The American economy is being buffeted by a fresh round of corporate layoffs, signaling new anxiety about the course of the coronavirus pandemic and uncertainty about further legislative relief.
Companies including Disney, the insurance giant Allstate and two major airlines announced plans to fire or furlough more than 60,000 workers in recent days, and more cuts are expected without a new federal aid package to stimulate the economy.
With the election a month away, an agreement has proved elusive. The White House and congressional Democrats held talks on Thursday before the House narrowly approved a $2.2 trillion proposal without any Republican support. It was little more than a symbolic vote: The measure will not become law without a bipartisan deal.
After business shutdowns in the early spring threw 22 million people out of work, the economy rebounded in May and June with the help of stimulus money and rock-bottom interest rates. But the loss of momentum since then, coupled with fears of a second wave of coronavirus cases this fall, has left many experts uneasy about the months ahead.
“The layoffs are an additional headwind in an already weak labor market,” said Rubeela Farooqi, chief U.S. economist for High Frequency Economics. “As long as the virus isn’t contained, this is going to be an ongoing phenomenon.”
The concern has grown as measures that helped the economy weather the initial contraction have wound down. The expiration of a $600-a-week federal supplement to unemployment benefits was followed by a 2.7 percent drop in personal income in August, the Commerce Department said Thursday.
In a separate report, the Labor Department said 787,000 people filed new applications for state jobless benefits last week. The total, not adjusted for seasonal variations, was a slight decline from the previous week, but continued to reflect the highest level of claims in decades.
The most recent layoffs are not included in that figure, nor will they be reflected in September data to be released by the department on Friday, the last monthly reading on the labor market before the election. The report is expected to show a continuing slowdown in hiring, with barely half of the spring’s job losses recovered, although there is more uncertainty than usual around the estimates.
“This doesn’t bode well for the economy,” said Gregory Daco, chief U.S. economist at Oxford Economics. “When you combine the layoffs with fiscal aid drying up, it points to very soft momentum in the final quarter of the year.”
Furloughs of more than 30,000 workers by United Airlines and American Airlines began Thursday after Congress was unable to come up with fresh aid for the industry, though the companies said they would reverse the cuts if Congress and the Trump administration reached an agreement. A $50 billion bailout in March obligated the carriers to hold off on job cuts through Oct. 1.
Allstate announced Wednesday that it would lay off about 3,800 employees to reduce costs. Those are about 8 percent of the roughly 46,000 employees Allstate had at the end of 2019.
Houghton Mifflin Harcourt, one of the country’s largest book publishers, said Thursday that it was cutting 22 percent of its work force, including 525 employees who were laid off and 166 who chose to retire. The company is a major supplier of educational books and materials, a business hit hard by school closings.
The Walt Disney Company said Tuesday that it would eliminate 28,000 jobs, mostly at theme parks in Florida and California. Many of the workers had been on furlough since the spring, but the company said it was making the cuts permanent because of “the continued uncertainty regarding the duration of the pandemic.”
Travel, entertainment, and leisure and hospitality employers have been among the hardest hit by the pandemic, and they continue to lag even as other areas of the economy have reopened. The American Hotel & Lodging Association, a trade group, said that without new stimulus legislation, 74 percent of hotels would lay off additional employees and two-thirds would be out of business in six months.
“We’re in a different phase of the recovery,” Mr. Daco of Oxford Economics said, and with demand for many companies’ services stuck below where it was before the pandemic, “businesses are left with no other choice but to reduce costs.”
Consumer spending on goods — whether for immediate consumption, like food, or used over a longer term, like appliances — now exceeds levels preceding the pandemic. But outlays for services, which account for roughly two-thirds of the nation’s economic activity, remain down about 8 percent.
The economic picture is not completely bleak. Personal spending was up 1 percent last month, and readings of consumer confidence have been gaining. Helped by low mortgage rates, the housing market is on a tear in much of the country, lifting employment in residential construction 2.1 percent from June to August, according to the Associated General Contractors of America.
But for many Americans, the easing of economic growth has meant an unexpected return to the ranks of the unemployed.
When the pandemic struck in March, Alex Stern was furloughed from his job as a publicist at a public relations firm in New York. He was called back in May after the agency, which works with companies in the food and beverage industry, received a loan through the federal Paycheck Protection Program.
But the company struggled to stay afloat, and Mr. Stern was permanently laid off on Tuesday.
To pay the November rent, he will have to borrow money from his parents, he said. He is considering moving back to his childhood home in Pennsylvania until he can find a new job.
“I don’t want to leave New York, and it’s hard because I’m almost 30 years old and I don’t know what I’m going to do next in life,” Mr. Stern said.
Among those affected by the Disney cutbacks is Taisha Perez, 29, who had worked part time as a drummer at the Animal Kingdom Theme Park at Walt Disney World in Orlando, Fla., for nearly three years.
