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Economy

U.S. economy faces uncertain fall months as rising COVID-19 cases impact recovery – The Globe and Mail

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People walk through Times Square, in New York, on July 29.

ED JONES/AFP

The promise of a “normal” U.S. economy this summer, which kicked off with the June revival of restaurants, air travel and baseball games, is transforming into an uncertain fall of rising health and economic risks.

Labor Day weekend, the traditional end of the U.S. summer season, was pegged as the moment when the economy would finally transition out of the pandemic slump, with private sector jobs and wages replacing unemployment benefits.

Instead, the summer is closing with rising COVID-19 case counts, hospitals bulging with patients, a sharp slowdown in jobs and dark predictions. Most startling – the University of Washington’s Institute for Health Metrics and Evaluation projects that between now and Dec. 1 there will be 100,000 COVID deaths, more than in the same period last year, when a wave of winter infections took hold and vaccines were not yet available.

“I don’t think fall 2021 is going to give us the catharsis we were waiting for,” said Nick Bunker, economic research director for hiring site Indeed, or provide a clear view of how fast U.S. job markets can recover the 5.3 million jobs missing from before the pandemic. “The transition is going to be longer than expected. The issue is, is it a stumble or does the baton get dropped?”

Nonfarm payrolls increased by 235,000 jobs last month after surging 1.053 million in July, the Labor Department said Friday. Economists had expected 728,000 new jobs.

Special $300-per-week unemployment benefits end on Saturday. While employers hope that will usher new job applicants into a labour-starved market, there are signs the pandemic may have begun to curb their hiring plans instead.

The reopening of schools, far from smoothing the way for parents to return to full-time jobs, has been marked by erratic outbreaks, quarantines and closures, as school boards battle over masking students.

The manager at The Irish Whisper, a pub near the Gaylord National Resort and Convention Center in Oxon Hill, Maryland, said that business has fallen off since an initial summertime rush.

“It’s not as great as pre-COVID, but it’s better than not having anything,” said the manager, who only gave his first name Andrew. “I thought we were in the clear and then this variant emerged.”

After a strong start early this summer, attendance is dropping in baseball stadiums.

BIDEN’S VIRUS OVERSHADOWED

It is a particularly sensitive moment for U.S. President Joe Biden.

The Democratic president has taken a hit in the polls from the resurgent virus, faces criticism over the Afghanistan withdrawal and must deal with the aftermath of Hurricane Ida and a gauntlet of deadlines in Congress in coming weeks to keep the government funded and his economic agenda on track.

“There’s a lot more work to do,” to fix the U.S economy, Biden said Friday, addressing the weak jobs numbers. “”We need to make more progress in fighting the Delta variant,” he said, repeating that it was a pandemic of the unvaccinated.

Biden’s strategy of wiping out COVID by getting all of the United States vaccinated was hindered by a politically charged antivaccination movement this summer, and the pace of vaccinations has slowed since peaking in April.

A run of higher-than-expected inflation due to supply chain woes and labour shortages consumed what would otherwise have been healthy wage gains. A closely watched index of consumer confidence, which can influence spending, tumbled in August to a six-month low.

Progress on the virus “is (Biden’s) No. 1 advantage, but people are discouraged and frustrated and it’s also interacting with the economy,” said one Biden adviser not authorized to speak on the record.

Administration officials believe the recovery largely remains on track, and infrastructure and spending plans may partly make up for the lapsed weekly unemployment insurance payments.

Democrats are hoping to finalize a $1-trillion bipartisan infrastructure bill as soon as this month while also working on a $3.5-trillion bill that could only secure party-line support.

“This bill is going to end years of gridlock,” Biden said of the smaller infrastructure bill. “Both literally and figuratively it’s going to change things,” he said.

Republicans are fighting the administration’s most ambitious spending plans. Goldman Sachs economists now estimate the “fiscal cliff,” as spending rotates away from the record government transfers of the past 18 months, will be a noticeable drag on growth by late 2022.

Oxford Economics economists expect to trim their outlook for 2021 gross domestic product growth to 5.5 per cent, down from 7 per cent in early August.

