(Bloomberg Opinion) — In the days before GPS was commercially available, I decided to hike Mount Jackson in New Hampshire. The guidebook said Tisdale Spring was close to the summit, so when I passed a small spring after a couple hours, I thought the hard part was almost over. After a while of heightened expectation, however, I passed another spring — and that process repeated itself several times before I reached the real Tisdale Spring and thereafter the summit.
The U.S. employment report released Friday, initially heralded as the end of the Covid-19 challenge, seems much more likely to be the economic equivalent of that first, misleading spring on Mount Jackson.
Yes, it was good news that the number employed rose by 2.5 million in May, after a decline of 22 million from January to April. But three factors suggest the economy remains fragile and in need of further government stimulus:
The job gains were concentrated in just eight sectors: restaurants, dentists, clothing stores, general merchandise stores, specialty contractors, auto dealers, personal and laundry services, and repair and maintenance services. In the other 85% of the economy, employment did not rise. The job gains appear to largely reflect simple reopening rather than any significant underlying economic strength. Whether these and other sectors add new jobs will depend on consumer demand, which will return to full strength only when the public health crisis subsides.
Much of the federal government’s massive support for the economy will soon expire. The Congressional Budget Office estimates that more than three-quarters of the fiscal impact of the CARES Act will occur before September. It would be foolish to celebrate positive jobs numbers without recognizing how much the colossal stimulus measures have blunted the effects of the economic crisis. It is likewise important to be cautious about what can happen if fiscal support is withdrawn. As I have warned before, without continued support, the U.S. risks a wave of cascading bankruptcies. The first test will come at the end of July, when expanded unemployment benefits, now supporting many families, are scheduled to expire. These benefits should be lowered so that they don’t discourage people from returning to work, but they should without question be extended.
The first two points interact with each another and lead to a third: Beware of “zombie firms.” If job gains largely reflect a one-time reopening effect and occur only in the context of temporary fiscal support, then it’s crucial that we not just make the wound look better but also address the underlying infection. Propping up companies and jobs that have no viable future quickly becomes unsustainable. A key question is: How much might the pandemic cause lasting changes in the economy? If there are permanent shifts, as some academic studies suggest there will be, then any future government fiscal support will need to take this into account, so that it can focus less on preserving the past and more on investing in the future. There are plenty of opportunities to do so, from stockpiling of key goods to hardening infrastructure, building out 5-G networks and updating the U.S. military to better prepare it for future threats. The key characteristic of this alternative approach is not its fiscal impact: Trillions of federal dollars would be spent either way. The challenge is to help position the economy for a brighter future, even at the cost of some dislocation as jobs shift.
My bet: By the end of the summer, we will see that without enormous additional fiscal stimulus (whether or not it’s focused on building the future) or getting lucky on the virus (either because it mutates into a less potent form or because effective drugs become available sooner than anticipated), we still face a very long ordeal ahead.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Peter R. Orszag is a Bloomberg Opinion columnist. He is the chief executive officer of financial advisory at Lazard. He was director of the Office of Management and Budget from 2009 to 2010, and director of the Congressional Budget Office from 2007 to 2008.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