The job gave her both a steady source of income and time to pursue her passion, television acting. “It’s honestly my favorite job that I’ve ever had,” Ms. Perez said. “I loved putting a smile on people’s faces.”
When she was furloughed in mid-March after the pandemic hit, she thought she would be out of work for just a few weeks. But on Tuesday, a text message from her union representative told her that her job would not be coming back.
“I was just in shock,” she said. “I couldn’t believe it.”
Ms. Perez said she could pay her rent and utilities on the roughly $250 a week she receives in state unemployment benefits, but could not afford any extra expenses, like the car she needs after hers broke down in March.
For those like Ms. Perez who lost work earlier in the year, the end of the $600 federal unemployment supplement has added to financial hardships.
Joann Taylor, a 45-year-old catering coordinator at a McAlister’s Deli franchise in Houston, used to work about 30 hours per week. But when the pandemic hit, her boss put her in an on-call position for deliveries only.
As a result, her hours were cut so severely — sometimes to two a week, or none at all — that she qualified for unemployment insurance, including $300 a week in Texas benefits before taxes.
But when the $600 weekly supplement expired at the end of July, Ms. Taylor began struggling to pay her monthly bills, including $1,240 in rent, $180 for electricity, a $240 car payment and $155 for auto insurance.
Determined to provide for her daughters, who are 6 and 14, she used the time while underemployed to get a license to sell life and health insurance. Now she’s looking for an agency to take her on, hoping for steadier income.
Until then, without further aid from Congress, Ms. Taylor is worried about paying the rent and buying groceries.
“I will have to go to every church around me and ask for help,” she said. “I will stand in food lines with the kids, because I cannot leave them at home. I will apply anywhere that I can for help, because there’s no way that I can allow us to be homeless.”
Reporting was contributed by Ben Casselman, Niraj Chokshi, Emily Cochrane, Alan Rappeport and Elizabeth A. Harris.
Calgary's post-pandemic economy poised for 6.9% expansion in 2021, report says – CBC.ca
Calgary’s economy is going to start roaring back to life next year, but not before the city posts a dismal 10.1 per cent GDP contraction for 2020 as the pandemic and the energy sector slump continue to take their toll, according to a report released Tuesday.
The Conference Board of Canada’s forecast for Calgary’s economy says that after being put through the wringer in 2020, the city’s fortunes will start to turn around in the new year.
“As the pandemic eases and oil prices slowly begin to strengthen, our call is for the Calgary economy to expand by 6.9 per cent in 2021,” the report said.
Calgary’s labour market already shed 44,000 jobs from the second quarter of 2019 to the first quarter of 2020.
Another 90,900 jobs were lost in the second quarter of this year, and the board predicts employment will fall by a record 8.0 per cent overall in 2020.
The report predicts Calgary’s unemployment rate will remain high for many more months, averaging 11.3 per cent this year and 10.4 per cent next year.
“Calgary won’t recover its lost jobs until the end of 2022, partly because the oil and gas sector will recover only slowly,” the report said.
Some sectors of the economy are expected to recover faster than others.
The board says Calgary’s badly bruised retail sector — which saw sales drop by 5.1 per cent in 2020 — will bounce back and grow 9.7 per cent in 2021.
But the arts and entertainment industry, which declined 26.2 per cent, and the accommodation and food industry, which fell by 36.9 per cent, might not fully rebound until 2022, the report says.
Speaking Tuesday at the annual outlook conference hosted by Calgary Economic Development, ATB Financial chief economist Todd Hirsch said it’s expected that unemployment in Alberta will drop only slightly to 11 per cent next year and remain in the double digits for some time yet.
“It’s going to take a lot of growth, maybe a few years of growth, to absorb all of that excess labour and make sure everyone finds jobs. So it’s going to take us a while and we don’t think we’re going to be back into single digits probably until 2022 or even later,” he said.
“To get back to 2014 levels, we estimate that’s not going to happen until probably 2024. So it’s sort of a lost decade of growth for this province.”
Calgary Economic Development is banking on the technology sector to help turn around the city’s fortunes.
CEO Mary Moran says companies are already realizing what Calgary has to offer, pointing to how several tech firms have moved into empty office space downtown.
“You have seen the real estate industry adjust to … shorter-term leases, different floor plates, different amenities that they’re offering. And those ones that have made that adjustment are the ones where the tech companies are migrating to.”
Moran says her organization’s goal is to double the number of tech companies in Calgary by the end of this decade.
Result of 2020 U.S. election has implications for Canadian economy – insauga.com
Coverage of the U.S. election has split Canadians into three main camps: those who are relieved they live north of the border, those who don’t care, and those who are nervous either outcome with have consequences for us, the neighbour to the north.