The reduction reflects “the deteriorating health situation weighing on optimism and spending, lingering capital and labour supply constraints and a slower inventory rebuild,” Oxford chief U.S. economist Gregory Daco said in an e-mail.

DELTA WEIGHS ON HIRING

The August jobs data released Friday showed the current surge of infections, which drove the number of new cases from around 11,000 a day in mid-June to almost 150,000 daily this week, slowed hiring and the broader recovery.

“Today’s report has the Delta variant written all over it,” Indeed’s Bunker said. “It is clear that the recent surge in COVID-19 cases is a strong headwind to the labour market.”

Economists are not expecting the sort of collapse in demand for restaurants, travel and other services seen in earlier virus waves. Many Federal Reserve officials feel businesses and families have learned to navigate the situation, either finding ways to lower the risk of infection as they resume work and business, or worrying less about infection because they’re vaccinated.

The disappointing 235,000 in new jobs comes as the unemployment rate fell to 5.2 per cent from 5.4 per cent in July. It has, however, been understated by people misclassifying themselves as being “employed but absent from work.”

Some employers argue that job growth figures could be much higher, given the record number of openings, if they had not had to compete with unemployment benefits. That hasn’t been borne out in states that ended the federal benefits early over the summer, where there’s little evidence more people went back to work.

Instead, employers seem to be pulling back on hiring themselves.

Hiring at around 50,000 small businesses has fallen since midsummer, data from time manager Homebase shows, while a work force recovery index from time management firm UKG, which analyzes time card punches, fell 2.4 per cent from July to August.

It was sharpest in the southeast, where the spread of the virus was most intense.

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Economy

Powell meets a changed economy: Fewer workers, higher prices – 95.7 News

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WASHINGTON (AP) — Restaurant and hotel owners struggling to fill jobs. Supply-chain delays forcing up prices for small businesses. Unemployed Americans unable to find work even with job openings at a record high.

Those and other disruptions to the U.S. economy — consequences of the viral pandemic that erupted 18 months ago — appear likely to endure, a group of business owners and nonprofit executives told Federal Reserve Chair Jerome Powell on Friday.

The business challenges, described during a “Fed Listens” virtual roundtable, underscore the ways that the COVID-19 outbreak and its delta variant are continuing to transform the U.S. economy. Some participants in the event said their business plans were still evolving. Others complained of sluggish sales and fluctuating fortunes after the pandemic eased this summer and then intensified in the past two months.

“We are really living in unique times,” Powell said at the end of the discussion. “I’ve never seen these kinds of supply-chain issues, never seen an economy that combines drastic labor shortages with lots of unemployed people. … So, it’s a very fast changing economy. It’s going to be quite different from the one (before).”

The Fed chair asked Cheetie Kumar, a restaurant owner in Raleigh, North Carolina, why she has had such trouble finding workers. Powell’s question goes to the heart of the Fed’s mandate of maximizing employment, because many people who were working before the pandemic lost jobs and are no longer looking for one. When — or whether — these people resume their job hunts will help determine when the Fed can conclude that the economy has achieved maximum employment.

Kumar told Powell that many of her former employees have decided to permanently leave the restaurant industry.

“I think a lot of people wanted to make life changes, and we lost a lot of people to different industries,” she said. “I think half of our folks decided to go back to school.”

Kumar said her restaurant now pays a minimum of $18 an hour, and she added that higher wages are likely a long-term change for the restaurant industry.

“We cannot get by and pay people $13 an hour and expect them to stay with us for years and years,” Kumar said. “It’s just not going to happen.”

Loren Nalewanski, a vice president at Marriott Select Brands, said his company is losing housekeepers to other jobs that have recently raised pay. Even the recent cutoff of a $300-a-week federal unemployment supplement, he said, hasn’t led to an increase in job applicants.

“People have left the industry and unfortunately they’re finding other things to do,” Nalewanski said. “Other industries that didn’t pay as much perhaps … are (now) paying a lot more.”

Christopher Rugaber, The Associated Press

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Dialogue NB Seeks To Rebuild An Inclusive Economy Through Conversation – Huddle – Huddle Today

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MONCTON – Dialogue NB CEO Nadine Duguay-Lemay says the business community has an integral place in a conversation about building a more equal and just New Brunswick.

