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Progress on COVID and economy under Biden, but disunion haunts U.S. on its 245th birthday – Financial Post

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Most U.S. adults are vaccinated but COVID-19 cases are rising. The economy is accelerating but inflation looms. Bipartisan cooperation has improved but political rancor is high.

More than five months into Joe Biden’s presidency, the United States has changed in multiple ways, with a healthier business outlook and a pandemic – at least in many parts of the country – increasingly under control.

But as the world’s largest economy celebrates its 245th birthday on July 4, the Independence Day holiday will not be the full celebration that Biden had hoped, or promised.

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A White House goal of vaccinating 70% of adults against COVID-19 with at least one shot will not be met, and legislation to repair the nation’s infrastructure is still far from arriving on Biden’s desk.

Biden will celebrate with a 1,000-person party on the White House lawn and fireworks over the National Mall. Historians said he, and the country, have a reason to do so.

“Compare where we are versus a year ago economically, in terms of public health, in terms of national psyche, it is almost like living in a different country,” said presidential historian Michael Beschloss.

He said Biden had to walk a careful line between celebrating the progress made on the pandemic and declaring: Mission Accomplished.

“If Biden had been too hasty in declaring the pandemic over, which he has not, it would be difficult to ask Americans for future sacrifices and it would also make Democrats politically vulnerable next year if the pandemic in some way recurs,” Beschloss said.

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Trouble may loom ahead, though. The U.S. government said on Thursday that daily coronavirus cases rose in the past week, driven by increases in the Midwest and Southeast where vaccination rates are low and the highly contagious Delta variant, first found in India, is spreading.

“We are celebrating, as a country, at the same time as we recognize the fact that we’re in a serious situation for those who have not been vaccinated,” said infectious disease expert Dr. Anthony Fauci. “And the message is: Get vaccinated.”

DIFFERENT PROBLEMS

In a sign of economic progress, the Labor Department said on Friday that U.S. companies hired the most workers in 10 months in June.

But the economy is far from back to normal, with 7 million fewer jobs than it had in February 2020, before the pandemic. Meanwhile some businesses are having trouble hiring the employees they need, as workers struggling with childcare or worried about illness choose to stay home https://www.reuters.com/business/livings-not-easy-worker-hungry-us-businesses-this-summertime-2021-06-30.

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Vanderbilt University historian Thomas Alan Schwartz noted the country’s challenges had changed since the tumultuous tenure of former President Donald Trump.

“Our problems are really different now,” he said. “I think Joe Biden’s America is a calmer, gentler place.”

Demonstrations over racial disparities have fallen after massive unrest in 2020 over the death of George Floyd, a Black man, and the white police officer charged with murdering him was sentenced to 22-and-a-half years in prison.

Biden commemorated https://www.reuters.com/world/us/biden-visit-tulsa-massacre-site-us-confronts-racial-legacy-2021-06-01 the 1921 massacre of Black Americans in Tulsa, Oklahoma, last month and signed a bill into law making June 19 a federal holiday commemorating the emancipation of the enslaved.

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At the same time, threats from home grown extremism, particularly white supremacists, are on the rise, Biden’s Justice Department has said.

And a Republican-led fight against “critical race theory” has turned the teaching of American history into a new political battleground https://www.reuters.com/world/us/partisan-war-over-teaching-history-racism-stokes-tensions-us-schools-2021-06-23.

Despite Biden’s pledge to get Republicans and Democrats in Congress to work together – and massive popular support – legislation on infrastructure, police reform, and gun safety still has not crossed his desk.

The Jan. 6 storming of the Capitol by Trump supporters, during which five people died including a Capitol Police officer, remains an open wound. House of Representatives Republican leader Kevin McCarthy has criticized members of his party who cooperate with a committee set up by Democratic Speaker Nancy Pelosi to investigate the insurrection.

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Still, McCarthy attended a White House event on Friday to honor the Los Angeles Dodgers baseball team, the 2020 World Series winners. Baseball is the quintessential American pastime.

“As we beat this pandemic and celebrate fans coming back to stadiums, we celebrate something else: a national achievement,” Biden said, hailing how frontline workers, friends, families and neighbors came together to look out for one another. “Together, as a nation, we have proved that it truly is never a good bet to bet against America.”

