(Bloomberg) — With new restrictions and Brexit threatening to push the U.K. back into recession, the economy is probably more than a year away from recouping the staggering losses inflicted by the coronavirus.In broad terms, no sector has escaped the carnage. Economic output is still almost 10% below pre-pandemic levels, 800,000 fewer employees are on payrolls and the government is borrowing on a scale not seen in peacetime in a bid to avert mass unemployment and keep struggling businesses afloat.Beneath the surface, however, sharply diverging fortunes can be perceived. The housing market is enjoying its best run for years, buoyed by government stimulus and pent-up demand. Retail sales are at an all-time high. Job cuts, meanwhile, have fallen hardest on young people seeking a foothold in the labor market.On day 12 of a new lockdown in England to tackle a resurgent Covid-19 outbreak, the following charts provide an overview of the Group of Seven’s hardest-hit economy, eight months after the crisis struck.
The Bank of England had no idea of what lay in store when it delivered its normal forecasting round in January. Brexit presented the biggest threat, policy makers said, as they predicted growth of around 1.5% a year and unemployment remaining below 4%.
As of the third quarter, the economy was over 10% smaller than predicted back then, and officials now don’t expect a return to pre-crisis levels until early 2022 — even if Britain and the European Union clinch a Brexit trade deal. Unemployment stood at 4.8%, the most in four years, after an unprecedented 314,000 redundancies.
On Nov. 5, Chancellor Rishi Sunak announced that furloughed workers will get 80% wage support through March. That may help limit the peak in joblessness to around 7.5%, according to Dan Hanson of Bloomberg Economics.
If any businesses are having a good pandemic, they are couriers, estate agents and some retailers, according to Office for National Statistics data last week.
The real-estate market reopened over the summer, releasing a wave of demand that was further fueled when Sunak announced a temporary tax cut for property buyers. Spending on gardens and house improvements has sustained Britons forced to spend more time at home. The strength of demand for postal services is unsurprising given the shift toward online purchases.
Their fortunes stand in stark contrast to hospitality, leisure and the performing arts. Hardest hit are travel agents, tour operators and air transport services, where output has plunged by over 80% since the end of 2019. Divergences are narrower in manufacturing, which has experienced fewer disruptions to day-to-day operations.
Just as they did in the global financial crisis, young people are bearing the brunt of the pandemic.
About a fifth of 18 to 24-year-olds who were furloughed have now lost their jobs, and only a third of those let go have been able to find new work, according to the Resolution Foundation. Youth unemployment jumped to 13.6% in the third quarter, almost triple the national average.
The figures pile pressure on Prime Minister Boris Johnson to do more to create jobs and retrain unemployed workers.
Even before the crisis, young people were struggling with unaffordable housing, job insecurity and years of wage stagnation. Now they potentially face further damage to their long-term prospects through the effects of scarring on earnings and employment.
The pandemic has wrought havoc with the public finances, pushing debt above 100% of GDP for the first time since Harold Macmillan was prime minister in the early 1960s.
The budget deficit, which was forecast to be just 55 billion pounds ($72 billion) in the current fiscal year, is now on course to exceed 400 billion pounds. As a share of the economy, that’s double the level reached after the financial crisis.
The scale of the damage will be laid bare on Nov. 25, when the Office for Budget Responsibility is due to publish new forecasts. Tax increases in the coming years appear inevitable but there is no immediate pressure on Sunak, with the International Monetary Fund arguing further stimulus may even be necessary.
Financial markets are sanguine too. With the Bank of England mopping up every pound of borrowed money through its bond-buying program, the cost of taking on debt has never been cheaper.
The challenge facing Sunak is vividly highlighted by the fact that Britain’s recovery trails far behind the world’s major industrialized nations, despite a record rebound in the third quarter.
Output was still 9.7% below end-2019 levels, leaving Britain closer to euro-area laggard Spain than its Group of Seven peers, where the average shortfall was little more than 4%. On Monday, Japan reported stronger-than-forecast 5% growth for the quarter, or an annualized 21.4%.
