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The economy can't recover until parents have child care again – CNN

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The coronavirus pandemic has already shut schools and day cares, leaving America’s working parents stuck juggling their professional and child care responsibilities at home. Now the summer holidays are around the corner, but it’s uncertain whether summer camps will open.
“Covid-19 has taught us a lot of things, but one critical thing it’s showed us is how important child care is to a functioning economy,” said Frances Donald, chief economist and head of macro strategy at Manulife Investment Management.
Beyond the risk of workers burning out, millions of people staying at home is a strain on the economy. And economists fear that could slow down the recovery.

The economy suffers when people stay home

In the economy everything is connected. If people aren’t going to work, that has a knock-on effect: Working from home means people don’t spend money on train tickets, gas, lunches or dry cleaning.
These might sound like mundane or small-ticket items. But they’re an important engine of economic activity, and if that kind of everyday spending remains on hold, it will slow down the pace of the recovery, Donald said.
Consumer spending contributes some two-thirds to US economic growth. Every dollar that consumers don’t spend takes away from economic growth.
Early data are already showing the economic effects of the pandemic: Personal consumption expenditures dropped 7.5% in March. US GDP collapsed by 4.8% between January and March, its worst performance since 2008.
It’s not clear when, or even if, parents will be able to get back to the office this summer. Day cares remain closed, and some summer camps across the country have already delayed start dates and payment deadlines. The American Camp Association told CNN in an email that camps are awaiting further guidance from the CDC and local governments, while also working on contingency plans including virtual programs.
But if summer activities simply move online, parents still can’t go to the office. And even if camps do open for the season, parents might not feel comfortable sending their kids there.
Mike Englund, principal director and chief economist at Action Economics, said all of this means households with two working parents will need to adopt a strategy to cope, perhaps with one parent working from home, quitting their job or not looking for a new one if they were laid off.
That continues the knock-on effect.
If people leave the labor force altogether to take care of their kids, “that reduces the labor force and the employment level, so we get a less rapid bounce,” Englund added.

The future of work and child care

Child care is also a problem of privilege because it’s expensive. And the current unemployment situation is highlighting that inequity.
A lot of jobs that were lost because of coronavirus were on the lower end of the income spectrum. And parents with lower incomes might have to choose between child care and reentering the job market when the economy begins to reopen, said Elise Gould, senior economist at the Economic Policy Institute.
“This will dampen how families, particularly low-income families, access the economy that is opening up to them again,” said Donald.
In the future, there might be more government support for child care, she suspects. That’s already happening in places like Illinois, for example, where the state is now picking up the child care costs for essential workers.
Since April 1, essential workers in health care, human services, government and infrastructure qualify for the state’s child care assistance program. That means Illinois will cover most, if not all, of the costs of child care for essential workers, irrespective of their income.
Between these kinds of social programs and the mainstreaming of remote work, coronavirus could change the nature of work forever.

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Economy

U.S. economic growth for last quarter revised up slightly to healthy 3.4% annual rate

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The U.S. economy grew at a solid 3.4 per cent annual pace from October through December, the government said Thursday in an upgrade from its previous estimate. The government had previously estimated that the economy expanded at a 3.2 per cent rate last quarter.

The Commerce Department’s revised measure of the nation’s gross domestic product – the total output of goods and services – confirmed that the economy decelerated from its sizzling 4.9 per cent rate of expansion in the July-September quarter.

But last quarter’s growth was still a solid performance, coming in the face of higher interest rates and powered by growing consumer spending, exports and business investment in buildings and software. It marked the sixth straight quarter in which the economy has grown at an annual rate above 2 per cent.

For all of 2023, the U.S. economy – the world’s biggest – grew 2.5 per cent, up from 1.9 per cent in 2022. In the current January-March quarter, the economy is believed to be growing at a slower but still decent 2.1 per cent annual rate, according to a forecasting model issued by the Federal Reserve Bank of Atlanta.

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Thursday’s GDP report also suggested that inflation pressures were continuing to ease. The Federal Reserve’s favoured measure of prices – called the personal consumption expenditures price index – rose at a 1.8 per cent annual rate in the fourth quarter. That was down from 2.6 per cent in the third quarter, and it was the smallest rise since 2020, when COVID-19 triggered a recession and sent prices falling.