A recent report from RSM Canada indicates the election outcome, combined with Canada’s reliance on the U.S. economy, might alter Canada’s recovery and longer-term outlook.
Based on the findings, Canada-China trade has been trending down since the beginning of the U.S.-China Trade War in 2018, while total trade between Canada and the United States increased during this period.
This indicates, based on the current administration’s inability to cap the domestic spread of the virus, a Donald Trump re-election could present economic risks to Canada, due to our dependence on them.
However, Trump’s protectionist tendencies suggest Canada may see further headwinds with its largest trading partner, should he be re-elected.
Additionally, Joe Biden’s proposed ‘Made in America’ tax incentive, which offers tax credits for companies in the U.S. that expand employment and salaries domestically, could potentially discourage future Canadian market expansion.
Further, Biden’s willingness to adopt Trump’s tough stance on China if elected suggests Canada will likely continue to be negatively affected by U.S.-China trade relations.
Moreover, Canadian oil pricing will be hit hard if Biden follows through on his campaign promise to cancel the Keystone XL pipeline–a critical venture for Western Canada oil producers that would provide direct access to the Gulf Coast refineries and world markets.
“Despite a rocky relationship between Canada and the current U.S. administration in recent years, it’s clear that a victory for either Trump or Biden would pose risks to Canada’s economy,” Alex Kotsopoulos, vice president of projects and economics with RSM Canada, said in a news release.
“The issue is that Canada has become increasingly dependent on its neighbour south of the border, and when you combine this with the strong ‘America First’ policies of both presidential candidates, Canada will feel the brunt of those decisions. Therefore, it’ll be important for the Canadian government to proactively engage with the new administration to shore up trade and supply chains, which will be vital in Canada’s own recovery,” he continued.
Ottawa's economy to shrink 5.7% in 2020 before rebounding next year: Conference Board – Ottawa Business Journal
Even the insulating effect of the federal government won’t be enough to prevent Ottawa-Gatineau’s economic output from contracting for the first time in nearly a quarter-century in 2020 as COVID-19 continues to wreak havoc with key sectors, a leading think-tank says.
The National Capital Region’s GDP is expected to shrink by nearly six per cent this year, the Conference Board of Canada predicts in its latest economic outlook released this week. To put that number in context, the city’s economy has grown by an average of 2.7 per cent annually over the last five years.
“Ottawa-Gatineau’s position as the nation’s capital and home to the federal government often insulates the city from big swings in economic growth,” said the organization, which forecast back in May that the region’s economy would contract by 2.4 per cent in 2020. “However, the city will not escape the impacts of the COVID-19 pandemic.”
It would be the first time Ottawa-Gatineau’s GDP has contracted since 1996, but the think-tank says the capital region is still in better economic shape than most other Canadian centres.
The Conference Board forecast says Canada’s overall GDP will shrink by 6.6 per cent in 2020 as households tighten their pursestrings and many sectors struggle to recover from a devastating spring and summer. The organization paints an even grimmer long-term picture for industries such as air transportation, accommodations and food and beverage services, declaring they “might never fully return to normal.”
The organization says public administration is the only sector of the local economy that’s expected to grow in 2020. Not surprisingly, the accommodation and food services industry – which has been largely shuttered for much of the pandemic as part of public health efforts to contain the virus – is expected to take the biggest hit, with the Conference Board’s forecast calling for the sector to decline by a whopping 35.6 per cent.
Other sectors facing big declines include retail, which is expected to shrink 6.4 per cent – only the third time in the last two decades its output has fallen year-over-year.
Still, the think-tank says it expects both the local and national economies to bounce back in a big way in 2021, with Ottawa-Gatineau’s GDP expected to grow by 5.2 per cent and the national GDP forecast to rise by 5.6 per cent.
The Conference Board is predicting Ottawa-Gatineau to continue on a growth path in the years ahead, albeit at a slower rate, forecasting GDP increases of 3.6 per cent in 2022 followed by consecutive 1.3 per cent bumps in 2023 and 2024.
The organization made several other economic forecasts, including:
- Ottawa-Gatineau’s unemployment rate – which peaked at 9.5 per cent in June – will finish at 7.4 per cent for the year, compared with a mark of 4.8 per cent in 2019. Employment in accommodation services will feel the biggest impact, plummeting 34 per cent from last year;
- Housing starts – which reached a 35-year high of 11,200 units in 2019 – will fall to 10,700 units this year before dipping below 10,000 in 2021 and the next few years ahead;
- The region’s population will grow 1.5 per cent in 2020, its smallest annual increase in the last five years;
- Ottawa-Gatineau’s per capita household income will rise 3.8 per cent this year, while per capita disposable income is forecast to grow 5.8 per cent.
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