U.K. business investment has stagnated since the 2016 Brexit referendum, and in the third quarter it recovered less than 25% of what it lost in the previous three months. The reticence of companies to spend reflects both the pandemic and concerns about Britain’s imminent exit from the EU single market — potentially with no trade deal.
©2020 Bloomberg L.P.
Dan Davies- Weekly Column – Horgan lacks plan to rebuild B.C. economy – Energeticcity.ca
The good news is we now see a light at the end of the tunnel. We’re able to start planning and thinking about rebuilding —about heading out to local businesses, about being able to start saving again for the future and plotting a path to personal economic recovery.
The bad news is John Horgan, and the NDP don’t seem to have a plan in place for rebuilding British Columbia — and the latest proof is in the Public Accounts for 2020/21.
Normally, these are just dry numbers, and they pass without much notice. This time is different. The numbers don’t lie, and they show where B.C. is at and, more importantly, where the province must go in the coming days.
The provincial deficit sits at $5.5 billion — which is a lot of money. Taxpayer-supported provincial debt has increased by $13.5 billion in 2020/21, with total provincial debt now at $87 billion. This works out to $16,919 in debt for every British Columbian.
Now, the Official Opposition backed the government in providing support, even when John Horgan was bungling the rollout of things like support for small businesses.
But we’ve also been clear that we need a plan to rebuild the economy. It’s not just enough to hope; we need a roadmap that clearly lays out how we ensure there are jobs in every corner of the province. The NDP hasn’t done that, except to spend $500,000 on a consultant from England.
We’re all doing the hard work of figuring out how to get ahead in our personal lives. It’s not too much to expect Premier Horgan to do the same for British Columbia. It’s time for him to do his job and create a B.C. jobs plan.
What freight rail tells us about the economy – Marketplace
Warren Buffett was once asked which economic indicator he would choose if he were stranded on a desert island with access to only one set of economic statistics. There are lots of indicators out there — consumer confidence, inflation and unemployment.
But Buffett picked freight rail traffic. And for good reason.
“What we move is the economy. It’s the tangible economy,” said Ian Jefferies, CEO of the Association of American Railroads. “And so as the economy goes, rail goes. So when rail is doing well, it usually means the economy is running pretty strong.”
Right now rail is doing well, especially when it comes to intermodal train traffic, Jeffries said. That’s when products travel in containers from ship to truck or train.
“The highest volumes we’ve ever seen”
“For the first half of 2021 … intermodal traffic was the highest volumes we’ve ever seen,” he said.
Intermodal train traffic was up more than 17% from the first half of last year, Jeffries said. No surprise there, because train shipments fell off when the pandemic started, like the rest of the economy. But intermodal traffic was also more than 5% higher than in 2019, which was a good year. These intermodal trains are brimming with the imported products consumers are demanding.
“This is a good sign,” said Diana Furchtgott-Roth, a former deputy at the Transportation Department now teaching at George Washington University. “It’s a good sign first of all that people have money to spend. And second, it’s good that they have confidence to spend.”
So, the freight rail tea leaves are pointing squarely toward more economic growth, right? Actually, Furchtgott-Roth said that this year, it’s complicated.
Jammed ports can cause problems on the rails
U.S. ports are backed up with a traffic jam of ships full of imports. Because of that whole intermodal thing, problems at the ports can cause problems on the rails. Plus, shipments for the holidays are starting now.
It could take longer for imported products to reach store shelves, Furchtgott-Roth said.
“If we don’t have enough goods shipped by rail, if the congestion continues, the prices will be higher,” she said.
Freight rail also tells us about U.S. exports. Right now, rail shipments of grain are down. That’s kind of weird, since farmers are producing plenty, said Joseph Schofer, who teaches civil and environmental engineering at Northwestern University. Grain might also be caught up in the international shipping snag, he said, or maybe it’s a storage issue.
“If you don’t have enough storage, you can’t move product and the system slows down or freezes up,” he said.
