This pandemic has put the U.S. economy in the ICU unit. It’s worse than the euro zone. Worse than China’s. Nearly all of it was self-inflicted.
Barclays Capital updated their global growth forecasts on Friday and the U.S. got hammered most.
In a subheading titled “U.S. Activity Falls Off A Cliff”, Barclays points out that U.S. GDP will be worse now than the entire euro zone.
For the year, U.S. economic output could contract by 6.4% while the eurozone economies contract by 5.5%. The U.S. contraction is due primarily to an expected two month long shutdown of the economy, over 22 million people laid off, and untold numbers more who were forced into pay cuts and lost bonuses. Within the Americas, only Peru’s economy performs worse, down 6.6% by Barclays’ estimate.
March retail sales, released last week, showed the consumer demand destruction beginning towards the end of the first quarter. Overall sales were down 8.7%, with non-essential businesses such as autos, furniture, clothing, recreational goods, bars and restaurants hit particularly hard and declining at a record pace. The lockdowns were just getting started in most of the country then. April and May promise to be even worse.
On the production side, March industrial production declined more than expected, showing that economic weakness is not just in the travel, tourism and hospitality industry.
Industrial production slid 5.4% on a monthly basis and while that might not look like a big stop, it is the biggest decline since 1945 and 1946, when the U.S. was reorienting production to build military equipment.
The March numbers give industrial production weak momentum heading into April, Barclays economist Mike Gapen wrote in a note.
Worse Than Europe & China
The expected decline in U.S. GDP is only surpassed in Europe by Italy at -8.5%. Italy is the worst hit of all, followed by Peru, then Malaysia, then the U.S. if the Barclays forecast pans out.
One of the main reasons for the euro area doing better than the U.S. at this juncture is quarantine measures will be lifted sooner there than here, Barclays insinuates.
The latest data on the coronavirus shows most of Western Europe has hit the peak and are plateauing. Strict quarantine measures designed to flatten the curve have worked, with the bulk of humanity in Germany, France, Italy, Spain, Belgium, and Austria hiding out from killer virus at home.
Infection rates are in decline. Hospital pressures are easing from where they were two short weeks ago. So with the infection rate hitting its plateau, national governments are ready to unleash their exit strategies for a gradual return to normalcy.
In the U.K., unemployment numbers for March will be the single most important data point this week. Barclays thinks a record 400,000 jobs were lost, and nearly 2 million laid off in the last three weeks.
U.K. PMIs for April are seen at a super weak 25 for services and 30 for manufacturing. Fifty is the baseline. Anything below 50 significies contraction.
Meanwhile, China is coming back from the dead.
China’s economy contracted 6.8% in the first quarter, erasing all the gains from the fourth quarter, which grew at a rate of 6% annualized, according to official government figures. This was pre-pandemic, of course.
China’s first quarter decline was generally larger than forecast. But March economic data suggest that the economy is past the worst. Production has resumed at China factories. Their GDP won’t be much to write home about. Up 1.3% on the year versus 6.1% last year, and market forecasts ranging between 5% to 5.5% growth this year.
The Trump Administration released its guidelines last week to re-open the economy, leaving the decision to open up to individual states.
New York Governor Andrew Cuomo said in his press conference last week that he was extending the lockdown period until May 15, but admitted the state could not stay on pause for much longer.
Although Cuomo did not say May 15 was a hard deadline, if hospitalization rates decline and if the medical community feels they have a handle on patient care in New York City, then the market chit-chat will be that Cuomo revisits that date and starts opening parts of the state sooner rather than later.
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.
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“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.
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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.”
Economy adds surprise 290,000 jobs in May; unemployment rate at record level – The Globe and Mail
Canada added 290,000 jobs in May after two months of brutal layoffs, a surprise turn for the job market as provinces have only recently begun to ease lockdown restrictions.
Despite the gain, the unemployment rate rose to 13.7 per cent, the highest since comparable data became available in 1976, as more people started seeking jobs.
“The surprisingly positive readings on employment paint a more optimistic picture of the early part of the recovery, but there’s still a long road back,” said Royce Mendes, senior economist at Canadian Imperial Bank of Commerce, in a note to clients.
About three-quarters of May’s increase was in full-time positions, while the goods-producing sector (5-per-cent gain) snapped back more forcefully than services (1-per-cent gain).
In turn, men saw stronger employment growth (206,000) than women (84,000). Statistics Canada noted that among parents, women registered fewer job gains than men and were more likely to lose hours.
The total number of hours worked in all industries climbed 6.3 per cent in May, following a plunge of nearly 28 per cent between February and April. There were sizable increases in construction (19 per cent), wholesale and retail trade (11 per cent) and manufacturing (10.9 per cent).
Quebec accounted for nearly 80 per cent of May’s employment increase as it saw a net gain of 231,000 workers. The province allowed the construction industry to return in mid-April and other restrictions began to ease outside the Montreal area in early May.
Ontario was the only province where employment declined last month, although losses were less severe than in March and April. The first stage of the province’s reopening plan took effect after the Victoria Day weekend.
Going into Friday’s job report, it was widely assumed that Canada would experience another month of layoffs. The median estimate from economists was for employment to decline by 500,000 in May, following April’s loss of nearly two million and March’s drop of about one million.
This was partially the result of timing. Statistics Canada surveyed households on their work status between May 10 and 16. By then, many reopening stages had yet to take effect.
Instead, Friday’s results surprised by showing that employers are already adding to payroll.
As Canada enters its summer months, there are mounting signs of economic activity picking up. Hiring site Indeed Canada has seen a recent uptick in new job postings. Consumer spending, while lower than a year ago, has improved in recent weeks, according to Royal Bank of Canada transaction data. And home and auto sales have perked up, as has business sentiment.
Still, it’s shaping up to be a long recovery in the job market. Many companies are reopening to weaker sales and larger debt obligations, making it difficult to staff at prepandemic levels.
Only 13 per cent of small business owners are planning to add to full-time staff in the next three months, compared to 37 per cent who are planning to cut back, according to recent survey results from the Canadian Federation of Independent Business.
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