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Millennials are facing another once-in-a-generation economic disaster – CNN

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She and her partner, Adam Tuthill, welcomed their second baby in late January. They were making pretty good money and hoping to buy a home in the coming year.
Then the coronavirus pandemic hit and upended their plans. Friend, 30, was furloughed from her job in a restaurant’s bakery section in mid-March and has struggled, like many, to get all her unemployment benefits. Tuthill, 38, saw his business as an independent commercial fisherman dry up during his most profitable season.
The coronavirus disrupted Rachel Friend's plans for herself and her family.
Now, instead of socking away money for their family, the Fort Pierce, Florida, couple is living off their tax refund, stimulus checks and partial unemployment payments. For Friend, it’s especially bitter since this is the second time her life has been derailed by an economic downturn.
“I feel like my generation has just received no breaks,” said Friend, who also hoped to start taking college classes this year. “When I graduated high school in 2008, it was a recession. Now, here I am, I just started a family, and I’m basically in another recession.”
While Americans of all ages are being hit hard by the economic upheaval sparked by the coronavirus outbreak, millennials are especially at risk. Now between roughly 24 and 40 years old, they have a much smaller financial cushion than prior generations had at their age to protect them from job losses and economic uncertainty.
“Millennials as a whole were more vulnerable going into this,” said Ana Hernandez Kent, a policy analyst at the Federal Reserve Bank of St. Louis. “Especially for those who have lost jobs, lost their income and then have no wealth safety net to fall back on, they could really, really suffer from this and be hard-pressed to recover.”
Earlier this year, CNN chronicled the plight of millennials, who are on track to be the first generation not to exceed their parents in terms of employment status or income, studies show. More than a dozen wrote in of their struggles to land good-paying jobs, manage their student loans and buy homes. Several felt the high cost of living is keeping them from starting families of their own.

The long shadow of the 2008 financial crisis

Many millennials came of age at the worst possible moment — when the economy collapsed after the 2008 financial crisis. That downturn has trailed older millennials for years, making them the only age group to fall below expectations for both income and wealth in 2010 and then drop further behind in 2016, according to research from the St. Louis Fed.
The average millennial family born in the 1980s had amassed a median net worth of only $23,200 by 2016, 34% less than expected, and a median income of $51,200, 3% below projections, researchers at the St. Louis Fed’s Center for Household Financial Stability found.
Those without college degrees fared even worse. Their income was 9% below expectations and their wealth was 44% lower. Likewise, black and Hispanic millennials typically have less wealth and income than their white peers.
More recent Federal Reserve data from 2019 shows that the average wealth of millennials has never reached the level of Generation X at the same age, said William Emmons, the center’s lead economist, though their incomes and retirement savings rates have improved.
Student loans are part of the issue. Young families had $1,415 in education debt, on average, in 1989, according to an Urban Institute calculation of Federal Reserve data, which looked that those age 18 to 29. That burden soared to $13,039 by 2016.
Another reason millennials are less wealthy than prior generations were at their age is they have lower rates of homeownership, which is often key to building net worth.
Only 43% of millennial households owned homes in 2016, compared to 51% of Generation X at the same age and 49% of Baby Boomers, according to a Government Accountability Office study of Federal Reserve data published in December.
The coronavirus pandemic, which led to the loss of more than 20 million jobs in April alone as states mandated residents to stay home and non-essential businesses to close, threatens to set millennials back even more.
“Young families are going to be put under a lot of pressure through this experience,” said Reid Cramer, a senior fellow at New America who directed the think tank’s Millennials Initiative.

