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Economy

The Fed Will Pump Another $2.3 Trillion Into The Economy. Here’s Why This Time Is Different. – Forbes

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(Updated 9:28 a.m. ET, April 9, 2020)

Topline: The Federal Reserve announced on Thursday that it will inject another $2.3 trillion to prop up the American economy through a series of unprecedented emergency initiatives that will extend its reach to small and mid-size businesses as well as state and municipal governments.

  • The Fed will offer up to $500 billion in loans to states and municipalities through the purchase of municipal bonds and expand an existing corporate lending program (the Term Asset-Backed Securities Lending Facility) to include more classes of low-rated and riskier debt.
  • Both of those actions are without precedent: the Fed has never exercised its ability to purchase muni bonds (to avoid picking and choosing the areas where it intervenes), and it has also been reluctant to wade into to lower-rated, riskier corporate credit markets.
  • The Fed also released new details about its highly anticipated Main Street Lending Program, which is aimed at small and mid-sized business that are struggling because of the slowdown and don’t quality for the Small Business Administration’s emergency loans.
  • The central bank will buy up to $600 billion in loans through the Main Street program (with a $75 billion injection from the Treasury), which will offer 4-year loans to companies with fewer than 10,000 workers or revenues of less than $2.5 billion. 
  • “Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” Federal Reserve Board Chair Jerome H. Powell said in a statement. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
  • The Fed announced earlier this week that it will also offer financing to banks making loans through the Paycheck Protection Program, a provision under the federal economic stimulus plan that sets aside $349 billion in rescue loans for small businesses through the SBA.

Crucial quote: “The Fed has launched a mind-boggling number of liquidity initiatives since the start of March and markets are somewhat inured to them at this point. The Fed is creating a powerful backdrop and it’s very hard to see the SPX hitting new lows,” says Vital Knowledge founder Adam Crisafulli.

Key background: Another 6.6 million workers filed new unemployment claims last week, according to data released by the Labor Department—it’s the latest indication of just how badly the coronavirus has damaged the American economy. All together, more than 16 million Americans have filed for temporary unemployment benefits over the last three weeks. Less than three weeks after President Trump signed the historic CARES Act into law, it’s clear that the $2 trillion-plus emergency rescue spending plan won’t be enough to prop up the economy during the coronavirus crisis, and lawmakers are already preparing to pass another stimulus package.

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Economy

Canada posts hefty job losses in April as third wave bites

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By Julie Gordon

OTTAWA (Reuters) –Canada lost more jobs than expected in April as fresh restrictions to contain a variant-driven third wave of COVID-19 weighed on employers, Statistics Canada data showed on Friday.

Some 207,100 jobs were lost in April, more than the average analyst prediction for a loss of 175,000. The unemployment rate climbed to 8.1%, missing analyst expectations of 7.8%. Employment is now 2.6% below pre-pandemic levels.

“This episode seemed to be a little more impactful in that it led to a big decline in full-time jobs and specifically in private-sector employment,” said Doug Porter, chief economist at BMO Capital Markets.

“There were some heavy hits in education and culture and recreation. So it seems like the third wave bit into other sectors a little bit more deeply than the second wave.”

Full-time employment was down by 129,400 while part-time employment fell by 77,800 positions.

With many retailers shuttered in April and the restrictions also hitting hotels, food services and entertainment, service sector employment plunged by 195,400 jobs. Employment in the goods sector fell by 11,800.

As COVID-19 infections surged in April, a number of Canadian provinces imposed fresh restrictions, including shuttering or limiting non-essential businesses and closing schools. Cases are beginning to decline, but reopening is still weeks away and economists expect further job losses in May.

Canada has so far fully vaccinated just over 3% of its nearly 38 million residents, while more than 36% have received a first dose. By the end of June, Canada expects to have received 40 million doses.

Long-term unemployment increased by 4.6% to 486,000 people, which suggests some labor market scarring is beginning to show, said Leah Nord, a senior director at the Canadian Chamber of Commerce.

“The job prospects for displaced workers grow slimmer with every month in lockdown as more businesses throw in the towel,” she said in a statement.

Total hours worked fell 2.7% in April, while the number of people working less than half their usual hours jumped 27.2% to 288,000.

“The hours worked numbers were I think weaker than had been expected,” said Andrew Kelvin, chief Canada strategists at TD Securities. “I think it suggests a weaker April than the Bank of Canada would have had penciled in.”

The Bank of Canada in April sharply boosted its outlook for the Canadian economy and signaled interest rates could start to rise in 2022.

The Canadian dollar was trading 0.3% lower at 1.2187 to the greenback, or 82.05 U.S. cents, after touching on Thursday its strongest level in 3-1/2 years at 1.2141.

(Reporting by Julie Gordon in Ottawa; additional reporting by Steve Scherer, Fergal Smith and Nichola Saminather, Editing by Hugh Lawson, Mark Heinrich and Nick Zieminski)

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Economy

Ivey PMI shows activity expanding at a slower pace in April

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TORONTO (Reuters) – Canadian economic activity expanded in April but the pace slowed from a 10-year high the previous month, Ivey Purchasing Managers Index (PMI) data showed on Friday.

The seasonally adjusted index fell to 60.6 from 72.9 in March. The March reading was the highest since March 2011 and the second highest since the PMI was launched in 2000.

Economic restrictions were tightened in some Canadian provinces in April to tackle a third wave of the coronavirus pandemic.

The Ivey PMI measures the month-to-month variation in economic activity as indicated by a panel of purchasing managers in the public and private sectors from across Canada. A reading above 50 indicates an increase in activity.

The gauge of employment fell to an adjusted 58.0 from 62.7 in March, while the supplier deliveries index was at 37.8, down from 39.6, indicating companies are having greater difficulty meeting increased demand.

The unadjusted PMI fell to 59.9 from 67.3.

 

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)

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Economy

Canadian dollar rises for sixth straight week despite jobs decline

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar was little changed against the greenback on Friday as jobs data for both Canada and the United States fell short of estimates, with the loonie holding near its strongest level in 3-1/2 years and extending a weekly win streak.

Canada lost 207,100 jobs in April as fresh restrictions to contain a variant-driven third wave of COVID-19 weighed on employers, Statistics Canada data showed. Analysts had forecast a decline of 175,000.

In the United States, data for the same month showed employers hiring far fewer workers than expected, likely frustrated by labor shortages.

“You have this unhealthy environment where growth goals are struggling to be met but unfortunately inflation is picking up everywhere,” said Avi Hooper, a senior portfolio manager at Invesco.

Supportive of the loonie, one cause of inflation has been a surge in the prices of some of the commodities that Canada produces.

Copper surged to a record peak on Friday, fueled by speculators and industrial buyers as Western economies recover from the pandemic, while oil settled 0.3% higher at $64.90 a barrel.

“A higher oil price from current levels, we think, will be the catalyst for the next leg of Canadian dollar strength,” Hooper said.

The loonie was nearly unchanged at 1.2145 to the greenback, or 82.34 U.S. cents, having touched its strongest intraday level since September 2017 at 1.2125. For the week, it was up 1.2%, its sixth straight weekly advance.

The currency has been on a tear since the Bank of Canada last month signaled it could begin hiking interest rates in late 2022 and cut the pace of its bond purchases.

Canadian government bond yields fell across the curve. The 5-year touched its lowest since March 5 at 0.841% before bouncing to 0.878%, down 3.8 basis points on the day.

 

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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