By Howard Schneider
WASHINGTON (Reuters) – Garbage haulers still collect trash. Cops are on the beat. Couriers deliver food and packages. Insurance agents work from home.
The coronavirus crisis would appear to have put the entire U.S. economy on ice. Twenty-six million people have filed for unemployment in just a month, with millions more likely waiting in electronic queues at overtaxed state unemployment systems.
Still the U.S. job count stood at more than 152 million as of February. Paychecks are arriving for tens of millions of government workers, hospital, sanitation, utility and other employees deemed to be doing essential jobs; an army of employees working from home; and even chefs cooking for carry-out. For roughly 42 million retirees, and millions more with disabilities, monthly Social Security payments continue.
When the first gross domestic product reports of the pandemic era are issued Wednesday, the numbers will show a large hit from the virus-fighting efforts that began in mid-March. Forecasters expect anywhere from $2 trillion to $5 trillion of output to be wiped out by year’s end.
But in a nearly $22-trillion economy, that leaves a lot on the table, the foundation for the gradual reopening being announced by state governments to build upon.
While described as a “lockdown,” the restrictions recommended or put in place around the country have just as often amounted to a rearrangement. For tens of millions of Americans, work has shifted from office to home and moved online. Other businesses may have been ordered to close, but have hunted for ways to cope and maintain some revenue.
For some companies, the pandemic could even bring a bumper year.
Wickliffe, Ohio-based Lubrizol Corp, the specialty chemicals maker owned by Warren Buffett’s Berkshire Hathaway Corp, has avoided layoffs among its 4,700 U.S. employees. And it continues to churn out products like the gelling agent used to make hand sanitizer.
“We’ve tripled our production of that material,” Chief Executive Officer Eric Schnur told Reuters, “and we still can’t get enough of that to our customers.”
Procter & Gamble Co and Kimberly-Clark Corp both recently posted their best sales growth in years on demand for cleaning and personal hygiene products, as evidenced by shelves stripped bare of toilet paper at grocery stores nationwide.
Citrix Systems Inc, the software maker enabling millions of people to work from home, posted record sales in the first quarter.
None of this is to downplay the staggering blow the pandemic has dealt to the U.S. economy. The United States won’t thrive on teleconferencing and toilet paper, of course, and the scope of the downturn is unprecedented. It could get worse if the virus isn’t controlled or a vaccine developed. In the meantime, small entrepreneurs and those thrown out of work are depending on trillions of dollars in approved government aid to keep them afloat.
Even if the health crisis passes soon and the economic rebound is sharp, there may be lasting structural change — whether in the type of jobs available, the travel and dining habits of consumers, or the look of Main Street if small businesses collapse.
BIG GOVERNMENT, ESSENTIALS AND THE HOME OFFICE
Still, parts of the economy have been buffered.
Start with government, accounting for a steady 17.5% of U.S. gross domestic product at the combined federal, state and local levels over the past three years, or $3.7 trillion of GDP in 2019.
That includes administrators, clerical workers and technology staff running the benefits programs that other Americans now rely upon, as well as firefighters and others who maintain basic services, including teachers leading online classrooms.
Much of that employment is likely to continue, at least for now. But difficult choices loom for state and local governments as costs for their pandemic responses rise, while key revenue sources like sales and income taxes tumble. That could force layoffs.
Calls for a broad package of federal help for local governments have so far been resisted by leading congressional Republicans. However the Federal Reserve this week expanded the scope of a $500-billion lending program for state, county and local governments. That will allow the Fed to buy short-term bonds from hundreds of local government entities to help them raise money needed to pay staff wages and other bills.
The federal government, meanwhile, will borrow massively to fund nearly $3 trillion in emergency programs. A large share of that is in the form of direct payments to households and expanded unemployment benefits. Jobless families will spend much of that on food, housing and perhaps medical care. Consumer spending accounts for about two-thirds of U.S. output.
In contrast to government, the private sector has absorbed a massive blow: Roughly one of every six workers was laid off in the space of a month. Airlines have been grounded, the industry so stricken it was singled out for direct government loans. Hotels and restaurants were also among the direct casualties of social distancing edicts.
But the dramatic headlines mask what’s still going on among two large categories of workers: those working remotely and those whose occupations are deemed “essential.” The latter category encompasses an enormous swath of workers, including front-line medical personnel, public safety officers, people laboring to keep the food supply intact, those distributing goods around the country and utility workers keeping the lights on and the water flowing.