The fresh hit from coronavirus

Brianna Garcia had hoped to land a better-paying job this spring, but the positions she applied for disappeared after the coronavirus arrived in the US. While she’s still employed as an administrative assistant in a medical clinic and her hometown of San Antonio, Texas, doesn’t seem to have been hit as hard economically, the 26-year-old is worried that she’ll face even more competition once businesses open up again.
Brianna Garcia feels the coronavirus pandemic has stalled her quest to find a better paying job.Brianna Garcia feels the coronavirus pandemic has stalled her quest to find a better paying job.
“There’s already too much to go against under normal circumstances, on top of this added pressure of the pandemic and the economy and the shakiness of it,” said Garcia, who was the first in her family to graduate college but can’t afford to move out of her parents’ home. “I don’t really know what’s going to happen to me.”
Those who have good jobs want to make sure they keep them. The prospect of a deeper downturn and slow recovery is prompting new rounds of layoffs beyond the initial cuts at restaurants, bars, hotels and entertainment venues.
Though he’s telecommuting now, Scott Larsen is putting in extra hours and getting involved in additional projects at his job as a marketing manager for a health and beauty company. He’s trying to make himself as vital as possible to his employer, who traditionally did not allow staffers to work remotely.
Scott Larsen thinks the pandemic is further delaying him from achieving his life goals.Scott Larsen thinks the pandemic is further delaying him from achieving his life goals.
Still, he feels the economic turbulence caused by the pandemic is further delaying him in pursuing career advancement, saving for the future and buying a home. It’s a sharp contrast with his parents, with whom he lives in Payson, Utah. Though they are retired, they continue to feel secure financially.
“I wasn’t exactly in an ideal place starting out and now I’ll just be treading water,” said Larsen, 29. “Now is not the time to be asking for a raise.”

Some good news

Millennials, however, have some factors working in their favor. They are more educated than previous generations and still have time to build wealth and earnings, as Gen X did after the Great Recession.
Those born in the 1970s are now on track in terms of income, and while their net worth remains below expectations, it increased greatly in the years after the financial crisis.
“They were lucky in that they were young enough to really redouble their efforts and try to recover,” Emmons said.
For Sarah Clinton, the coronavirus outbreak has meant new opportunities. A social worker, Clinton had long thought about taking on some private patients but was typically too tired after driving up to four hours a day for her main job counseling the homeless.
The shift to telecommuting may allow Sarah Clinton to buy a home in a more affordable area.The shift to telecommuting may allow Sarah Clinton to buy a home in a more affordable area.
Now, however, the Waltham, Massachusetts, resident is working from home and has extra time on her hands. Plus, there’s more of a need for therapists these days because so many Americans are wrestling with depression and anxiety amid the pandemic. So she’s joined a practice and will see several clients a week via telehealth.
The massive shift to telecommuting sparked by the coronavirus may lead to even bigger changes in Clinton’s life. She and her husband have wanted to buy a house but couldn’t afford any in an area reasonably close to their jobs. Now that both are working from home, they realize they may be able to explore less expensive neighborhoods that are farther away.
“Maybe living out in the middle of nowhere is okay, maybe we could telework,” said Clinton, 35. “I’m feeling like we can dream a little bit more. There are more possibilities.”

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New cruise ship restrictions will mean big hit to B.C. economy, industry says – CBC.ca

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There will be no cruise season in Canada this year, an industry representative says, after the federal transport minister announced new restrictions on vessels’ ability to sail in Canadian waters.

On Friday, federal Transportation Minister Marc Garneau announced further limits on vessels and extended restrictions until October as a measure to limit the spread of COVID-19.

“It’s obviously disappointing news,” said Barry Penner, legal advisor to Cruise Lines International Association — Northwest and Canada. “There won’t be a cruise season in Canada, at all.”

“This announcement will be acutely felt in coastal communities, small towns, bigger centres, everywhere from Newfoundland, Nova Scotia, New Brunswick,  Prince Edward Island, Quebec, and especially British Columbia.”

The Diamond Princess cruise ship in February, quarantined in Japan. The ship was the scene of a major coronavirus outbreak earlier this year. (Mayuko Isobe/Kyodo News/The Associated Press)

Penner said the cruise ship industry contributed over $4.1 billion to the Canadian economy in 2018 and led to 29,000 jobs. Over $2.3 billion of that economic activity and over 15,000 of those jobs are in B.C. 

The employment figures include spin-off jobs in businesses like hotels, restaurants and taxis serving cruise ship customers on shore, as well as suppliers producing goods for vessels, Penner said.

310 Vancouver port calls cancelled

B.C. health officials have already said cruise ships will be allowed to stop for refuelling in the province’s ports but passengers will not be permitted to disembark.

Dayna Miller, director of global partnerships with Tourism Vancouver, said her organization understands the decision by the federal government.

“I think we were not entirely surprised,” Miller said, especially with large gatherings on hold in B.C.

Princess Cruises’ Emerald Princess arrives at Canada Place in Vancouver in March 2019. Some cruise ships begin or end their voyages in Vancouver and some make port calls on their way to Alaska. (Gian-Paolo Mendoza/CBC)

However, she said, 310 cruise ship calls were expected in Vancouver this season, which would have brought about 1.2 million visitors to the city. Each call, she said, generates about $3 million in economic activity.