Ore, metal and chemical shipments are up
Rail shipments of other raw materials like ores, metals and chemicals are up, Schofer said; they’re going to U.S. factories, which are ordering a lot of supplies right now.
“Because they have either expectations that they can sell more products, or they have firm orders for more products,” he said.
Either way, Schofer said, it’s a vote of confidence in the economy, pointing the way to more economic growth this fall. How much growth depends on COVID-19, of course, but also how long it takes to unclog the ports and sort out storage issues and other bottlenecks that could cut into the rail shipments the economy needs to keep humming.
Nova Scotia election: party leaders talk economy with Halifax Chamber of Commerce – CTV News Atlantic
Nova Scotia’s Liberal leader pitched himself as a deficit slayer before a business audience on Wednesday, contrasting his budget balance goals with the spending plans of his Progressive Conservative opponent.
The differing spending strategies were on display as the two party leaders, along with the head of the province’s NDP, responded to questions posed by members of the Halifax Chamber of Commerce and debated each other.
“We need to make sure that we are living within our means,” Liberal Leader Iain Rankin told the business crowd. “The spending that is proposed by both opposition parties is in the billions — adding structural deficits that we cannot incur right now.”
Tory Leader Tim Houston has presented a costed platform that projects $553 million in new spending in Year 1 if he’s elected, with about 80 per cent of that dedicated to health care.
Houston and NDP Leader Gary Burrill told the chamber they planned to run deficits to address needs in health care, housing and long-term care.
In contrast, Rankin spoke of targeted spending to ensure the province can get back to balanced budgets over the next four years. The Liberal leader insisted that a more measured approach to spending would help preserve core government services and prevent future tax increases.
“This government has clearly shown that we will keep taxes low,” he said. “When we got back to (budget) balance four times we reduced taxes for small businesses, we reduced taxes for income tax.”
But Houston said big spending is needed to address challenges, particularly in the health-care sector, in which he proposes to invest an additional $430 million. “We need to be up front and honest,” he said. “Big spending is required to fix health care after eight years of neglect.”
The Tory leader said that even with his new proposed spending, his plan would return the province’s ledger to balance within six years.
Houston highlighted his party’s $140-million program that would allow companies to pay lower taxes if they put more money toward workers’ salaries.
“That’s a very specific government policy that will put more money into the hands of those working families that are struggling to pay for groceries, struggling for housing,” he said.
Meanwhile, Burrill said the NDP — which held only five seats at the legislature’s dissolution — said deficit spending is required during a time when the economy is trying to recover from one of its biggest contractions in recent history.
Burrill also said a $70-million tax break given to the province’s larger corporations that took effect just prior to the pandemic effectively prevented the government from helping small businesses in a meaningful way during the lockdowns.
He warned that if the Liberals win the Aug. 17 election, they will likely cut hundreds of millions of dollars in government spending in order to achieve balanced budgets. The Liberals, Burrill added, balanced budgets during their prior mandate by cutting a film tax credit and rural economic development programs.
The NDP leader also pointed out that most jurisdictions in Canada are not planning to return to balanced budgets for the next six to eight years.
Later in the day, the Liberals, who had been revealing their campaign planks in separate announcements, released their entire platform, estimating the cost of their promises at $454.7 million over four years, including $93.2 million in Year 1.
About $127 million is committed to health care, $77.8 million to skills and job training and $183 million toward economic and business initiatives.
“It is a plan that sets this province on a clear course to recover from the pandemic,” Rankin told reporters.
The Liberal leader presented four new proposals in the platform, including a $30-million, 10-year funding commitment for the Centre for Ocean Ventures and Entrepreneurship in Dartmouth, N.S., which is dedicated to researching new technologies for the ocean.
Rankin promised $6 million for the cultural sector, including for a new $3-million “content creator fund” to help boost local talent. The Liberal leader also pledged to create a new cabinet position: minister of digital government, responsible for overseeing initiatives in the digital economy.
This report by The Canadian Press was first published Aug. 4, 2021.
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