A Brookings Institution study using the Department of Homeland Security’s guidance on “essential industries” estimated that up to 62 million employees might qualify, as much as 40% of total employment before the crisis.
Searches for “telehealth nurse” increased more than 10-fold from March to mid-April on Indeed.com, the job site’s Chief Economist Jed Kolko said in a recent presentation. Online sellers and food retailers, notably Amazon.com Inc and Walmart Inc, have added tens of thousands of employees to ship goods to homebound Americans instructed not to venture out if possible.
Many of those people bunkered in their houses are still earning income. Up to 37% of U.S. jobs “can plausibly be performed from home,” according to a recent study by Jonathan I. Dingel and Brent Neiman, researchers at the University of Chicago Booth School of Business. They estimated those jobs account for an outsized 46% of U.S. wages, and include perhaps 80% of workers in the finance and insurance industries, and in scientific and professional fields.
Many of those jobs could still prove vulnerable. Architects and civil engineers, for example, could be laid off alongside bricklayers and carpenters if construction slumps. The longer a downturn lasts, the more troubles will mount for the nation’s white-collar workforce.
TOUGH RESTRICTIONS, BUT WORK GOES ON
But even in the hardest-hit industries and states, some activity continues.
Michigan, for example, has been hammered by the coronavirus, with more than 38,000 COVID-19 cases. It ranks in the Top 10 nationally both by the total number of cases and in the infection rate, estimated at roughly 3,400 infections per 100,000 people. Michigan’s automotive sector closed down early, and other industries followed under Governor Gretchen Whitmer’s March 23 stay-at-home order, considered among the strictest in the country.
(For a state-by-state breakdown of U.S. coronavirus cases, see: https://tmsnrt.rs/35oYKhr)
The unemployment rate in Michigan, among people covered by unemployment insurance, hit 17.4%, the highest in the country.
But even Michigan’s tough rules deemed 14 industries to have at least some essential workers, including financial services, communications and “critical manufacturing,” along with health and public safety.
Restaurants, bars and many retail outlets had to close to the public. But restaurants could still offer carry out, hotels could stay open if they chose, and construction on many types of projects could continue under social distancing rules.
All businesses were allowed to keep some employees on site for “minimum basic operations” such as maintaining equipment and inventory, guarding property, processing payroll or transactions, or supporting those working remotely.
An analysis of Michigan’s unemployment claims by Michael Horrigan, president of the Upjohn Institute, a labor think tank, showed the differential spread of the crisis across industries and gave some sense of the workforce still on the job.
As of mid-April, as many as 54% of workers in Michigan’s construction sector were still employed, according to Horrigan’s analysis. He compared unemployment claims filed in the industry with employment levels as of the first quarter of 2019, the most recent data from the federal government’s comprehensive Quarterly Census of Employment and Wages. For agriculture, finance and utilities the share of workers still employed could be above 90%, he said.
The numbers will no doubt change as more unemployment claims are processed and as restrictions are lifted, a process Whitmer has already begun.
Based on 2019 output levels for the state by industry, if current levels of joblessness held for a year it would cut Michigan’s GDP by perhaps 23%, knocking the state back to where it was in 2013. Nonetheless, that would still mean Michigan workers and factories would generate $422 billion in goods and services this year.
SOME ADAPT, SOME THRIVE
Across the country, firms are coping in different ways. Some are finding small bits of revenue to sustain themselves, while others are adjusting to an unexpected surge in demand.
Utah greenhouse owners Scott and Karin Pynes had built a solid events business alongside selling plants, but those gatherings vanished overnight under social distancing orders. The Pynes don’t expect to be hosting weddings or corporate events anytime soon, they said in a recent webcast seminar on business survival sponsored by the David Eccles School of Business at the University of Utah.
Their business, Cactus and Tropicals, is still taking online orders for plants and offering outdoor displays and pickups. The Pynes are holding video landscaping consultations by Skype and Zoom, and hunting for a new business model that will work as the economy reopens, perhaps under new rules to keep people more distant from each other.
Scott Pynes said the company has scaled back seasonal hiring, but kept around 85 permanent staff on the payroll with the help of a Small Business Administration loan. With the peak season starting on Mother’s Day, he has his fingers crossed.
“We feel confident we will make it through,” he said in an interview with Reuters. “We will be a bit scarred.”
Richard Schwartz, chief executive of Austin, Texas-based Pensa, faces the opposite challenge — keeping up with a burgeoning workload.
Schwartz’s firm offers automated inventory tracking to retailers so they can plan orders, detect shortages and let manufacturers know to ramp production up or down accordingly. It does that with the help of artificial intelligence software and drones that prowl the aisles of stores to count items on shelves.