“It’s a vital industry as a whole,” she said.

Global problems

The coronavirus pandemic has been devastating to the cruise industry globally.

Experts have said cruise ships, with hundreds or thousands of people in close proximity, present virus transmission risks. 

There have been reports that even once cruises are given the OK to begin operations again, fewer customers will want to set sail over health fears. Some have speculated the pandemic will mean the end for at least some cruise lines.

In February, a high-profile outbreak on the cruise ship Diamond Princess led to hundreds of passengers testing positive for the disease. 

“I think everybody’s been learning, as fast as they can, around the world,” Penner said.

Penner said the pandemic has been a “vexing” problem for governments and health authorities and the cruise industry is working with both to find best practices to contain viral risks.

But cruise lines aren’t alone, he said. Airlines and movie theatres face similar issues, for instance.

His industry is making some changes to increase consumer confidence, such as making cancellations more flexible for travellers booking in 2021.

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S&P US chief economist: How we can add $5.7 trillion to the US economy – CNN

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The government’s economic relief package, as well as the Fed’s stimulus measures, will likely help the economy — but it is not nearly enough. Without an additional boost, I expect US economic activity will shrink peak-to-trough by 11.8% ($566 billion) in real terms and will remain down by 5.2% in 2020. In worst-case scenario, we may see a peak-to-trough drop of 13.7% in GDP, and remain down by 8.2% in 2020.
It’s not too late to change our trajectory, though. An investment in infrastructure would help get the United States back on track, with GDP likely recovering in four quarters instead of seven.
As the United States has evolved over the years, its infrastructure has fallen into massive disrepair. Roads, bridges, the electric grid and even public health infrastructure has been grossly neglected. US infrastructure has received a grade of D or D+ from the American Society of Civil Engineers since 1998, while the Department of Transportation wrote in 2018 that 64% of highways and 25% of bridges are in need of upgrades. Making this much-needed investment in infrastructure would give the US economy the boost it needs. In fact, I’ve found that a $2.1 trillion boost in public infrastructure spending over a 10-year period would have a return of 2.7, meaning that for each dollar spent, the US economy would get $2.70 back. This investment would be around the levels (relative to GDP) seen in the mid-20th century — the last time the United States heavily invested in infrastructure.
Why I will never let our employees go fully remote after the pandemicWhy I will never let our employees go fully remote after the pandemic
Over 10 years, the economic activity generated from this investment would be 10 times bigger than what was lost in the Covid-19 recession. It could add as much as $5.7 trillion to the US economy over the next decade, creating 2.3 million jobs by 2024 as the work is being completed. The additional 0.3% boost to productivity per year that it generates would lead to 713,000 more jobs by 2029. The estimated potential real GDP growth over the next 10 years would rise to 2.2% from 1.7%.
Though many jobs would end once projects are built, other jobs would be created from the net boost infrastructure gives to productivity, and the United States would see fatter paychecks each year. Our models show that it would add an additional $2,400 to per capita personal income by 2029, which would allow households to spend $3.5 trillion more over that period than if there was no investment in infrastructure. In addition, significant spending on large projects can enhance efficiency and allow goods and services to reach their destinations more quickly and at lower costs.
While boosting the American economy, infrastructure spending could also improve the ability to fight future pandemic outbreaks. US public health infrastructure is currently faced with an unprecedented crisis, and budget cuts over the past 10 years have likely made it harder to handle Covid-19. Solid investments in public health infrastructure, like public health agencies, a skilled public health workforce and updated data and information systems would help not only the health of citizens, but also their productivity, and, in turn, the health of the US economy.
The Covid-19 pandemic has been the catalyst for re-thinking the fundamental structure of many aspects of everyday life. Social distancing has led to changes in how we interact. Remote working may become a permanent fixture of the business landscape, raising the need to examine our data infrastructure. Transportation systems may be re-thought to incorporate these new ways of living. Not all people can afford the private transportation that would satisfy social distancing, and many rely on publicly available transport to make a living. In many parts of the country, reworking this infrastructure may be one of the cornerstones to adapting life to this new reality and ensuring it is viable.
By prioritizing infrastructure now, Americans could invest not only in the physical health of the nation, but also its economic health. At the same time, the systems and roads we build may be our path to the future and go a long way to determining how strong America’s future will be in the end.

