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The economy can only start to recover from its coronavirus meltdown once it hits rock bottom. Are we there yet? – MarketWatch

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Investors will largely get a break this coming week from all the awful U.S. economic news before the Memorial Day holiday weekend, but not because things are getting better. They’re not.

Last week brought news of a record 16.4% plunge in retail sales, another 2.6 million layoffs, and a huge drop in inflation. Lower inflation is usually a good thing, but not in the current environment when businesses have to slash prices to stay alive and keep workers on the job.

Read:Jobless claims climb by another 2.6 million amid coronavirus shutdowns

Economic data due for publication in the upcoming week is sparse. On tap: A few million additional jobless claims or layoffs — unthinkable just a few months ago — and more evidence the housing market has taken a hit like every other major part of the U.S. economy.

See:MarketWatch Economic Calendar

The best that can be hoped for is the economy has finally hit rock bottom. A few scattered reports suggest it might be the case.

Surveys of small businesses and consumers, for example, appeared to stabilize in May. A flood of government aid to the tune of $3 trillion has had a lot to do with it. Washington is trying to keep businesses afloat and help tens of millions of suddenly unemployed workers weather the toughest time of their lives.

Most U.S. states, meanwhile, have started to reopen their economies and relax stay-at-home rules and business lockdowns.

These are tentative steps really, and not enough to truly move the needle. It’s going to take a lot more work to get the economy to resemble anything remotely close to normal.

Read:39 million Americans have applied for jobless benefits, but it appears just two-thirds are getting them

A new employment tracker by the workforce-management company Kronos helps to illustrate the depths of the decline.

As it happens, Kronos also makes digital time-clocks that workers use to check in and out of work at some 30,000 companies across the U.S. in fields such as manufacturing, retail and health care.

Since most American workers are still paid on an hourly basis, companies have to keep track. But they aren’t using those old fashioned paper punchers. In many cases workers are using mobile apps or the internet to record when they arrive and leave.

The newly compiled data from Kronos shows that basically an entire shift of work in a three-shift workday got wiped out during the first month of the pandemic. Time-punches sank a whopping 36%.

In a normal week, time punches rarely rise or fall more than 1% to 2%. See more Kronos data here

“This suggests people are starting to return to work as states open up, but they are not returning real quickly,” said Dave Gilbertson, vice president of HCM strategy and operations at Kronos.

Not every industry and not every region of the country has suffered the same.

Las Vegas was particularly hard hit as more than 90% of hourly employees tracked by Kronos were put out of work initially. Most work in casinos that thrive on millions of people visiting the state — millions who have vanished during the shutdowns.

Read:Bottoming out? Consumer sentiment improves in May due to massive federal aid

The health-care industry has been another surprise loser. All the focus on thwarting COVID-19 caused people to stop going to their doctors, dentists or hospitals for elective and even critical procedures. So many medical professionals have been laid off.

It comes as no surprise that the big cities in the East and West bore the brunt of the pandemic’s devastation. Concentrated populations that rely heavily on public transport have suffered the worst.

The South, where states are reopening more aggressively, has largely skirted the worst of the damage. Kronos found that shifts among retailer workers in Florida are almost back to normal — assuming the data is capturing the state as a whole.

“The South didn’t have the same kind of shutdown as the coasts,” Gilbertson said.

If there’s any good news, employees are returning back to work. But slowly. Time punches are still down 28% as of mid-April.

“The pace of recovery is going to be quite a bit slower than we hoped,” Gilbertson said.

Read: Why the U.S. economy’s recovery from the coronavirus is likely to be long and painful

Most economists think it will take years before the U.S. fully recovers. But the sooner the recovery begins the quicker the damage can begin to be reversed. Recent surveys of businesses and consumers, rising stock prices
DJIA,
+0.25%

and reports like the one produced by Kronos suggest the U.S. might just very well be ready to start its long journey back.

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The extreme impacts from the lockdown economy: Morning Brief – Yahoo Canada Finance

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Employment down, savings up, and an uncertain summer for the U.S. economy

June is here.

And as summer has arrives across the country, so too does something resembling a resumption of economic activity.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="We’ve noted recently that economic data has stopped getting worse, building the case that the most severe impacts of the lockdown-related economic stoppage are behind us.” data-reactid=”22″>We’ve noted recently that economic data has stopped getting worse, building the case that the most severe impacts of the lockdown-related economic stoppage are behind us.