Pensa’s flying checkers, he said, were a “sleepy” part of the wholesale-to-retail supply chain before coronavirus hit. Many stores were content to use human workers to jot down inventory on clipboards.
With virus-panicked shoppers emptying shelves and manufacturers struggling to keep pace, robots offer a fast way to keep track of inventory and ordering needs. Schwartz says potential customers now are poised to adopt in a matter of months technology they might have rolled out over years.
Technology “normally goes in fits and spurts,” he said.
Coronavirus, Schwartz said, “is one of those accelerators where it shines a light on a problem.”
(Reporting by Howard Schneider; Additional reporting by Ann Saphir and Timothy Aeppel; Editing by Dan Burns and Marla Dickerson)
Iran economy could rebound to 4.4% growth if U.S. sanctions lifted: IIF – TheChronicleHerald.ca
By Davide Barbuscia
DUBAI (Reuters) – Iran’s economy could grow 4.4% next year if U.S. President-elect Joe Biden lifts sanctions that have contributed to a deep three-year recession, although the COVID-19 crisis could limit foreign investment, the Institute of International Finance (IIF) said.
Biden’s victory in the Nov. 3 U.S. election has raised chances that the United States could rejoin a deal Iran reached with world powers in 2015, under which sanctions were lifted in return for curbs on Iran’s nuclear programme.
This is unlikely to happen overnight, however, and the prospects remain uncertain as the adversaries would both want additional commitments.
Iran’s rial currency has lost about 50% of its value against the U.S. dollar in 2020, reflecting economic damage from sanctions and the coronavirus pandemic, although it strengthened in late October in anticipation Biden would unseat U.S. President Donald Trump.
Iran has the highest COVID-19 death toll in the Middle East.
Trump abandoned the nuclear deal in 2018, and Tehran responded by scaling down its compliance.
The IIF, a trade body for the global financial industry, said that if United States lifted most of the economic sanctions on Iran by the end of 2021, the economy could expand 4.4% next year after an expected 6.1% contraction in 2020.
It would then grow by 6.9% in 2022 and 6% in 2023, the IIF said, adding that if oil exports increase, Iran could see its foreign reserves rise to $109.4 billion by the end of 2023.
Tehran has spoken optimistically about the return of foreign companies under a new U.S. administration, but lack of financial transparency could still curb interest from firms who had made tentative moves to invest after the 2015 deal was struck.
Garbis Iradian, IIF’s chief economist for the MENA region, told Reuters foreign direct investment inflows would increase progressively from this year’s $890 million to over $6.4 billion in 2025.
Assuming most sanctions could be lifted by late next year, FDI is likely to remain below $2 billion in 2021, with most of the money coming from China, Iradian said, adding: “Moreover, the coronavirus pandemic will limit FDI inflows in 2021.”
The Iranian economy would remain fragile, though “not to the brink of collapse” if most of the sanctions remain in place, the IIF said.
Under such a “pessimistic” scenario, Iran would post 1.8% growth next year and its foreign reserves would steadily decrease from about $80 billion this year to $46.9 billion by the end of 2023.
About 90% of Iran’s official reserves are frozen abroad due to U.S. sanctions.
(Reporting by Davide Barbuscia; Editing by Catherine Evans)
Picture of US economy is worrisome as virus inflicts damage – Investment Executive
The number of Americans seeking unemployment aid rose last week for a second straight week to 778,000, evidence that many employers are still slashing jobs more than eight months after the virus hit. Before the pandemic, weekly jobless claims typically amounted to only about 225,000. Layoffs are still historically high, with many businesses unable to fully reopen and some, especially restaurants and bars, facing tightened restrictions.
Consumers increased their spending last month by just 0.5%, the weakest rise since the pandemic erupted. The tepid figure suggested that on the eve of the crucial holiday shopping season, Americans remain anxious with the virus spreading and Congress failing to enact any further aid for struggling individuals, businesses, cities and states. At the same time, the government said Wednesday that income, which provides the fuel for consumer spending, fell 0.7% in October.
The spike in virus cases is heightening pressure on companies and individuals, with fear growing that the economy could suffer a “double-dip” recession as states and cities reimpose curbs on businesses. The economy, as measured by the gross domestic product, is expected to eke out a modest gain this quarter before weakening — and perhaps shrinking — early next year. Mark Zandi, chief economist at Moody’s Analytics, predicts annual GDP growth of around 2% in the October-December quarter, with the possibility of GDP turning negative in the first quarter of 2021.
