If the end of the great toilet paper shortage is any indication, the U.S. economy has already bottomed out and a fragile recovery is underway.
After months of being hard to find, toilet paper is increasingly available on supermarket shelves and at popular online sites such as Amazon. Americans aren’t hoarding supplies as much or desperately seeking where to find rolls except in a diminishing number of coronavirus hotspots.
Toilet paper is not the only cue.
All 50 states have partly reopened their economies, people are slowly returning to work, consumer confidence has crept higher and Americans are driving further and getting out of their house more often, according to social mobility trackers. Signs of revival are everywhere.
“The economy has bottomed,” said Steve Blitz, chief economist of TS Lombard.
The big unknown — what’s on everyone’s mind — is how quickly the U.S. recovers from the shock of a coronavirus pandemic that ignited the fastest and deepest economic slump in modern history. The Wall Street forecasting firm IHS Markit predicts gross domestic product in the second quarter will sink by a whopping 40% at an annualized pace, dwarfing anything the U.S. has witnessed before.
There’s little doubt among economists the U.S. will experience a burst of growth before the end of the year. Blitz likened the economy to a rubber duck being held under water in a bathtub. When it’s released, it briefly shoots up in the air — before falling back down.
That’s the most likely path of the recovery, analysts say. The U.S. will get a pop after most of the coronavirus restrictions are lifted, but the economy won’t be restored to pre-crisis levels for at least a few years.
The biggest barrier naturally is the virus itself. So long as a vaccine or treatment remains elusive, many Americans are likely to continue social distancing and avoiding large crowds on their own volition. Although the vast majority of people who have contracted the virus have survived, a recent poll by Harris Interactive found that 50% of Americans think they will die if they get COVID-19.
“A full recovery in the economy is going to hinge on how well society gets the pandemic under control,” said Boston Federal Reserve President Eric Rosengren. “If consumers are afraid to eat out, shop, travel, a relaxation of laws may do little to bring back customers and thus jobs.”
Absent a cure, large and critical segments of economy will require sweeping changes just to survive that could result in the loss of millions of jobs. These industries include airlines, hotels, retail stores and restaurants.
The restaurant-booking site OpenTable, for example, predicts one in four restaurants are likely to close because of the virus. And airlines that typically bank on selling at least 80% of their seats to make money will have to cut flights, amenities, and jobs if only 60% of their seats are filled in a post-pandemic world. Those are just a few of the nightmare scenarios.
For now millions of workers in these fields are on furlough and getting paid unemployment benefits by the government. Others who work for idled small businesses have been put back on company payrolls through an emergency federal program that provides forgivable loans.
Yet if these job losses turn from temporary to permanent it will make a recovery all the harder, keeping unemployment in the double digits at least until 2021.
The jobless rate rose unofficially to almost 20% in May, according to a government analysis, from just 3.5% three months ago. More than 20 million people lost their jobs in April alone.
Feeling growing public pressure and worried about falling tax revenue, every state is reopening their economies ore relaxing restrictions to try to limit the damage
“The longer stay-in-place restrictions prevail, the more likely job losses are permanent rather than temporary,” said economist Stephen Gallagher of Societe Generale.
There’s growing evidence that federal help is working for small business and state reopenings. The number of Americans in early May who were collecting unemployment benefits, known as continuing claims, actually fell for the first time since the crisis began.
“The much slower rise in continuing claims suggests that people are now beginning to return to work,” chief U.S. economist Paul Ashworth of Capital Economics said.
The Trump White House, with an eye toward the 2020 presidential elections, is pushing the states to reopen even faster. Yet most economy watchers, including Federal Reserve Chairman Jerome Powell, suggest Washington will have to spend even more than the $3 trillion it has already approved.
“This is the biggest shock we’ve seen in living memory. The question that looms in the air is, is it enough?” Powell told senators at a hearing on Tuesday about emergency loans for business.
The next pivotal event for the economy is likely to come by midsummer when federal programs that offer extra unemployment benefits and subsidies to keep small business workers on payrolls expire. If not enough workers are able to return to their jobs because business is slow, Congress might need to add more money to the pot to prevent more mass layoffs and another shock to the economy.
