WASHINGTON — President Donald Trump has a new pitch to voters for this fall: Trust me.
As the economy faces a once-in-a-century recession, with more than 38 million people out of work, Trump is increasingly talking up a future recovery that probably won’t materialize until after the November election. He’s asking voters to look past the pain being felt across the nation and give him another four-year term on the promise of an economic comeback in 2021.
“It’s a transition to greatness,” Trump says over and over, predicting a burgeoning economy come the fall. “You’re going to see some great numbers in the fourth quarter, and you’re going to end up doing a great year next year.”
His chief economic adviser, Larry Kudlow, echoes the wait-until-next-year sentiment, holding out hope for a “big bang 2021.”
It’s a delayed-reward tactic Trump was using long before the global pandemic gut-punched the country. He has turned to it with new urgency as the coronavirus has robbed him of the booming economy that was to be the core of his reelection message.
Trump had already pledged to finally release a Republican health care plan after the polls closed — despite having served more than three years in office — along with a postelection tax cut and a “Phase 2” trade deal with China.
Now, Trump is making the case to voters that if he helped bolster the economy once, he can do it again.
“We built the greatest economy in the world,” Trump says frequently. “I’ll do it a second time.”
It’s not just next year that will be a mystery to voters on Election Day. Trump and his team have been talking up the fourth quarter — October through December — but economic reports on that period won’t be released until 2021. Preliminary figures for the third quarter will be released Oct. 29, days before the Nov. 3 election. And unemployment could still be in double-digit territory by Election Day, top White House economist Kevin Hassett said Sunday.
“You’re going to be starting at a number in the 20s and working your way down,” Hassett told CNN’s “State of the Union.” “And so, of course, you could still not be back to full employment by September or October.”
Still, Trump and his campaign are hoping they can convince the public that Trump, not Democrat Joe Biden, is the candidate who can turn things around, even as they push the recovery timeline into next year.
“The president has a clear record of building the economy to unprecedented heights before it was artificially interrupted by the coronavirus, and they know he will build it a second time,” said Trump campaign communications director Tim Murtaugh.
Economists, however, warn that the “snap back” Trump’s advisers have been talking up is unlikely, given the severity of the recession. It will take years for the economy to recover, according to the Congressional Budget Office.
Polling data suggests Trump has some work to do to persuade Americans that all will be well next year.
Americans are split on whether they think the economy will improve (41%) or worsen (40%) over the coming year, according to a poll by The Associated Press-NORC Center for Public Affairs Research.
Their opinions differ based on their politics. A majority of Republicans (62%) think the economy will get better in the coming year, while a majority of Democrats (56%) think it will get worse.
The poll finds that only 49% of Americans now approve of how Trump is handling the economy, compared with 56% in March, though the numbers remain split largely on party lines.
While a majority of Americans in households that lost a job do think it’s at least probable that the job will return, 70% now describe the state of the nation’s economy as poor, versus just 29% who say it’s good — down from 67% in January.
Trump has been encouraging states to begin easing restrictions and reopening their economies. But that doesn’t necessarily mean jobs will return. While most of those who say they got a haircut at least monthly before the outbreak or shopped regularly in person for nonessential items would definitely or probably do so in the next few weeks if they were allowed, Americans may be wary to return to life as normal.
Only about half of those who did so at least monthly before the outbreak say they’d travel, go to bars and restaurants, use public transportation, or exercise at a gym or studio. Just 42% of those who went to concerts, movies, or theatre or sporting events at least monthly say they’d do so in the next few weeks if they could.
Still, the poll shows that 66% of Americans continue to say that their personal financial situation is good — a number that has remained steady since before the outbreak began. Americans are also more likely to expect their personal finances to improve than worsen in the next year, 37% to 17%.
In the end, that’s what is going to matter most, said Michael Steel, a Republican political strategist.
