued to be a higher share of people working less than half of their usual hours.
Lower-wage workers were among the first- and hardest-hit during the shutdown, largely because they worked in industries like retail, restaurants and hotels that closed early in the pandemic.
Besides seeing less improvement generally compared with men, women with children under age six saw slower job gains than those with older children.
Rebounds were also weak for students and recent immigrants.
This report by The Canadian Press was first published June 5, 2020.
Saskatchewan says economy is rebounding despite 12.5% unemployment rate – Globalnews.ca
The Saskatchewan government is feeling confident its economy is on the rebound.
By the end of April, the unemployment rate in the province was 11.3 per cent. Saskatchewan’s unemployment rate is, however, the second-lowest among provinces and below the national average of 13.7 per cent.
“The Saskatchewan workforce is still being seriously affected by the COVID-19 pandemic but there are a number of signs that show Saskatchewan’s economy is both recovering faster, and was less impacted, than other provinces,” said Jeremy Harrison, immigration and career training minister, in a statement.
“We have the second-lowest unemployment rate in Canada and the number of people working rose in May, which is a strong, positive sign in the COVID-19 era. The Saskatchewan economy is positioned to strongly improve as we move forward with the Re-Open Saskatchewan plan.”
In Saskatchewan, there were 600 more jobs in May than April, while 87 per cent of those working in February were working in May.
Since February, the number of hours worked in the province has dropped by 9.1 per cent. It’s the second-lowest decline in provinces. Nationally, the average decline in the number of hours worked over that same period is 19.3 per cent.
Coronavirus outbreak: All options on the table for benefits to help those impacted by COVID-19
“Looking forward, we are seeing positive economic news in Saskatchewan, including announcements about helium and lithium recently,” Harrison said.
“These new investments will bring jobs and investment to communities across the province and will help lift our economy out of the current challenges facing markets globally.”
The province said businesses in Saskatchewan are faring better than other jurisdictions, claiming to have closed fewer than other provinces did.
“This speaks to the strength of Saskatchewan’s economy and a strong reopening plan aiding in economic recovery,” the province said in a release issued on Friday.
Despite the optimism from the provincial government, the Saskatchewan NDP has laid out three actions it believes the province should take right now to strengthen the economy going forward.
First, to put Saskatchewan businesses and workers first through a Sask-first procurement plan that helps keep jobs in the province. Secondly, make the Saskatchewan Small Business Emergency program more accessible.
Saskatchewan tops up economic stimulus package by $2 billion
Finally, to end the six-month lockout between Regina’s Co-op Refinery and its workers, which would put 800 Saskatchewan people back to work.
“New Democrats have urged Premier Moe and this Sask. Party government to protect jobs and small businesses, but clearly not enough has been done,” Opposition Leader Ryan Meili said.
“We know that Saskatchewan’s economy was already shrinking before COVID – and now the Premier’s lack of action to put Saskatchewan workers and businesses first is making things worse.”
Saskatchewan continues its reopen plan with Phase 3 beginning on June 8.
© 2020 Global News, a division of Corus Entertainment Inc.
Uncertainty abounds as Nova Scotia economy reopens – TheChronicleHerald.ca
Premier Stephen McNeil is encouraging people to “think local, support local” as the province’s economy reopens Friday but the future of many small businesses struggling to meet government public health guidelines remain uncertain.
“Businesses will require our support on a go-forward basis,” said McNeil Thursday, before facing criticism from opposition leaders for what they deemed a poorly orchestrated and communicated reopening plan that has left businesses scrambling to reopen.
“There should be a massive information exercise by the Province of Nova Scotia that gives Nova Scotians confidence in the system that’s in play,” said Tory Leader Tim Houston.
Government announced its plan to reopen sectors of the economy, including restaurants and bars, salons and gyms last week. The premier has faced ongoing criticism for not offering clear direction on what specific public health requirements, including equipment, businesses need to meet in order to reopen.
“The lack of information over the last few weeks and couple of months has really put businesses at a disadvantage,” said Houston. “I’m hearing from lots that are having difficulty getting supplies that they think they need for disinfecting. There’s a whole host of businesses that still don’t know what they’re required to do and what their customers are required to do.”
The province is offering a $25-million grant program that offers up to $5,000 for small business, non-profits and other operations, including dental offices. The program is intended to help those groups with the costs of buying equipment and cleaning supplies needed to reopen.
Sectors, including barber shops and hair salons, are frustrated over the limit of 10 occupants permitted in their businesses. Restaurants will essentially be reduced to half capacity. Many businesses are unable to secure protective equipment and cleaning supplies in time to reopen.
Meanwhile, many small businesses are still pleading for rent relief. The federal Canada Emergency Commercial Rent Assistance Program, offering to cover 75 per cent of rent for small businesses, has had limited uptake largely because it’s optional for landlords.
Business Minister Geoff MacLellan admitted that businesses would require added financial assistance at least through the initial months of the reopening. He said that’s especially true given that tourism numbers are predicted to drop dramatically this summer, a primary source of for many businesses reopening.
“I think that’s inevitable, to be honest,” said MacLellan.
His department is working directly with associations representing businesses working to get their reopening plans approved by public health and government.
“We’ll open up and see how things go the first few days,” said MacLellan. “I’m absolutely certain we’ll hear back from those associations.”
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