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Trump says the economy is booming. He's right — but you don't feel it – CNN

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Federal Reserve Chairman Jerome Powell spent all last week testifying about the recovery on Capital Hill. His message: This is a tale of two economies, and one looks much stronger than the other.
On paper, the economy is roaring back even stronger than Powell and many economists expected.: More than 22 million jobs vanished in the spring lockdown, but 10.6 million jobs have since been added back.
And US gross domestic product — the broadest measure of the economy — is expected to rebound sharply after collapsing at a revised, annualized and seasonally adjusted rate of 31.7% between April and June. The Atlanta Fed’s GDP Now model predicts GDP will jump at an annualized and seasonally-adjusted rate of 32% in the third quarter.
But that’s only one side of the story.

The other side

Many shops are still closed. About 11.5 million people who became unemployed because of Covid-19 remain out of work. And next week, unless Congress acts to provide more federal help, up to 100,000 airline industry jobs may be lost after the expiration of the CARES Act, which provided a $50 billion bailout to keep US airlines afloat.
Meanwhile, the sugar rush from Congress’s initial stimulus has worn off. Without more intervention we could be in for a long winter, especially as Covid-19 infections are rising again in some parts of the world.
“The risk going forward is that people are spending [now] because they have money in the bank even though they’re unemployed,” Powell said.
But once that money runs out, people might start scaling back their spending — a potential body blow to the recovery given consumer spending is the economy’s biggest engine.
Retail sales, one measure of how Americans’ spending behavior, have bounced back, recording their biggest monthly surge on record in May. But while the data has gotten better in the following months, the pace of improvement has slowed.

Fears of funds drying up

One possible reason is that unemployment benefits are now lower: a supplemental $600 in weekly jobless aid, part of Washington’s first stimulus bill, ran out at the end of July, and Congress hasn’t agreed on a new stimulus deal.
President Donald Trump signed an executive order to bolster benefits again, though by $400 a week this time, by diverting money from the Federal Emergency Management Agency. FEMA said that some states have already exhausted their allocated amounts.
Meanwhile, businesses using the Paycheck Protection Program to make it through the worst months of the crisis are worrying about funds drying up.
Problems like these underscore the importance of Congress taking action — and soon.
“I do think it’s likely that additional fiscal support will be needed,” Powell reiterated before the Senate Banking Committee on Thursday, even though the recovery will ultimately depend on the path of the pandemic.
If Washington fails to agree on more stimulus the fourth quarter of this year, as well as 2021, could look much weaker than expected, said Gus Faucher, chief economist at PNC, in a note.
But now that lawmakers are more focused on approving a new US Supreme Court justice, worries are growing that no further stimulus will be passed until after the election.
Experts at Oxford Economics still believe a $1.5 trillion stimulus package could be agreed upon before the election on November 3.
But the window to get a deal done is closing fast and will require that rarest of commodities in Washington: compromise.

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Result of 2020 U.S. election has implications for Canadian economy – insauga.com

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Coverage of the U.S. election has split Canadians into three main camps: those who are relieved they live north of the border, those who don’t care, and those who are nervous either outcome with have consequences for us, the neighbour to the north.

A recent report from RSM Canada indicates the election outcome, combined with Canada’s reliance on the U.S. economy, might alter Canada’s recovery and longer-term outlook.

Based on the findings, Canada-China trade has been trending down since the beginning of the U.S.-China Trade War in 2018, while total trade between Canada and the United States increased during this period.

This indicates, based on the current administration’s inability to cap the domestic spread of the virus, a Donald Trump re-election could present economic risks to Canada, due to our dependence on them.

However, Trump’s protectionist tendencies suggest Canada may see further headwinds with its largest trading partner, should he be re-elected.

Additionally, Joe Biden’s proposed ‘Made in America’ tax incentive, which offers tax credits for companies in the U.S. that expand employment and salaries domestically, could potentially discourage future Canadian market expansion.

Further, Biden’s willingness to adopt Trump’s tough stance on China if elected suggests Canada will likely continue to be negatively affected by U.S.-China trade relations.

Moreover, Canadian oil pricing will be hit hard if Biden follows through on his campaign promise to cancel the Keystone XL pipeline–a critical venture for Western Canada oil producers that would provide direct access to the Gulf Coast refineries and world markets.

“Despite a rocky relationship between Canada and the current U.S. administration in recent years, it’s clear that a victory for either Trump or Biden would pose risks to Canada’s economy,” Alex Kotsopoulos, vice president of projects and economics with RSM Canada, said in a news release.

“The issue is that Canada has become increasingly dependent on its neighbour south of the border, and when you combine this with the strong ‘America First’ policies of both presidential candidates, Canada will feel the brunt of those decisions. Therefore, it’ll be important for the Canadian government to proactively engage with the new administration to shore up trade and supply chains, which will be vital in Canada’s own recovery,” he continued.

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Ottawa's economy to shrink 5.7% in 2020 before rebounding next year: Conference Board – Ottawa Business Journal

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Even the insulating effect of the federal government won’t be enough to prevent Ottawa-Gatineau’s economic output from contracting for the first time in nearly a quarter-century in 2020 as COVID-19 continues to wreak havoc with key sectors, a leading think-tank says.

The National Capital Region’s GDP is expected to shrink by nearly six per cent this year, the Conference Board of Canada predicts in its latest economic outlook released this week. To put that number in context, the city’s economy has grown by an average of 2.7 per cent annually over the last five years.

“Ottawa-Gatineau’s position as the nation’s capital and home to the federal government often insulates the city from big swings in economic growth,” said the organization, which forecast back in May that the region’s economy would contract by 2.4 per cent in 2020. “However, the city will not escape the impacts of the COVID-19 pandemic.”

