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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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UK Economy Faces $6.3 Billion Hit From Pingdemic, CEBR Says – BNN

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(Bloomberg) —

The U.K.’s economy could face a loss of more than 4.6 billion pounds ($6.3 billions) in just four weeks if rules on self-isolation following a “ping” from the NHS app aren’t relaxed, according to data from Centre for Economics and Business Research.

Since July 19 “freedom day,” the surge of Covid cases in the U.K. implies has caused increasing number of people will need self-isolate after being contacted by the NHS app, triggering disruption in supply chains. Figures released this week from the NHS track-and-trace app, covering the period from July 8-14, show a record 607,486 self-isolation pings were sent within a week in England.

The government may need to speed up its overhaul of the NHS App, as exemptions introduced for key workers would reduce the overall cost by only 300 million pounds over the period, CEBR said, whereas more than half could be saved by relaxing isolation for those who have had their second vaccination by at least two weeks, they added.

Britain’s economy already showed signs of slowing in July as euphoria following the easing of coronavirus restrictions eased and a resurgence of the coronavirus caused widespread staff shortages. An index based on a survey of purchasing managers by IHS Markit fell unexpectedly to its lowest since March.

Meanwhile, London Mayor Sadiq Khan urged Boris Johnson’s government to relax isolation rules for vaccinated people who come into contact with a Covid-19 case, with the U.K. capital facing major disruption.

Politicians and scientists are now concerned that people are deleting the official Covid-19 mobile phone app, or at least switching off its tracing function, to avoid having to self-isolate.

©2021 Bloomberg L.P.

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Virus resurgence menaces economy just as rescue programs unravel – POLITICO

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The resurgence of the coronavirus is threatening to undercut the U.S. economic recovery and upend Americans’ plans to return to work just as the sweeping social safety net that Congress built during the pandemic is unraveling.

That one-two punch — a new wave of cases followed by the looming expiration of enhanced jobless benefits, a ban on evictions and other rescue programs — is sparking concern among lawmakers and economists who say that while widespread business shutdowns are unlikely, renewed fears of the virus alone can slow the economy just as it’s getting back on track.

That could dampen hiring and keep some workers on the sidelines of the job market — stalling or even reversing the labor recovery, the centerpiece of President Joe Biden’s economic agenda. New unemployment claims jumped last week to 419,000, well above expectations and the highest since mid-May, the Labor Department reported on Thursday.

Biden — whose Gallup approval rating dropped to 50 percent this week, its lowest yet — is already drawing attacks from Republicans over the issue. Rep. Kevin Brady of Texas, the top GOP tax writer in Congress, said the president has focused too much on pushing his “$4 trillion spending binge” and not enough on the virus.

Jason Furman, a former top economic adviser to President Barack Obama who is close to the current White House economic team, said the West Wing is very aware of the risks to the economy from the spike in Covid cases.

“Any problem that has a 5 to 10 percent chance to derail the economic recovery you are looking at very closely and are worried about,” Furman said.

He said that concern isn’t especially high, however, because even under “the most plausible worst-case scenario,” the risk is that the Delta variant “takes what was a very fast recovery and turns it into just a fast recovery.”

Another person familiar with the economic team’s discussions confirmed that the White House is paying close attention but doesn’t consider the virus a significant threat. Biden has been calling on Americans to get vaccinated, mainly out of concern for people’s safety but also with an eye out for the economy, the person said.

Biden, speaking on Monday after the stock market tumbled as investors braced for a potential rebound of the virus, said, “We can’t let up, especially because of the Delta variant, which is more transmissible and more dangerous.”

Coronavirus cases have been rising nationwide and are back to their highest level since early May as the highly contagious variant spreads across the country. The sharp uptick has reignited fears of the pandemic, particularly as cases rise among young children who are unable to get a vaccine and even among those who have been fully vaccinated.

“If people don’t feel safe, they’re going to close schools. If people don’t feel safe, they’re not going to go back to work,” said Claudia Sahm, a former Federal Reserve economist. “The recovery — it’s going, but it’s still vulnerable.”

While it’s far too early to gauge the fallout from the increase in cases, any Delta-driven jobs slowdown is likely to be most pronounced in blue states, where higher percentages of residents are vaccinated but where people are also less willing to take risks as coronavirus cases rise. A CBS News poll this week showed that nearly 3 in 4 fully vaccinated Americans are worried about the Delta variant, compared to less than half of those who are not fully vaccinated or who have not received any shots at all.

Those same Democratic-led states also have the most jobs left to recover since they had stricter shutdown orders in place initially and then reopened more slowly. Roughly 8 million of the 10 million jobs that are still missing in the economy from before the pandemic are in blue states, said Arindrajit Dube, a labor economist at the University of Massachusetts at Amherst.

The slowdown in jobs growth, then, is likely to be most acute in the states where the need is greatest. And given how much economic activity those states generate, the ripple effects on the macroeconomy will be more severe.

“If you have highly populous parts of the country who have taken Covid seriously the entire time, and those people get afraid, then you have at least a noticeable slowing in the recovery,” said Sahm, now a senior fellow at the Jain Family Institute.

If Delta continues to spread, the economic shock would come as huge swaths of Americans are still struggling to get back on their feet.

While wages have been rising, particularly for low-income workers in leisure and hospitality, those gains have been outpaced by inflation. And more than 1 in 3 American adults have less in emergency savings now than before the pandemic, despite the more than $5 trillion Congress has pumped into the economy since March 2020 in stimulus and relief funds, according to a Bankrate.com survey released on Wednesday.

