The coronavirus pandemic is the greatest challenge that the U.S. economy and financial system have faced in more than a decade.
As the U.S. braces for cases of the coronavirus to rise through the country, Americans are preparing to hunker down and withdraw from society in a bid to avoid infection — or at least buy time for a medical system that may be stretched beyond its limits.
Financial markets have suffered their worst losses since the 1987 stock market crash, wiping out nearly three years of gains and prompting crisis-level action from the Federal Reserve.
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Concerts, professional and student sporting events, music and film festivals, parades, and other gatherings across the U.S. have been canceled or suspended, depriving vulnerable service workers, small businesses and the economy at large of crucial consumer spending.
Widespread school and office closures have sapped profits for businesses dependent on steady flows of workers or students through their doors. And the earliest industries affected by the outbreak have already laid off hundreds of workers, a number likely to grow as businesses shutter.
“In the financial crisis, most people kept their jobs. Many people maintained their spending. Now everyone is cutting their spending,” Furman continued. “Lots of people, if they don’t lose their jobs, are going to get substantial pay cuts in a potentially much more widespread way than the financial crisis.”
The sudden advancement of the coronavirus seems almost certain to derail the record stretch of steady economic growth and job creation.
The U.S. economy has added workers and expanded in each month since July 2009, defying the expectations of economists, shattering half-century records in unemployment and driving stocks to historic highs.
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Despite a series of government funding crises, widespread political unrest, a variety of economic shocks and a global trade war, the economy remained resilient and even appeared to accelerate toward the start of 2020.
As the coronavirus traveled beyond China, reached the U.S., and began spreading throughout the country, however, stocks plunged and the Treasury bond market seized as the scale of social disruption to mitigate the outbreak became apparent.
The Federal Reserve sought to stabilize financial markets and restore investor confidence with an emergency interest rate cut on March 3 and the issuance this week of up to $1.5 trillion in short-term loans to banks meant to boost Treasury market liquidity. The Fed is likely to slash interest rates to 0 percent next week and could take further dramatic steps to provide liquidity beyond the financial sector.
Even so, economists warn that the sudden synchronized shutdown of nearly every sector of the consumer economy will likely pull the U.S. into a steep downturn — and potentially a recession.
A slew of policymakers and economists have called for a titanic economic rescue package designed to carry laid-off or underscheduled workers and cash-strapped small businesses through the impending slowdown.
“Any kind of social activity just stops on a dime, and that means that the associated revenue and income for workers and revenues for firms just stops, but their obligations don’t stop,” Julia Coronado, founder and president of research firm MacroPolicy Perspectives and a former Federal Reserve economist, said in a Friday interview.
“Policymakers need to get really creative really fast to keep this from escalating from what’s already a public health crisis into a deep economic recession.”
Trump announced earlier that he would declare a national emergency, allowing state and local governments to tap into federal funding as they fight the pandemic.
Economists warn that while mitigating the spread of the virus is the most important step to protect the economy, a much larger burst of stimulus and financial relief is essential to prevent the U.S. from falling into a deep recession.
Michael Feroli, chief economist at JPMorgan Chase, said in a Thursday research note that the U.S. economy would likely shrink by 2 percent of gross domestic product (GDP) annualized in the first quarter and by 3 percent of GDP annualized in the second quarter even with a $500 billion stimulus plan.
“We believe at least that much [is] warranted to make up the lost demand,” Feroli wrote.
Furman and economists across the ideological spectrum have called on the U.S. to send cash directly to Americans, akin to the checks deployed by former President Bush during the 2008 downturn.
“It’s more money for people at the bottom, less money for people at the top,” Furman said.
“It’s money for people who have lost their jobs and [are] not getting a paycheck. And it’s lots of money upfront rather than having it dribble out over time.”
While the House is still on track to leave Washington, D.C., for a planned congressional recess, senators are expected to huddle next week on an economic rescue plan that could earn Trump’s support.
Trump and GOP senators have grown anxious about the impact of the pandemic — and their handling of it — on the 2020 election, raising the political pressure to pass an ambitious economic package. The president had sought to ride the strong economy to another term before the pandemic emerged as the greatest international crisis he has faced in office.
“I would be willing to say we are in a recession right now,” Cohn continued, adding that “when we get done with this public health crisis … the market will be resilient enough to recover.”
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 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.
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.