It would be the first time Ottawa-Gatineau’s GDP has contracted since 1996, but the think-tank says the capital region is still in better economic shape than most other Canadian centres. 

The Conference Board forecast says Canada’s overall GDP will shrink by 6.6 per cent in 2020 as households tighten their pursestrings and many sectors struggle to recover from a devastating spring and summer. The organization paints an even grimmer long-term picture for industries such as air transportation, accommodations and food and beverage services, declaring they “might never fully return to normal.”

The organization says public administration is the only sector of the local economy that’s expected to grow in 2020. Not surprisingly, the accommodation and food services industry – which has been largely shuttered for much of the pandemic as part of public health efforts to contain the virus – is expected to take the biggest hit, with the Conference Board’s forecast calling for the sector to decline by a whopping 35.6 per cent.

Other sectors facing big declines include retail, which is expected to shrink 6.4 per cent ​– only the third time in the last two decades its output has fallen year-over-year.

Still, the think-tank says it expects both the local and national economies to bounce back in a big way in 2021, with Ottawa-Gatineau’s GDP expected to grow by 5.2 per cent and the national GDP forecast to rise by 5.6 per cent. 

The Conference Board is predicting Ottawa-Gatineau to continue on a growth path in the years ahead, albeit at a slower rate, forecasting GDP increases of 3.6 per cent in 2022 followed by consecutive 1.3 per cent bumps in 2023 and 2024.

The organization made several other economic forecasts, including:

  • Ottawa-Gatineau’s unemployment rate – which peaked at 9.5 per cent in June – will finish at 7.4 per cent for the year, compared with a mark of 4.8 per cent in 2019. Employment in accommodation services will feel the biggest impact, plummeting 34 per cent from last year;
  • Housing starts – which reached a 35-year high of 11,200 units in 2019 – will fall to 10,700 units this year before dipping below 10,000 in 2021 and the next few years ahead;
  • The region’s population will grow 1.5 per cent in 2020, its smallest annual increase in the last five years;
  • Ottawa-Gatineau’s per capita household income will rise 3.8 per cent this year, while per capita disposable income is forecast to grow 5.8 per cent.

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Why the US economy won't gain any traction until 2021 – CNN

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The economy’s travails are evident in the Back-to-Normal index (BNI) developed by Moody’s Analytics and CNN Business. The index is a compilation of a wide range of economic statistics available from the government and third-party sources. The BNI measures how the economy is performing compared to its pre-pandemic normal. Currently, the index is sitting at just over 80%. In other words, the economy is operating 20% below where it was when the pandemic hit back in March. That is a long way from normal, and only about halfway back from where the economy was at its April low.
The BNI also indicates the economic recovery has more or less stalled since the summer. The index isn’t much higher today than it was back in June when it was closer to 75%. The re-intensification of the pandemic has been a major cause of this painfully slow recovery. There is a clear relationship between the health care crisis created by the pandemic and the economic crisis: More infections result in a weaker economy.
Based on our analysis tying confirmed Covid-19 infections with unemployment rates across states and since the pandemic began, rising infections result in fewer jobs and higher unemployment one month later. This relationship is not materially different between states like New York that have aggressively shut down businesses and states like Florida that have kept businesses largely open. We also found that it isn’t true that the recession caused by the pandemic was our own doing because we shut businesses down. There would have been a recession regardless, as worried households and businesses would have pulled back on their activities whether or not businesses were shut down.
It is thus not surprising that as infections have significantly increased across Europe over the past several weeks, the European economy is faltering again. Europe had meaningfully brought down infections with its stringent lockdowns early on in the pandemic, and its economy had begun a strong comeback in the summer, but that recovery looks to be flagging with the re-intensifying pandemic. The same dynamic also appears to have begun here at home. As people start to move indoors with the colder weather, infections in recent weeks are up in much of the country. This doesn’t bode well for our economic recovery.
The impending presidential election could also weigh on our economy. The process of electing a president has historically been neither here nor there when it comes to the economy. Even the highly contentious George W. Bush vs. Al Gore election in 2000 had no meaningful impact, save perhaps for a few bad days in the stock market, which was already struggling with the dot-com stock bust. This time may be different. The nation feels like it could boil over if we have a close election and one side or the other believes that the election is being stolen.
This would be much less of a concern if the winner wins handily, making it indefensible to question the outcome. Current polling suggests this may happen. However, our election model of the state Electoral College, which takes into account a range of political factors, including previous state voting patterns and the President’s approval rating, and a range of economic factors, such as unemployment, housing and stock prices, suggests the results will be much closer. Assuming that turnout by Republicans and Democrats isn’t lopsided, then our modeling shows Biden winning the Electoral College with 279 votes. Of course, 270 votes are needed to win. If the election is this close, it seems certain to be contested, which could make the next couple of months difficult as the mess gets sorted out. There is nothing but downside to the economy in such a disquieting scenario.
But perhaps the most serious blow to the economy as this monumental year ends will be the failure of President Trump and Congress to come to terms on providing more help to those hit hardest by the pandemic. It makes economic sense for lawmakers to agree on legislation providing substantial additional fiscal support, including more aid to the unemployed, small businesses, the airlines, state and local governments and a long list of others. Without these additional funds, the already fragile recovery threatens to come undone. It also makes political sense given the approaching election and the need for lawmakers to demonstrate that they have voters’ backs. Yet a deal has not come to fruition and it appears we will have to wait until the next president and Congress take office before any real help is put in place.
Until then, much could wrong, driving the economy off the proverbial rails. It would be prudent to buckle in.

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