But this still leaves the economy a long way from healed.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="As Bank of America outlined in a note last month, the current recovery is likely to play out in three phases: lockdown, transition, recovery. We are now in the transition phase. But what this phase might look like continues to be informed by some of the jarring data coming out of the economy’s March-April lockdown phase.” data-reactid=”24″>As Bank of America outlined in a note last month, the current recovery is likely to play out in three phases: lockdown, transition, recovery. We are now in the transition phase. But what this phase might look like continues to be informed by some of the jarring data coming out of the economy’s March-April lockdown phase.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="What we know is that tens of millions of workers have lost jobs. Last Thursday, initial jobless claims data brought total filings for unemployment insurance since this crisis began to north of 40 million.” data-reactid=”25″>What we know is that tens of millions of workers have lost jobs. Last Thursday, initial jobless claims data brought total filings for unemployment insurance since this crisis began to north of 40 million.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="And on Friday, the April data on personal income, outlays, and savings served as another stunning entry in the history books. In response to mass unemployment, we know that consumers saved at a record rate, cut spending at a record rate, and saw incomes rise due to enhanced unemployment benefits passed through the CARES Act.” data-reactid=”26″>And on Friday, the April data on personal income, outlays, and savings served as another stunning entry in the history books. In response to mass unemployment, we know that consumers saved at a record rate, cut spending at a record rate, and saw incomes rise due to enhanced unemployment benefits passed through the CARES Act.

Taken together, this data really tells the simplest story of what happened in the U.S. economy during the most severe stage of this crisis — millions of people lost jobs and saved every penny they could as a result. How we go forward from here will be informed by fiscal policy, the spread of the virus, and how many workers are re-employed quickly.

“Consumer spending fell off a cliff in April, collapsing by 13.6% [month-over-month] while the annual momentum plunged to its weakest pace on record,” Lydia Boussour, senior U.S. economist at Oxford Economics, said in a note to clients. “Meanwhile greater benefit payments temporarily lifted income momentum to its strongest pace on record.”

The CARES Act boosted personal income in April while spending rose at a record pace amid massive job losses during the most severe stage of shelter-at-home policies hurting economic activity. (Source: Oxford Economics)
The CARES Act boosted personal income in April while spending rose at a record pace amid massive job losses during the most severe stage of shelter-at-home policies hurting economic activity. (Source: Oxford Economics)

Boussour added that, “Amid extreme uncertainty, the savings rate spiked from 12.7% to 33.0% — the highest rate ever. This underscores how the global coronavirus recession is leading to more frugal consumer behavior which will dampen the recovery. This is particularly true as the boost from social benefits will gradually erode over time leaving households more financially constrained.”

And so it seems that Congress was able to keep U.S. consumers afloat while shelter-at-home policies and fears about the future kept most of those excess dollars coming into consumer stashed away. Savings during this initial phase of the pandemic and the recession could, it seems, help boost the economy into the second half of the year.

Michael Gapen at Barclays said in a note published Friday that, “under the assumption households have not spent the entirety of safety net payments already, the potential good news in the report on April personal income is that households have, on net, likely accumulated sizeable cash savings that could be spent in upcoming quarters should the U.S. economy successfully emerge from economic lockdowns.”

April’s personal income and spending data, then, serves as evidence of the consumer holding what amounts to economic dry powder as we emerge from shelter-at-home policies.

How quickly the labor market heals, however, is likely to be more important in shaping how eager consumers are to resume consumption in the months ahead.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This coming Friday, the May jobs report is expected to show the unemployment rate rose to 19.6% last month with another 8 million Americans losing their jobs, according to estimates from Bloomberg. In the view of some economists, the stubbornly high level of initial jobless claims shows that businesses which initially closed on a temporary basis early in this crisis are now closing permanently.” data-reactid=”45″>This coming Friday, the May jobs report is expected to show the unemployment rate rose to 19.6% last month with another 8 million Americans losing their jobs, according to estimates from Bloomberg. In the view of some economists, the stubbornly high level of initial jobless claims shows that businesses which initially closed on a temporary basis early in this crisis are now closing permanently.

The more time that passes without answers for businesses and consumers, the more these temporary disruptions become permanent. Which is the whole story of the “transition” economy and the summer of 2020 — how many temporary changes can be prevented from becoming permanent.

The fewer the better. And the clock is ticking.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="By&nbsp;Myles Udland, reporter and co-anchor of&nbsp;The Final Round. Follow him at&nbsp;@MylesUdland” data-reactid=”52″>By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

What to watch today

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  • 9:45 a.m. ET: Markit US Manufacturing PMI, May final (39.8 prior)

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  • 10 a.m. ET: ISM Manufacturing, May (43.5 expected, 41.5 in April)

  • 10 a.m. ET: ISM Prices Paid, May (40.0 expected, 35.3 in April)

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South Korea Unveils $62 Billion 'New Deal' to Reshape Post-Virus Economy – BNNBloomberg.ca

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(Bloomberg) — The South Korean government unveiled a 76 trillion won ($62 billion) ‘New Deal’ spending plan to reshape the economy in the aftermath of the pandemic after slashing its growth forecast for the year.