Local and state governments are also coping with unprecedented declines in tax revenue and are being forced to lay off scores of workers. Democrats and Republicans are divided over whether to help them out, but if the crisis gets worse, a reluctant Trump White House might have to come to the rescue.
By the early fall, the fear over the virus returning is another potential obstacle on the path to recovery. If the disease starts to spread again and forces more state lockdowns, all the progress made during the warmer months could be lost.
Even if the virus remains contained in the fall, the lingering threat all but ensures states will retain some restrictions, limiting the size and speed of the rebound.
“A slow reopening will limit a renewed viral outbreak, but will also prolong the stress on workers and firms,” economists at Northern Trust predicted.
Economy adds surprise 290,000 jobs in May; unemployment rate at record level – The Globe and Mail
Canada added 290,000 jobs in May after two months of brutal layoffs, a surprise turn for the job market as provinces have only recently begun to ease lockdown restrictions.
Despite the gain, the unemployment rate rose to 13.7 per cent, the highest since comparable data became available in 1976, as more people started seeking jobs.
“The surprisingly positive readings on employment paint a more optimistic picture of the early part of the recovery, but there’s still a long road back,” said Royce Mendes, senior economist at Canadian Imperial Bank of Commerce, in a note to clients.
About three-quarters of May’s increase was in full-time positions, while the goods-producing sector (5-per-cent gain) snapped back more forcefully than services (1-per-cent gain).
In turn, men saw stronger employment growth (206,000) than women (84,000). Statistics Canada noted that among parents, women registered fewer job gains than men and were more likely to lose hours.
The total number of hours worked in all industries climbed 6.3 per cent in May, following a plunge of nearly 28 per cent between February and April. There were sizable increases in construction (19 per cent), wholesale and retail trade (11 per cent) and manufacturing (10.9 per cent).
Quebec accounted for nearly 80 per cent of May’s employment increase as it saw a net gain of 231,000 workers. The province allowed the construction industry to return in mid-April and other restrictions began to ease outside the Montreal area in early May.
Ontario was the only province where employment declined last month, although losses were less severe than in March and April. The first stage of the province’s reopening plan took effect after the Victoria Day weekend.
Going into Friday’s job report, it was widely assumed that Canada would experience another month of layoffs. The median estimate from economists was for employment to decline by 500,000 in May, following April’s loss of nearly two million and March’s drop of about one million.
This was partially the result of timing. Statistics Canada surveyed households on their work status between May 10 and 16. By then, many reopening stages had yet to take effect.
Instead, Friday’s results surprised by showing that employers are already adding to payroll.
As Canada enters its summer months, there are mounting signs of economic activity picking up. Hiring site Indeed Canada has seen a recent uptick in new job postings. Consumer spending, while lower than a year ago, has improved in recent weeks, according to Royal Bank of Canada transaction data. And home and auto sales have perked up, as has business sentiment.
Still, it’s shaping up to be a long recovery in the job market. Many companies are reopening to weaker sales and larger debt obligations, making it difficult to staff at prepandemic levels.
Only 13 per cent of small business owners are planning to add to full-time staff in the next three months, compared to 37 per cent who are planning to cut back, according to recent survey results from the Canadian Federation of Independent Business.
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U.S. economy added 2.5 million jobs in May as states reopened from COVID-19 shutdowns – CBC.ca
The unemployment rate in the United States unexpectedly fell in May and layoffs abated, the Department of Labour said Friday in a report that showed the latest signs the economic downturn caused by the COVID-19 pandemic was bottoming.
The department’s closely watched monthly employment report showed the jobless rate dropped to 13.3 per cent last month from 14.7 per cent in April. Nonfarm payrolls rose by 2.509 million jobs after a record plunge of 20.687 million in April.
Economists polled by Reuters had forecast the jobless rate jumping to 19.8 per cent in May from 14.7 per cent in April. Nonfarm payrolls for May had been expected to fall by eight million jobs.
The jobs market improved considerably in the second half of May as businesses reopened after shuttering in mid-March to slow the spread of COVID-19. Consumer confidence, manufacturing and services industries are also stabilizing, though at low levels, signs the worst may be over.
“The good news is that we probably have hit the bottom,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “But the recovery will be painfully slow. It will take years, probably a decade to get back to where we were at the end of last year.”