“This election will turn on facts more than messages,” he said. “The president is placing a bet by reopening the economy before public health officials believe it is safe. If the economy recovers sharply and infection rates remain steady or go down, then voters will reward his boldness, but if we continue to see massive unemployment and a spike in new infections and deaths, all the political wordsmithery the world will offer won’t help him.”
AP Director of Public Opinion Research Emily Swanson contributed to this report.
Jill Colvin And Zeke Miller, The Associated Press
People more important than the economy, pope says about Covid crisis – The Guardian
By Philip Pullella
VATICAN CITY (Reuters) – Pope Francis said on Sunday that people are more important than the economy, as countries decide how quickly to reopen their countries from coronavirus lockdowns.
Francis made his comments, departing from a prepared script, at the first noon address from his window overlooking St. Peter’s Square in three months as Italy’s lockdown drew to an end.
“Healing people, not saving (money) to help the economy (is important), healing people, who are more important than the economy,” Francis said.
“We people are temples of the Holy Spirit, the economy is not,” he said.
Francis did not mention any countries. Many governments are deciding whether to reopen their economies to save jobs and living standards, or whether to maintain lockdowns until they are sure the virus is fully under control.
The pope’s words were met with applause by hundreds of people in the square, many of whom wore masks and kept several meters from each other. The square was reopened to the public last Monday. Normally tens of thousands attend on a Sunday.
The last time the pope delivered his message and blessing from the window was March 1, before Italy, where more than 33,000 people have died from the virus, imposed a lockdown. The last restrictions will be lifted on Wednesday.
Francis led the crowd in silent prayer for medical workers who lost their lives by helping others.
He said he hoped the world would come out of the crisis more united, rather than divided.
“People do not come out of a crisis like this the same as before. We will come out either better or worse than before. Let’s have the courage to emerge better than before in order to build the post-crisis period of the pandemic positively,” he said.
(Reporting by Philip Pullella; Editing by Susan Fenton)
ANC Looks for New Levers to Boost South Africa's Economy – BNNBloomberg.ca
The head of economic transformation in South Africa’s ruling party proposed a range of measures to bolster the economy, ranging from encouraging the use of pension funds and the central bank to finance infrastructure spending to the creation of a state bank and pharmaceutical company.
Enoch Godongwana’s recommendations to the African National Congress come as the government tries to revive an economy devastated by the coronavirus pandemic.
“The Covid-19 shock is posing unprecedented challenges, the economic crisis entailed by the pandemic is unique,” Godongwana said in the May 22 document seen by Bloomberg. “Globally, central banks have reverted to their original role as bankers to their governments.”
While business and investors have been calling for strong government action to support Africa’s most-industrialized economy, the document may heighten concerns about state intervention and so-called prescribed investment — mandatory funding by private companies of certain sectors.
In the document, Godongwana proposed changing regulation 28 of the Pension Funds Act to boost the funding of infrastructure projects spearheaded by state development finance institutions using private capital. South Africa’s main state-owned DFIs are the Industrial Development Corp. and the Development Bank of Southern Africa, of which Godongwana is chairman.
He also suggested that the Reserve Bank help finance DFIs through the creation of a 500 billion-rand ($29 billion) fund. Money should also come from the Public Investment Corp., a 2.13 trillion-rand fund manager that oversees civil servants’ pensions, Godongwana said.
“While it faces increasing continental competition, the South African financial-services sector can rightly be said to endow our emerging-market nation with ‘the financial plumbing of a rich place’ with deep, liquid markets,” he said.
While the document is a break with the thinking of some ANC leaders that the state should be responsible for much of the investment in the economy, it does advocate increased government “guidance.”
“A narrow and flawed understanding of what the developmental state is has led to the erroneous conclusion that it is only about public investments and public ownership, with a related over-emphasis on the limited funds of the state,” he said. “A developmental state does not necessarily mean higher levels of state ownership, but high levels of guidance.”
In an interview with Johannesburg’s Business Times, which reported on the document earlier, Godongwana said the proposals didn’t amount to advocating for prescribed assets. They merely meant that regulations should be changed so that pension funds can invest in DFI’s if they wish to.