The plan, first outlined by Moon in April, aims to refocus the economy through 2025 by supporting job growth and new industries. It will partly be funded by a third extra budget now being drafted, according to a statement on the policy outlook for the second half.

The extra spending will help an economy forecast to grow by just 0.1% this year, the slowest expansion since the 1998 Asian financial crisis. The latest projection was more optimistic than the contraction expected by the Bank of Korea and private economists, but the government acknowledged downside risks to its view should a second virus wave emerge.

South Korea’s trade-dependent economy is suffering as the pandemic hits overseas markets. New virus clusters have also sprung up at home, raising fear among the public and potentially hindering a domestic recovery. President Moon Jae-in’s administration has so far announced 250 trillion won in measures to prop up the economy, including direct support, loans and funds to stabilize financial markets.

While previous measures have been focused on helping the economy ride out the pandemic, the government’s long-term spending plan envisions the creation of 550,000 jobs by 2022. The plan seeks to have 100,000 specialists in artificial intelligence and software programming.

Some 31 trillion won will be spent on the project by 2022, when Moon’s term ends. Another 45 trillion won will be spent by 2025.

The focus is to promote the use of fifth generation wireless networks and artificial intelligence across industries and foster digitalization in South Korea’s least developed areas. Investment will also support startups focusing on green technologies, while the country seeks to make its manufacturing sector more energy-efficient.

South Korea to Make 5G, AI Centerpieces of ‘Korean New Deal’

Part of the new-deal fund will be used to retrain workers and expand employment insurance for universal coverage.

To accelerate South Korea’s economic recovery this year, the government said it will use funds from the upcoming extra budget to issue discount coupons to encourage spending. It will also lower the consumption tax on car purchases during the second half of the year. Tax incentives will be offered to companies that increase investment by more than their average in the past three years, the statement said.

The government said inflation will probably slow to 0.4% this year, slightly better than the BOK’s 0.3% estimate. It sees zero job growth, down from 300,000 in 2019. Exports are expected to fall 8% this year while imports drop 8.7%.

©2020 Bloomberg L.P.

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South Africa partly lifts lockdown to try to fix battered economy – The Guardian

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By Tim Cocks

JOHANNESBURG (Reuters) – South Africa partly lifted a two month-old coronavirus lockdown on Monday, letting people outside for work, worship, exercise or shopping, and allowing mines and factories to run at full capacity to try to revive the economy.

President Cyril Ramaphosa was widely praised when he ordered one of the world’s strictest lockdowns at the end of March, confining people to their homes, forcing miners and manufacturers to slash operations by half, and banning the sale of alcohol and cigarettes.

But the measures have battered the economy of Africa’s most industrialised nation, which was already in recession before the virus, owing mostly to power cuts at its dysfunctional state provider, Eskom.

The central bank expects it to contract by 7% this year.

The government hopes Monday’s move to “level 3” lockdown will sputter businesses to a start. It will inevitably increase the number of coronavirus infections, which over the weekend jumped past 30,000.

“The move to level 3 … marks a significant shift in our approach to the pandemic,” Ramaphosa was quoted in South Africa’s Independent as saying on Sunday at an editors’ forum.

South Africa has so far had fewer than 700 COVID-19 deaths, while vastly more people – half of whom live below the official poverty line – are at risk from hunger because of the shutdown.

Industry officials said the outlook for the manufacturing sector remained bleak, despite the opening up. Output fell for the ninth consecutive month in February.

Philippa Rodseth, executive director of the Manufacturing Circle association, said she expected demand to come “first and foremost in medical textiles and equipment and PPE (personal protective equipment), although that’s not going to contribute to overall aggregate demand”.

Ramaphosa’s move to re-open so quickly, long before new COVID-19 infections reach their peak, has been controversial.

Schools had been ordered to open on Monday for the last years of primary and secondary school, but teachers’ unions and governing associations urged their staff to defy the order, saying schools were not equipped to keep staff and pupils safe.

The education ministry backed down late on Sunday, saying pupils would only return the week after next. Teachers will report this week for training and to receive protective gear.

However, Western Cape province, which is run by the opposition Democratic Alliance, announced that its schools would re-open for those grades as planned on Monday, because they were well-equipped.

The province is the main coronavirus hotspot, with two thirds of cases.

The Marxist main opposition Economic Freedom Fighters (EFF) have meanwhile accused authorities of sacrificing poor and vulnerable workers to the interests of a wealthy elite.

The EFF and others have also criticised the government’s decision to re-open churches and other places of worship if they limit to 50 people, despite the risks of spreading the virus.

(This story corrects to make clear central bank expects economy to contract by 7%, not 4%).

(Additional reporting by Nqobile Dludla and Alexander Winning; Editing by Nick Macfie)

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