That very conversation will take place on September 27 in Moncton with Dialogue Day 2021.

“When we talk about anti-racism, notions of equality, diversity, acceptance and inclusion and all those notions we celebrate, it’s not something we can do on our own,” said Duguay-Lemay.

“The business community actively needs to participate, if anything, because those topics concern them. That’s why you see so many business support the event.”

The volunteer-led non-profit organization plans to host an inclusive conversation on Monday at Moncton’s Crowne Plaza and virtually, online.

Dedicated to building social cohesion in New Brunswick, the sold-out event will feature discussions about racial justice in the workplace, rethinking the economy as it recovers from the pandemic and how to be a better ally to Indigenous people.

The event, which has sold out of in-person seats, will feature Jeremy Dutcher, a Wolastoq singer, songwriter, composer, musicologist and activist from Tobique First Nation, as its keynote speaker.

The mandate of the discussions is to ensure everyone feels heard, valued and that they belong, making diversity an asset – something Duguay-Lemay considers imperative to a functional economy.

“What I’ve found is that people don’t like to go into uncomfortable discussions. Some people want to embrace social cohesion but don’t know where to start, or are afraid of saying the wrong thing. This is our expertise – we’re good at the art of dialogue and multiple viewpoints at one table,” she said.

“We need a lot of different voices and perspectives at the table to rethink the system for the wellbeing of all. These discussions shouldn’t be happening in isolation.”

Duguay-Lemay said New Brunswick faces many economic challenges, noting a diverse workforce will help recover from those challenges.

She stressed that the business community needs to work toward a goal of truth and reconciliation, and in a call with Huddle, rebutted the metaphor of everyone being on the same boat during the pandemic.

“I’d argue we’re all facing the same storm, but not in the same boat. Some people are in yachts and some are in little boats about to capsize,” she said.

Other voices are emerging – female and Indigenous, for example – looking to address poverty and wage inequality and unfairness, employment access, systemic racism and environmental degradation, noted Duguay-Lemay, adding that the province’s 4,418 non-profits need more recognition as an economic partner.

“Inclusion is embedded in our DNA as Canadians. We’re already a country and province that abides by those laws, so it’s important to look at inclusion,” she said.

The conversations will also focus on racial justice in the workplace, how the pandemic hurt Indigenous and black Canadian employment, versus non-minorities, access to employment – and the social barriers that exist for racialized workers.

“I invite all organizations, employers, public and non-profits to look at their practices in place and ask if they walk the talk for truth and reconciliation. We’re all treaty people – how do we uphold this?” said Duguay-Lemay.

“We want to at least demonstrate to Indigenous people in New Brunswick that we hear their plight and are serious about truth and reconciliation.”

Greater social cohesion is the best step forward, Duguay-Lemay noted, adding that real dialogue can build an economy that works for everyone.

She said matters of racial justice in the workplace – and specific matters, such as owners objecting to the declaration of September 30 as a statutory holiday, contending that they can’t afford it – will be among the economic issues for which solutions will be sought.

The conversation will also focus on how the province’s recovery from the pandemic has exposed inequalities in the economy.

Duguay-Lemay stressed the need to learn from the way the pandemic exposed inequalities, and rethink a system that works for everyone.

“We need to think differently and it really shouldn’t be based on the interests of the privileged,” said Duguay-Lemay.

“As employers are looking to attract and retain talent, we hear about skill shortages all the time. This becomes a matter of attracting talent, whether from newcomers or tapping into Indigenous communities, how can we make our workplaces more equitable and inclusive?

The event will feature an “eclectic” round table of specialists, artists, activists and experts from numerous sectors, and identities in New Brunswick, with opportunities for networking, inspiration for change with concrete examples and skills to help become a social leader.

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Economy

With the economy, we may be heading back to the 1970s – The Globe and Mail

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Kenneth Rogoff, a former chief economist of the International Monetary Fund, is professor of economics and public policy at Harvard University.