“That really underscores how much we need to restore jobs,” said Diane Swonk, chief economist at Grant Thornton. “All of those issues that really plague low-income households have not gone away. We bought some time, but the clock is expiring.”

The end of various social safety net programs will affect tens of millions of Americans. Survey data from the Census Bureau shows 3.6 million households say they are somewhat or very likely to face eviction in the next two months as the nationwide moratorium expires at the end of July. More than 12 million Americans continue to receive some form of jobless benefits, which will be slashed or cut entirely by Labor Day.

And some 42 million student loan borrowers will need to resume payments in October unless the Biden administration acts — and 2 in 3 say it will be difficult for them to pay the bill, according to a Pew Charitable Trusts survey this month.

The ultimate risk is if those and other programs run out at the same time that a major coronavirus outbreak leads to a pullback in economic spending, a slowdown in hiring or an increased hesitancy to find work for fear of catching the virus.

“If we are to see a significant wave in the end of summer, early fall, then we are likely to see an environment where the economic impact will be much greater if there isn’t additional fiscal support,” said Gregory Daco, the chief U.S. economist at Oxford Economics.

Congress has been preoccupied in recent months not with short-term stimulus but longer-term initiatives, namely a bipartisan infrastructure plan and a multitrillion-dollar spending package for child care, health care, education and climate, Daco said. In short order, too, lawmakers will also have to take action on urgent items including the budget and the debt ceiling.

“Those are likely to be the key focus,” he said. “So there might be a significant disconnect between the potential need for additional fiscal stimulus and Congress’ focus on more medium-term plans.”

In the meantime, the Delta variant is giving Republicans fresh ammunition to rail against the multitrillion spending package they have long slammed as an expensive Democratic wishlist. Brady, the ranking Republican on the House Ways and Means Committee, said Tuesday he’s hopeful the president will now “turn away from his distraction on another $4 trillion spending binge” to focus on coronavirus and the economy.

“I’m worried that almost since Day One, six months ago, [Biden] took his eye off defeating the virus and rebuilding the economy,” Brady said. “The president is scrambling now to make up for that lack of attention, but I worry that it’s too late.”

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A 'delta' chill in the air? The economy is still booming, but it faces new uncertainty – MarketWatch

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The U.S. economy caught fire in the spring and it’s still running pretty hot this summer, but a new strain of the coronavirus is threatening to cast a chill over the recovery.

Worries about the so-called delta strain sent a shiver through investors last week after the number of people catching the virus quickly climbed from a pandemic low. The stock market
DJIA,
+0.68%

posted its biggest decline in almost 10 months before recovering and bond yields also fell.

Although the U.S. Covid caseload is still quite low, the delta variant has introduced new uncertainty into the economic outlook and forced households, businesses and government to consider how to respond.

The reaction so far? Not much. Los Angeles County recommended that residents wear masks again, but it’s one of the few governments to do so.

By and large, the delta variant has drawn a wait-and-see reaction. Just look at the stock market. The Dow Jones Industrial Average recovered all of its losses in just a few days and was back at an all-time high.

A chief reason for the optimism, it seems, is that the White House and Federal Reserve will do whatever it takes to keep the economy propped up.

“As long as the government and the Fed keep pumping things up, it is hard to see how the markets can stay down for an extended period,” said chief economist Joel Naroff of Naroff Economic Advisors.

Massive government financial stimulus played a huge role in what’s expected to be a very strong U.S. economic performance in the second quarter. Economists polled by The Wall Street Journal estimate that gross domestic product soared at a 9.1% annual rate in the period stretching from April to June.

See: MarketWatch Economic Calendar

That would be one of the strongest American growth rates ever and help compensate for the devastating economic losses early in the pandemic. GDP, the official scorecard for the U.S. economy, will be released on Thursday.

More important, of course, is what happens next. GDP is mostly a look in the rearview mirror.

Other reports next week are likely to show the U.S. sustaining its recent momentum. Consumer spending data and orders for manufactured goods in June are also expected to point to underlying strength in the economic recovery.

Read: Takeout and dining out has never been so popular – how U.S. restaurants survived and even thrive

Households are spending freely and businesses just can’t keep up with demand. One of their biggest problems is finding enough workers.

What about the delta strain?

So far most people who are catching it are unvaccinated. So-called break-though cases among the vaccinated, meanwhile, are not inducing many severe reactions or deaths.

So it seems the prognosis for broader economy — not to mention the health of the public — is still pretty good with more than 68% of the adult U.S. population having received at least one shot.

Yet if there’s one thing that’s been learned during the pandemic, nothing can be taken for granted. The virus could mutate again, for instance, or individuals, businesses and government could adopt defensive measures that take some steam out of the recovery.

Perhaps the most realistic danger for now is that the delta variant will spread more rapidly around the world and further disrupt global suppy chains that have been strained by the pandemic.

These supply-chain problems — a notable example is a shortage of computer chips — could exacerbate the surge in U.S. inflation this year and further raise costs for consumers and businesses alike.

Already higher inflation is hurting Americans financially and undermining confidence in the recovery. A key inflation report next week, known as the PCE price index, due on Friday, is expected to show another large increase.

The Fed, for its part, is likely to try to reassure consumers and investors next week that the spike in inflation is just temporary after its latest big meeting on the economy. That’s been the Fed’s mantra for months.

Read: Prices are soaring and Americans aren’t happy about it

Also: The cost of living posts biggest surge since 2008 as inflation spreads

Yet the central bank badly underestimated how much prices would rise this year and even some top Fed officials are starting to get worried.

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