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Restarting The American Economy: The Most Essential Factors – Forbes

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When governors and the federal government made the decision to close “non-essential” businesses and issue shelter-at-home orders to slow the spread of COVID-19, they did so without the benefit of a historical precedent. We are only now beginning to understand some of the ramifications of this drastic action. As the U.S. moves to unshackle its economy, millions of workers sit nervously waiting for a call from their employer. Though some workers have returned or hired on with companies that have thrived during this pandemic, others may never get ‘the call’ as companies restructure. You see, a crisis provides an opportunity (and motivation) for companies to reevaluate their business model in search of ways to cut expenses and increase profits. This is because success depends on how well a company can meet the needs of its consumers (revenue) and how well it manages its expenses. The difference between revenue and expenses is profit, which is the driving force behind the private sector. Profit is the lifeblood of every business and it is this lifeblood that is under attack.

How quickly will the U.S. economy return to normal? The answer is ‘it depends.’ It depends on how fast the unemployment rate falls. It depends on how quickly the consumer returns to their pre-COVID level of spending. It depends on the path of the virus. In essence, it depends on a myriad of variables. Let’s begin with unemployment as this will determine the level of economic growth over the next 12 to 18 months.

Unemployment

The official number of unemployed workers is now slightly over 41 million. This is substantially higher than the 5.75 million unemployed at the end of 2019. The current number of unemployed workers represents approximately 26% of the ‘pre-COVID-19’ work force. The unemployment rate hit 14.7% in April, the highest figure since the 24.9% rate during the Great Depression. According to some sources, unemployment is expected to reach 25.2% by the end of this year. Unlike the depression, however, the cause of this downturn is known, and the policy response has been more on point. Even so, can the U.S. economy return to normal with so many workers on the sidelines?

Slower Return to Normal?

Roughly 70% of the U.S. economic engine comes from consumer spending. Thus, when the consumer is actively engaged, the economy tends to prosper. Remove an additional 35 million consumers from the work force and, well, the economy suffers. More importantly, debt plays a vital role in economic growth. When consumers borrow, they spend more, which leads to growth. When you look at the level of total credit issued from all commercial banks since 1973, the average increase from one month to the next was 0.6%. In March and April of this year, the increase was 2.8% and 3.3% respectively. However, this was due to a 25% rise in commercial and industrial lending, much of which is attributable to the Paycheck Protection Program.

What about the largest driver of economic growth? Loans to consumers, which averaged a 0.5% increase from month to month since 1973, fell 3.5% in April. This is the largest monthly decline on record. This reduction in consumer lending has led to weaker consumer spending and slower economic growth. In fact, from March 1 to the end of April, consumer spending – as measured by personal consumption expenditures, fell nearly 20%. If you reduce the volume of loans to consumers – again, the largest contributor to GDP consumer spending falls and the economy slows. Therefore, we must find a way to help the consumer regain what they lost from the shutdown.

What else will affect the return to normal? It starts with demand, which, due to the shutdown, has plummeted. This is why the federal government, the Treasury, and the Fed embarked on a massive stimulus program to put money into the hands of Americans. However, since a one-time payment of $1,200 per individual and $500 per dependent won’t go very far, the federal government added a $600 per month bump in unemployment benefits.

The segment that benefits most from this are workers at the lower end of the income scale. Assuming these unemployed workers are receiving a total benefit of $800 per week ($200 state; $600 fed), this equates to over $41,000 per year. Working for $15 per hour, 40 hours a week, 52 weeks per year, yields $31,200 in gross income. Therefore, where is the incentive to return to a lower paying job? Unless extended, the $600 federal stipend will end July 30. This could lead to a flood of workers seeking reemployment. But how many of these jobs will be filled by then?

Safety concerns are key to consumer demand, which is key to the reemployment of the unemployed. How fast will the consumer reengage? Will there be a second wave of the virus? Will the virus mutate, hindering efforts to develop a vaccine? Regardless, some businesses will permanently close, others will reopen more slowly than expected, and many will look vastly different. Technology will assist those who continue working from home and replace jobs in some industries.

The ‘return to normal’ boils down to how well businesses adapt to this rapidly changing environment and become profitable again. A prosperous business community is necessary for a plentiful job market, which is critical for a thriving economy. If businesses fail to thrive, workers will have fewer employment options and unemployment could remain elevated for longer than necessary. Thus, saving our businesses may be the most important task of all, outside of the virus that is.

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