Godongwana didn’t answer a call to his mobile phone. Neither did Pule Mabe, the spokesman for the ANC.
The document also proposed the formation of a state bank, a pet project of Finance Minister Tito Mboweni, and a national pharmaceuticals company.
It also advocated, in contrast to the drive of some government departments, a swift move away from coal-fired energy to renewable power. The state-owned Central Energy Fund should be used to partner private investors in new projects, Godongwana said.
©2020 Bloomberg L.P.
Bond Traders Glimpse Yields' Liftoff Potential as Economy Wakens – BNNBloomberg.ca
(Bloomberg) — Investors in the world’s biggest bond market are starting to see what the other side of America’s worst-ever economic downturn could mean for their portfolios.
With more U.S. regions gradually reopening and investor sentiment picking up, the Treasuries yield curve from 5 to 30 years ended May close to the steepest since the height of the virus-fueled market panic more than two months ago.
Traders are betting short-to-medium term rates will be anchored by Federal Reserve stimulus, including potential steps such as capping yields. Meanwhile, they see scope for higher longer-maturity yields amid signs that the most dire economic reports may soon be in the rear-view mirror. Data suggesting the labor market was beginning to rebound last month could cushion the blow from this week’s labor report, which is forecast to show the highest jobless rate since the Great Depression.
“We are going to get the last of the big job-shedding numbers, and that will be important context to help investors judge the depth of the contraction, and what the process of coming out of it will look like,” said Ian Lyngen, a strategist at BMO Capital Markets. “The steepening trade is going to be thematic over the course of the next 12 to 18 months.”
The gap between 5- and 30-year yields surged to end last week at 110 basis points, touching the widest since mid-March. Benchmark 10-year yields were barely changed on the week, ending at around 0.65%.
Last week delivered a reminder of what could limit the upside in yields, with U.S. President Donald Trump intensifying his confrontation with China on Friday. An escalation of tensions between the world’s two biggest economies threatens to curb demand for risky assets and bolster the appetite for Treasuries.
There’s also the obvious uncertainty over the coronavirus pandemic’s trajectory and the risk of a second wave of infections. Fed Chair Jerome Powell warned on Friday that a full economic recovery “will really depend on people being confident that it’s safe to go out.”
But green shoots are emerging. Continuing jobless claims fell in the most recent week, the first decline during the pandemic. And St. Louis Fed President James Bullard said the unemployment rate could fall below 10% by December. Data this week are forecast to show it reached 19.6% in May, a level unseen since the Depression.
Even so, bond strategists are coalescing round the view that the Fed later this year will implement a policy of yield-curve control — partly as a way to reinforce guidance that it will keep its main policy rate low for an extended period. The consensus expectation revolves around capping yields on maturities from two to five years.
Although the Fed is about to slow its Treasuries buying again, investors will get a reprieve on the issuance front this week, with only bills on the auction docket. So any move toward further steepening in the days ahead could be telling.
“It would signal the curve may be steepening more so for economic reasons,” said Chris Ahrens, a strategist at Stifel Nicolaus & Co. “The long end seems to be pricing that we are getting to the worst of the bottoming of the economy.”
What to Watch
- Friday’s release of May jobs data is the focus for the economic calendar:
- June 1: Markit U.S. manufacturing PMI; construction spending; ISM manufacturing
- June 2: Wards vehicle sales
- June 3: MBA mortgage applications; ADP employment; Markit U.S. services PMI; factory orders; durable goods; ISM non-manufacturing
- June 4: Challenger job cuts; trade balance; nonfarm productivity; jobless claims; Bloomberg consumer comfort
- June 5: Nonfarm payrolls; consumer credit
- The Fed calendar is empty before the June 10 policy decision
- Auction calendar:
- June 1: 13-, 26-week bills
- June 2: $40 billion 119-day cash-management bill; $65 billion 42-day CMB
- June 4: 4-, 8-week bills
©2020 Bloomberg L.P.
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