Stripping out volatile food and energy prices, so-called core inflation amounted to 2 per cent from October through December, unchanged from the third quarter.

The economy’s resilience over the past two years has repeatedly defied predictions that the ever-higher borrowing rates the Fed engineered to fight inflation would lead to waves of layoffs and probably a recession. Beginning in March 2022, the Fed jacked up its benchmark rate 11 times, to a 23-year high, making borrowing much more expensive for businesses and households.

Yet the economy has kept growing, and employers have kept hiring – at a robust average of 251,000 added jobs a month last year and 265,000 a month from December through February.

At the same time, inflation has steadily cooled: After peaking at 9.1 per cent in June 2022, it has dropped to 3.2 per cent, though it remains above the Fed’s 2 per cent target. The combination of sturdy growth and easing inflation has raised hopes that the Fed can manage to achieve a “soft landing” by fully conquering inflation without triggering a recession.

Thursday’s report was the Commerce Department’s third and final estimate of fourth-quarter GDP growth. It will release its first estimate of January-March growth on April 25.

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Canadian economy starts the year on a rebound with 0.6 per cent growth in January – CBC.ca

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The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada said Thursday.

The rate was higher than forecasted by economists, who were expecting GDP growth of 0.4 per cent in the month. December GDP was revised to a 0.1 per cent contraction from zero growth initially reported.

January’s rise, the fastest since the 0.7 per cent growth in January 2023, was helped by a rebound in educational services as public sector strikes ended in Quebec, Statistics Canada said.

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WATCH | The Canadian economy grew more than expected in January: 

Canada’s GDP increased 0.6% in January

41 minutes ago

Duration 2:20

The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada says.

“The more surprising news today was the advance estimate for February,” which suggested that underlying momentum in the economy accelerated further that month, wrote CIBC senior economist Andrew Grantham in a note.

Thursday’s data shows the Canadian economy started 2024 on a strong note after growth stalled in the second half of last year. GDP was flat or negative on a monthly basis in four of the last six months of 2023.

More time for BoC to assess

The strong rebound could allow the Bank of Canada more time to assess whether inflation is slowing sufficiently without risking a severe downturn, though the central bank has said it does not want to stay on hold longer than needed.

Because recent inflation figures have come in below the central bank’s expectations, “it appears that much of the growth we are seeing is coming from an easing of supply constraints rather than necessarily a pick-up in underlying demand,” wrote Grantham.

“As a result, we still see scope for a gradual reduction in interest rates starting in June.”

WATCH | Bank of Canada left interest rate unchanged earlier this month: 

Bank of Canada leaves interest rate unchanged, says it’s too soon to cut

22 days ago

Duration 1:56

The Bank of Canada held its key interest rate at 5 per cent on Wednesday, with governor Tiff Macklem saying it was too soon for cuts. CBC News speaks with an economist and a couple who might be forced to sell their home if interest rates don’t come down.

The central bank has maintained its key policy rate at a 22-year high of five per cent since July, but BoC governors in March agreed that conditions for rate cuts should materialize this year if the economy evolves in line with its projections.

The bank in January forecast a growth rate of 0.5 per cent in the first quarter, and Thursday’s data keeps the economy on a path of small growth in the first three months of 2024. The BoC will release new projections along with its rate announcement on April 10.

Growth in 18 out of 20 sectors

Growth in January was broad-based, with 18 of 20 sectors increasing in the month, StatsCan said. The agency said that real estate and the rental and leasing sectors grew for the third consecutive month, as activity at the offices of real estate agents and brokers drove the gain in January.

Overall, services-producing industries grew 0.7 per cent, while the goods-producing sector expanded 0.2 per cent.

In a preliminary estimate for February, StatsCan said GDP was likely up 0.4 per cent, helped by mining, quarrying, oil and gas extraction, manufacturing and the finance and insurance industries.

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Economy

Yellen Sounds Alarm on China ‘Global Domination’ Industrial Push – Bloomberg

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US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit.

“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview with MSNBC Wednesday — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.”

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