Economy

How School Closings Will Hurt the Economy – Barron's

Published

5 years ago

March 13, 2020

So far, 29 countries have shut schools nationwide.

Photograph by Feliphe Schiarolli

School closures are one of the main ways through which government attempts to limit the spread of the coronavirus will hurt economic activity, economists say.

Vicky Redwood, an economist at Capital Economics, notes that so far, 29 countries have shut schools nationwide. Another 20, she says, have implemented localized closures. As the outbreak spreads, these closures will become increasingly widespread.

The economic impact is obvious. There will be a direct reduction in output due to parents taking time off work to look after their kids, and there will be a reduction in demand if workers get paid less as a result. (Of course, at least some employers and governments are likely to offer support to affected employees).

While information on the actual number of working parents in countries is hard to come by, Redwood says labor-market data in the U.S., U.K. and euro zone indicate that between 15% and 20% of the workforce may need to take time off work to care for dependent children.

For the sake of estimating, Redwood assumes schools are closed for four weeks. On the face of it, the toll could be large. A fifth of the workforce out of action for that period has the potential to knock 6% off global gross domestic product in that quarter, or 1.5% off global annual GDP, she said.

In reality, though, the effect is likely to be smaller than this for several reasons. One is that not all parents work full time, meaning the reduction in overall hours, and therefore output, should be less than the number of workers affected.

Another mitigating factor is that some people will do at least some work while home with their children. Many workers can’t work remotely—Redwood says only a fifth of people in the 36 countries represented by the Organization for Economic Co-Operation and Development have ever worked from home—though some companies have been ramping up work-from-home policies.

There’s also the consideration that some parents may take their annual leave now versus later in the year. That would make the time off somewhat of a wash on an annual basis.

And, Redwood says, there is a degree of “output elasticity,” meaning that co-workers may cover for absent parents to an extent. Academic research pegs this elasticity of output at around 0.8, she said, meaning that a 1% drop in labor input leads to a smaller 0.8% drop in output.

All of this said, Redwood says there is a question mark over whether any of this would actually show up in the economic data, given the difficulties of measuring of output in the services sector. That’s a reminder to investors that while closing schools will no doubt affect economic activity, it is still too early to really predict the impact.

The stock market is assuming things will be bad. The
Dow Jones Industrial Average
had its biggest percentage drop since 1987 on Thursday.

Write to Lisa Beilfuss at lisa.beilfuss@barrons.com

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

2 days ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Economy adds 47,000 jobs in September, unemployment rate falls to 6.5 per cent

Published

2 days ago

October 11, 2024

Anne Joseph

OTTAWA – The economy added 47,000 jobs in September, while the unemployment rate declined for the first time since January to 6.5 per cent, Statistics Canada reported on Friday.

The agency says youth and women aged 25 to 54 drove employment gains last month, while full-time employment saw its largest gain since May 2022.

The overall job gains followed four consecutive months of little change, the agency said.

The unemployment rate has been steadily climbing over the past year and a half, hitting 6.6 per cent in August.

Inflation that month was two per cent, the lowest level in more than three years as lower gas prices helped it hit the Bank of Canada’s inflation target.

The central bank has cut its key interest rate three times this year, and is widely expected to keep cutting as inflation has subsided and the broader trend points to a weakening in the labour market.

Despite the job gains in September, the employment rate was lower in the month, reflecting continued growth in Canada’s population.

Statistics Canada said since the employment rate saw its most recent peak at 62.4 per cent in January and February 2023, it’s been following a downward trend as population growth has outpaced employment growth.

On a year-over-year basis, employment was up by 1.5 per cent in September, while the population aged 15 and older in the Labour Force Survey grew 3.6 per cent.

The information, culture and recreation industry saw employment rise 2.6 per cent between August and September, after seven months of little change, Statistics Canada said, with the increase concentrated in Quebec.

The wholesale and retail trade industry saw its first increase since January at 0.8 per cent, while employment in professional, scientific and technical services was up 1.1 per cent.

Average hourly wages among employees rose 4.6 per cent year-over-year to $35.59, a slowdown from the five-per-cent increase in August.

The unemployment rate among Black and South Asian Canadians between 25 and 54 rose year-over-year in September and was significantly higher than the unemployment rate for people who were not racialized and not Indigenous.

Black Canadians in that age group saw their unemployment rate rise to 11 per cent last month while for South Asian Canadians it was 7.3 per cent. For non-racialized, non-Indigenous people, it rose to 4.4 per cent.

This report by The Canadian Press was first published Oct. 11, 2024.

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Economy

S&P/TSX composite little changed in late-morning trading, U.S. stock markets down

Published

3 days ago

October 10, 2024

Anne Joseph

TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.

The S&P/TSX composite index was up 0.05 of a point at 24,224.95.

In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.

The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.

The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.

The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.

This report by The Canadian Press was first published Oct. 10, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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