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How Is the U.S. Economy Doing? Ways to Give the Economy a Boost. – Barron's

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Though its full impact is yet unknown, the coronavirus has the potential to upend the U.S. economy and send it into recession. Even if a recession is avoided, it’s clear that certain industries—and their workers—will be hit hard. Airlines, cruise lines, and hotels have been at the center of the story, and it wouldn’t be a surprise to see restaurants and retail also take a hit. Then there are the so-called gig workers, who could be among the hardest hit if the gigs dry up.

There’s only so much the Federal Reserve can do about the situation. Its job in all this is to make sure that companies that need access to funds can get it, whether that means lowering interest rates, as it did last week, or through other steps. It needs to keep the financial system working.

But as many have pointed out, there’s nothing the Fed can do about the spread of coronavirus, supply-chain disruption, or workers losing their jobs. If the hit from coronavirus reaches crisis level—and it’s still not clear it will—then it will be up to the Federal government to figure out. Ideas already being discussed include a payroll tax holiday, infrastructure spending, and tax rebates. Here’s what has been tried to over the years.

Cut Corporate Taxes

The idea behind cutting corporate taxes is that companies will have more money to spend on paying workers, so they can hire more or at least fire fewer. Already, Italy has announced a tax credit for any company that has seen revenue decline by more than a quarter. In the U.S., White House sources have been quoted as saying that the government was considering tax relief for airlines, cruise operators, and other travel companies impacted by the coronavirus. Corporate tax cuts, however, have been criticized as being less effective than other forms because they don’t do much to stimulate demand.

Tax Rebates and Stimulus Checks

What better way to help the economy than putting more money in people’s pockets? This was tried in 2008, before the recession that started in 2007 became the Great Recession, when Congress tried to boost the economy by passing the Economic Stimulus Act of 2008 in February of that year. The law is best remembered for the stimulus checks that Americans received, which was supposed to lead to a quick boost in spending. It did, but not enough to stave off the financial crisis. An even faster way to get money more money to Americans is by cutting the payroll tax. That tax takes a piece out of every worker’s paycheck. Of course, it would benefit only those who have a job.

Infrastructure Spending

Everyone likes to think of infrastructure spending when the economy goes bad, but it’s often considered a stimulus of last resort. For instance, one year—and one Lehman Brothers bust—after Congress enacted the Economic Stimulus Act of 2008, it passed the American Recovery and Reinvestment Act of 2009. The law included tax rebates but also extended unemployment benefits, provided tax incentives for companies, and, yes, funded infrastructure projects. The most massive infrastructure stimulus, however, came with the New Deal during the Great Depression. Not only were Social Security and other entitlements created, it funded massive infrastructure projects as a way to put Americans to work. Let’s hope it doesn’t come to that.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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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 Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

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