Canada can hit climate targets without ruining economy, economists and climate experts say – CBC.ca
Last November, the United Nations Environment Program released its annual Emissions Gap Report, which found that in order to limit global warming to 1.5 C above pre-industrial levels, CO2 emissions would need to drop by 7.6 per cent annually over the next decade.
Given that worldwide emissions are estimated to have risen by about 0.4 per cent in 2019, this seemed like an unattainable goal.
A recent study published in Nature Climate Change, however, suggests that as a result of global shutdowns due to the COVID-19 pandemic, emissions in 2020 could drop by roughly seven per cent.
At first glance, it might appear as though a devastating economic shutdown is the only way to reach those UN targets. But some experts say this isn’t the case, and insist there is a way to have economic growth and reduce emissions that adhere to the UN guidelines.
“We can’t have this [kind of a shutdown] for tackling climate change — absolutely not,” said Corinne Le Quéré, a Canadian professor of climate change science at the University of East Anglia and lead author of the Nature study. “This is a really painful way to get a decrease in emissions.” She also noted that it likely won’t last.
Don Drummond, an economist who worked for the federal Department of Finance for 23 years, pointed out that emissions in Canada have almost flat-lined, on average, over the past few years during a period of economic growth (prior to the coronavirus pandemic).
This, he said, is evidence that reducing emissions to UN guidelines is possible.
“We’ve achieved higher growth with flattening emissions and we can and should go further and achieve positive growth with declining emissions,” said Drummond, an adjunct professor at Queen’s University and former chief economist at the Toronto-Dominion Bank. “That can be done, but we need a more concentrated policy effort.”
Drummond, who was one of the architects of the Goods and Services Tax in 1991, said there is a long history in Canada of scare-mongering that a given new policy will kill the economy, from the GST to the North American Free Trade Agreement. Quite often, it doesn’t.
Many governments around the world are trying to stimulate their economies during the pandemic, and this could be an opportunity to funnel money into green technologies, said Le Quéré.
She said that one of the key findings of the Nature study was that the biggest drop in emissions during the pandemic, behind the aviation industry, has been in surface transport. This, she said, could be one sector governments could target.
“The biggest reason why the emissions [went] down now is mobility. So we just don’t go anywhere. We don’t use our cars. Governments could say, ‘Well, we’re going to tackle that as we get out of confinement,'” Le Quéré said. That could “include everything from encouraging home-working for those who want to and who can, then developing infrastructure for … walking or cycling.”
While Drummond believes the federal government is likely to invest in methods to reduce emissions, he said it will likely be a long time — perhaps years — before we see stimulus packages aimed at revitalizing the economy, such as specific jobs programs.
In the meantime, he said the government can use other means to reach the 7.6 per cent emissions-reduction goal, such as disincentives — like the carbon tax on things like gasoline and heating fuels — which can be effective in bringing down emissions, particularly when that money is recycled back to people and businesses, as the federal government is doing.
“If you have the right incentives or the right disincentives in place, there can be growth that takes place that is not environmentally damaging,” Drummond said.
“I would say put a price on it … that’s what it really comes down to.”
Another could be investing in retrofitting buildings to make them more efficient, which would be very labour-intensive and could create more jobs. But Drummond said that would be “second best.”
On the path
Mark Jaccard, a professor of sustainability energy at Simon Fraser University, said transitioning to renewable energy isn’t as costly as some may think it is.
He said it would cost “at most, two years of economic growth spread over a 30-year period.” (In recent years, Canada has experienced annual growth in the 1.5 to 1.9 per cent range.)
Jaccard, who is currently working on the next IPCC report, said that this small sacrifice over an extended period of time is far better than the alternative.
“It’s a slight difference in economic output over a 30-year period in order to prevent the dramatic crashing in your economy because of wildfires, acidified oceans, rising seas, major storms and pandemics that can happen from climate change,” he said.
Drummond agrees, noting that concerns about emissions reductions harming the economy will likely always be around, even if they are without merit.
Canada is already on the right path, he said, and the country can ramp up its efforts to see both economic growth and a notable reduction in emissions.
“It’s not like we’re asking to do something that’s never been done before. We are doing it right now, we’re just not doing it enough,” he said. “If you asked me to move a three-tonne rock, if I can move it an inch, I’m pretty sure I can move it a foot.”
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