With the disastrous U.S. exit from Afghanistan, the parallels between the 2020s and the 1970s just keep growing. Has a sustained period of high inflation just become much more likely? Until recently, I would have said the odds were clearly against it. Now, I am not so sure, especially looking ahead a few years.

Many economists seem to view inflation as a purely technocratic problem, and most central bankers would like to believe that. In fact, the roots of sustained inflation mainly stem from political economy problems, and here the long list of similarities between the 1970s and today is unsettling.

In the United States, following a period in which the president challenges institutional norms (Richard Nixon was the 1970s version), a thoroughly decent person takes office (back then, Jimmy Carter). Abroad, the U.S. suffers a humiliating defeat at the hands of a much weaker, but much more determined adversary (North Vietnam in the 1970s, the Taliban today).

On the economic front, the global economy suffers a lingering productivity slowdown. According to the Northwestern University economist Robert Gordon’s magisterial account of innovation and growth, The Rise and Fall of American Growth, the 1970s marks a turning point in U.S. economic history, thanks to a sharp slowdown in meaningful economic innovation. Today, even if productivity pessimists grossly underestimate the phenomenal gains the next generation of biotech and artificial intelligence will bring, a large body of work finds that productivity growth has been slowing in the twenty-first century, and now the pandemic looks to be inflicting another heavy blow.

The global economy suffered a massive supply shock in the 1970s, as Middle East countries massively hiked the price of oil they charged the rest of the world. Today, protectionism and a retreat from global supply chains constitute an equally consequential negative supply shock.

Low-income Canadian households will suffer the most from soaring inflation

The Bank of Canada isn’t losing sleep over inflation, and neither should you – yet

Finally, in the late 1960s and 1970s, huge increases in government spending were not matched by higher taxes on the wealthy. The spending increases stemmed in part from president Lyndon Johnson’s “Great Society” programs in the 1960s, later amplified by the soaring cost of the Vietnam War. In recent years, first the Trump tax cuts, then pandemic-related catastrophe relief, and now progressive plans to expand the social safety net have hit the federal budget hard. Plans to fund these costs by raising taxes only on the rich will likely fall far short.

It is true that despite all these similarities, today’s independent central banks stand as a bulwark against inflation, ready to raise interest rates if inflation pressures seem to be getting out of hand. In the 1970s, only a few countries had independent central banks, and in the case of the U.S., it did not act like one, fuelling inflation with massive monetary expansion. Today, relatively independent central banks are the norm across much of the world. It is also true that today’s ultralow global real interest rates provide rich-country governments a lot more room to run deficits than they had in the 1970s.

On the other hand, the challenges of providing for aging populations has become vastly more difficult over the past five decades (at least in advanced economies and China). Underfunded public pension schemes arguably are a much larger threat quantitatively to government budget solvency than debt. At the same time, social pressures to increase government spending and transfers have exploded across the world, as inequality becomes more politically salient for many countries, and improving growth less so. And confronting climate change and other environmental threats will almost certainly put additional pressure on budgets and slow growth.

Sharply rising government debts will inevitably make it more politically painful for central banks to raise nominal interest rates if global real rates start turning upward. High debts are already a reason why some central banks today will hesitate to raise interest rates if and when postpandemic normalization occurs. Private debt, which has also soared during the pandemic, is perhaps an even bigger problem. Widespread private defaults would eventually have a huge fiscal impact via lower tax collection and higher social safety net costs.

Today’s economic challenges are certainly solvable, and there is no reason why inflation should have to spike. Leading central bankers today such as Jay Powell of the U.S. Federal Reserve and Christine Lagarde of the European Central Bank are a far cry from pliable Fed Chair Arthur Burns in the 1970s. They both have superb staffs to support them. Yet all central banks still face constant pressures, and it is hard for them to stand alone indefinitely, especially if politicians become weak and desperate.

America’s humbling defeat in Afghanistan is a big step toward recreating the perfect storm that led to slow growth and very high inflation of the 1970s. A few weeks ago, a little inflation seemed like a manageable problem. Now, the risks and the stakes are higher.

Copyright: Project Syndicate, 2021. www.project-syndicate.org

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