Economists at JPMorgan Chase have slashed their forecast for the first quarter to a negative 1% annual GDP rate.
“This winter will be grim,” they wrote in a research note.
Zandi warned that until Congress agrees on a new stimulus plan to replace a now-expired multi-trillion-dollar aid package enacted in the spring, the threat to the economy will grow.
“The economy is going to be very uncomfortable between now and when we get the next fiscal rescue package,” Zandi said. “If lawmakers can’t get it together, it will be very difficult for the economy to avoid going back into a recession.”
Some corners of the economy still show strength, or at least resilience. Manufacturing is one. The government said Wednesday that orders for durable goods rose 1.3% in October, a sign that purchases of goods remain solid even while the economy’s much larger service sector — everything from restaurants, hotels and airlines to gyms, hair salons and entertainment venues — is still struggling. But economists caution that factories, too, remain at risk from the surge in coronavirus cases, which could throttle demand in coming months.
And sales of new homes remained steady in October, the latest sign that ultra-low mortgage rates and a paucity of properties for sale have spurred demand and made the housing market a rare economic bright spot.
But at the heart of the economy are the job market and consumer spending, which remain especially vulnerable to the spike in virus cases. Most economists say the distribution of an effective vaccine would likely reinvigorate growth next year. Yet they warn that any sustained recovery will also hinge on whether Congress can agree soon on a sizable aid package to carry the economy through what could be a bleak winter.
“With infections continuing to rise at an elevated pace and curbs on business operations widening, layoffs are likely to pick up over coming weeks,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
The government said he total number of people who are continuing to receive traditional state unemployment benefits dropped to 6.1 million from 6.4 million the previous week. That figure has been declining for months. It shows that more Americans are finding jobs and no longer receiving unemployment aid. But it also indicates that many jobless people have used up their state unemployment aid — which typically expires after six months.
More Americans are collecting benefits under programs that were set up to cushion the economic pain from the pandemic. For the week of Nov. 7, the number of people collecting benefits under the Pandemic Unemployment Assistance program — which offers coverage to gig workers and others who don’t qualify for traditional aid — rose by 466,000 to 9.1 million.
And the number of people receiving aid under the Pandemic Emergency Unemployment Compensation program — which offers 13 weeks of federal benefits to those who have exhausted state jobless aid — rose by 132,000 to 4.5 million.
The data firm Womply says that 21% of small businesses were shuttered at the start of this month, reflecting a steady increase from June’s 16% rate. Consumer spending at local businesses is down 27% this month from a year ago, marking a deterioration from a 20% year-over-year drop in October, Womply found.
The heart of the problem is an untamed virus: the number of confirmed infections in the United States has shot up to more than 170,000 a day, from fewer than 35,000 in early September. The arrival of cold weather in much of the country could further worsen the health crisis.
Meanwhile, another economic threat looms: the impending expiration of the two supplemental federal unemployment programs the day after Christmas could end benefits completely for 9.1 million jobless people. Congress has failed for months to agree on any new stimulus aid for jobless individuals and struggling businesses after the expiration of a multi-trillion dollar rescue package it enacted in March.
The expiration of benefits will make it harder for the unemployed to make rent payments, afford food or keep up with utility bills. Most economists agree that because unemployed people tend to quickly spend their benefits, such aid is effective in boosting the economy.
When the viral outbreak struck in early spring, employers slashed 22 million jobs in March and April, sending the unemployment rate rocketing to 14.7%, the highest rate since the Great Depression. Since then, the economy has regained more than 12 million jobs. Yet the nation still has about 10 million fewer jobs than it did before the pandemic erupted.
All of which has left many Americans anxious and uncertain. The Conference Board, a business research group, reported Tuesday that consumer confidence weakened in November, pulled down by lowered expectations for the next six months.
And the University of Michigan’s Surveys of Consumers reported Wednesday that sentiment declined slightly this month, and remained far below where it was before the pandemic struck. With the resurgence of the virus depressing the outlook of consumers, the sentiment index fell to its lowest point since August.
“Gloomier consumer expectations will weigh on spending as the holidays approach,” cautioned Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.
Israel’s Gaza blockade has devastated Hamas-ruled territory’s economy, UN agency says – Global News
Israel’s blockade of the Hamas-ruled Gaza Strip has cost the seaside territory as much as $16.7 billion in economic losses and sent poverty and unemployment skyrocketing, a U.N. report said Wednesday, as it called on Israel to lift the closure.