Asked about the future of Biden-backed infrastructure spending in Congress, McCarthy told a reporter he was only there to celebrate the Dodgers. (Reporting by Jeff Mason; Additional reporting by Andrea Shalal; Editing by Heather Timmons and Daniel Wallis)

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The global economy is falling below expectations – The Economist

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IT IS WELL known that markets hate uncertainty. Bad news, then, that by one measure the world economy is throwing up more nasty surprises for investors. Citigroup’s global economic-surprise index (CESI), which measures the degree to which macroeconomic data announcements beat or miss forecasts compiled by Bloomberg, has fallen into negative territory for the first time since November (the indices for America and China have been negative since mid-May). Since the summer of 2020 economic indicators had tended until recently to surprise on the upside. But as inflation has surged and consumer confidence has flagged, they are now failing to meet forecasters’ expectations. (See chart.)

Measures of economic surprises appear to be a useful way to gauge market sentiment. When the economy is booming data releases will typically be better than analysts expected, boosting the CESI. During an economic downturn, economic statistics will fall below the consensus estimate, leading to negative surprises. From June 2020 to July 2021, when the CESI for America was positive thanks to upbeat employment, inflation and housing figures, the S&P 500 index of big American firms rose by 38%. Since then the CESI has bounced above and below zero, and shares have fallen by roughly 9%.

In a paper published in 2016 Chiara Scotti, an economist at the Federal Reserve, constructed her own surprise index based on five indicators: GDP, industrial production, employment, retail sales and manufacturing output. America’s index also measured personal income. Ms Scotti found that positive economic surprises in America were associated with appreciation of the dollar relative to the euro, pound sterling and yen. (In fact, Citi’s index was designed by the bank’s foreign-exchange unit for trading currencies, not stocks.)

But the surprise index can be hard to interpret. The CESI includes both backward- and forward-looking macroeconomic indicators, and is weighted in favour of newer releases and those that tend to have the biggest impact on markets. Because the index reflects economic performance relative to expectations, it can be negative during expansions if forecasters are too optimistic, and positive during contractions if they are too gloomy. But as Citi analysts wrote in a research note, “coincident rather than causal relationships are relied on even if they have no consistency whatsoever.”

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Sri Lanka Economy Shrinks 1.6% Amid Political Chaos, Inflation – BNN

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(Bloomberg) — Sri Lanka’s economy fell back into contraction last quarter as the country battled its worst economic problems since independence, with emergency aid to stabilize the island nation proving elusive.

Gross domestic product declined 1.6% in the quarter ended March from a year earlier, the Department of Census and Statistics said in a statement on Tuesday. That’s shallower than a 3.6% contraction seen by economists in a Bloomberg survey and compares with a revised 2% expansion in the previous quarter.

The contraction likely marks the beginning of a painful and long recession for the country, whose Prime Minister Ranil Wickremesinghe last week said the economy had “completely collapsed.” The crisis follows years of debt-fueled growth and populist fiscal policies, with the Covid-19 pandemic’s hit to the dollar-earning tourism industry serving as the last straw.

Absence of foreign exchange to pay for import of food to fuel led to red-hot inflation, the fastest in Asia, triggering protests against the government led by the Rajapaksa clan that eventually led to the resignation of Mahinda Rajapaksa as premier. While the months-long protests hurt business activity in parts of the country, the government on Monday imposed new curbs, which includes a call to residents to stay home until July 10 to conserve fuel. 

That will depress activity further, while raising the risk of more unrest given lingering shortages of essential goods.

Sri Lanka is in talks with the International Monetary Fund for aid to tide over the crisis, with at least $6 billion needed in the coming months to prop up reserves, pay for ballooning import bills and stabilize the local currency. The central bank has raised interest rates by 800 basis points since the beginning of the year to combat price gains that touched 39%.

Other details from the GDP report include:

  • For the first quarter, the services sector grew 0.7% from a year earlier
  • Industrial production slipped 4.7% and agriculture output contracted 6.8%

©2022 Bloomberg L.P.

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China's economy recovering but foundation not solid, premier says – Financial Post

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BEIJING — China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.

China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.

“Currently, the implementation of the policy package to stabilize the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.

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“The task of stabilizing employment remains arduous.”

China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.

China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.

In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.

Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.

(Reporting by Kevin Yao and Beijing newsroom; Editing by Andrew Heavens, William Maclean)

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