The report by the U.N. Conference on Trade and Development echoed calls by numerous international bodies over the years criticizing the blockade. But its findings, looking at an 11-year period ending in 2018, marked perhaps the most detailed analysis of the Israeli policy to date.
Israel imposed the blockade in 2007 after Hamas, an Islamic militant group that opposes Israel’s existence, violently seized control of Gaza from the forces of the internationally recognized Palestinian Authority. The Israeli measures, along with restrictions by neighbouring Egypt, have tightly controlled the movement of people and goods in and out of the territory.
Israel says the restrictions are needed to keep Hamas from building up its military capabilities. The bitter enemies have fought three wars and numerous skirmishes over the years.
But critics say the blockade has amounted to collective punishment, hurting the living conditions of Gaza’s 2 million inhabitants while failing to oust Hamas or moderate its behaviour. Gaza has almost no clean drinking water, it suffers from frequent power outages and people cannot freely travel abroad.
“The result has been the near-collapse of Gaza’s regional economy and its isolation from the Palestinian economy and the rest of the world,” the U.N. agency said in a statement.
The report analyzed both the effects of the closure, which has greatly limited Gaza’s ability to export goods, as well as the effects of the three wars, which took place in 2008-2009, 2012 and 2014.
Video appears to show Israeli missiles intercept rockets fired from Gaza Strip
The last war was especially devastating, killing over 2,200 Palestinians, more than half of them civilians, and displacing some 100,000 people from homes that were damaged or destroyed, according to U.N. figures. Seventy-three people, including six civilians, were killed on the Israeli side, according to Israel’s Foreign Ministry, and indiscriminate Hamas rocket fire brought life to a standstill in southern Israel.
Using two methodologies, the report said that overall economic losses due to the blockade and wars ranged from $7.8 billion to $16.7 billion. It said Gaza’s economy grew by a total of just 4.8 per cent during the entire period, even as its population grew over 40 per cent.
These economic losses helped propel unemployment in Gaza from 35 per cent in 2006 to 52 per cent in 2018, one of the highest rates in the world, UNCTAD said.
It said the poverty rate jumped from 39 per cent in 2007 to 55 per cent in 2017. Based on Gaza’s economic trends before the closure, the report said the poverty rate could have been just 15 per cent in 2017 if the wars and blockade had not occurred.
“The impact is the impoverishment of the people of Gaza, who are already under blockade,” said Mahmoud Elkhafif, the agency’s co-ordinator of assistance to the Palestinian people and author of the report.
Israel has long accused the U.N. of being biased against it. The report, for instance, included only a brief mention that indiscriminate rocket fire at Israeli civilian areas is prohibited under international law. “Palestinian militants must cease that practice immediately,” it said.
Israel’s Foreign Ministry accused UNCTAD of failing its mission to assist developing economies and presenting a “one-sided and distorted depiction” that disregards ”terrorist organizations’ control over the Gaza Strip and their responsibility for what occurs in the Gaza Strip.“
Palestinian officials say Gaza ceasefire reached with Israel
“In light of all this, we cannot take the findings of the reports it publishes seriously, and this report is no different,” it said.
In Gaza, Hamas spokesman Hazem Qassem said the report revealed “the level of the crime” committed by Israel.
“This siege has amounted to a real war crime and pushed all services sectors in the Gaza Strip to collapse,” he said. “These figures also reveal the international inability to deal with the illegal siege on Gaza.”
Gisha, an Israeli human rights group that pushes for freedom of movement in an out of Gaza, said it was Israel’s “moral and legal obligation” to life the closure. “The true price paid by Palestinians in lost time, opportunities, and separation from loved ones is inestimable,” it said.
The U.N. agency said it compiled the report at the request of the U.N. General Assembly and noted that it did not include other costs of Israeli occupation over the Palestinians. Israel captured the West Bank, east Jerusalem and Gaza Strip in the 1967 Mideast war, though it withdrew from Gaza in 2005.
UNCTAD, a technical agency that seeks to reduce global inequality, recommended that Israel lift the blockade to allow free trade and movement. It also called for reconstruction of Gaza’s infrastructure, addressing Gaza’s electricity and water crisis, allowing the Palestinians to develop offshore natural gas fields and for the international community to push Hamas and the Palestinian Authority to reconcile.
Associated Press writer Fares Akram contributed reporting from Gaza City, Gaza Strip.
© 2020 The Canadian Press
Iran economy could rebound to 4.4% growth if U.S. sanctions lifted: IIF – TheChronicleHerald.ca
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