Connect with us

Business

US economy turns in record Q3 growth, but crisis is not over – Al Jazeera English

Published

 on


The United States economy grew at its fastest pace on record in the third quarter, rebounding at an annual rate of 33.1 percent, the Bureau of Economic Analysis said on Thursday.

The blockbuster reading follows on from a record-shattering 31.4 percent contraction in the second quarter – and a negative 5 percent hit in the first quarter – when the economy officially entered a recession in February.

The balance signals that though the economy is crawling out of the deep hole dug by COVID-19, it still has a way to go to recapture its pre-pandemic strength.

Put simply, the economic crisis is not over.

Moreover, some sectors of the economy are recovering faster than others and those disparities are rippling through the fabric of American society in the form of deepening inequalities.

Those with a job and assets like stock portfolios and homes are doing well, while those who are jobless or own a business ravaged by virus restrictions are falling further behind. Racial wealth and income disparities are widening.  Women are dropping out of the workforce at an alarming rate as the demands of jobs and looking after children learning remotely force tough choices on parents.

Thursday’s report on gross domestic product (GDP) is the last major economic data release before the November 3 US presidential election.

Though the headline number may be seized upon as a bragging point for President Donald Trump, it is unlikely to dramatically influence his re-election prospects, given that more than 75 million Americans have already voted, according to the US Elections Project.

But there is a world of uncertainty that lies ahead – both for the election and the economy.

If the results of the election are contested, it could lead to further hold-ups with a new round of virus relief aid as the White House and Democrats in Congress fail to find common ground.

The stakes could not be higher.  Aid from the federal government such as enhanced employment benefits, lifelines for small businesses, and one-off cash payments to households helped the economy bounce back in the third quarter. But those stimulus effects are fading.

There is a mounting body of data that points to a downshifting recovery in the fourth quarter. Federal Reserve Chairman Jerome Powell has warned that more government spending is needed to keep the recovery on track.

Now surging COVID-19 infections are raising the spectre of more business-sapping restrictions.

An unprecedented recession, a slowing recovery

The COVID-19 recession is a far different beast from previous post-war contractions.

The Great Recession of 2008-2009 was triggered by a massive build-up of debt, mostly due to the housing bubble.  When it burst, loans soured, house prices crashed, credit markets seized, wealth was wiped out, unemployment skyrocketed and demand for finished goods and services – what economists call “aggregate demand” – suffered a massive blow.

That devastated industries like construction and manufacturing and sent the Federal Reserve scrambling to create new tools to pull the US and global economies back from the brink of collapse. Congress dithered and eventually stepped up with a $787bn stimulus package in 2009.

But subsequent rounds of federal spending were not forthcoming, leaving the Fed to carry the recovery ball with the blunt tool of monetary policy. Many economists believe this led to a more protracted recovery.

The COVID-19 recession, by contrast, was triggered by lockdowns designed to contain the spread of the disease. Entire sectors of the economy ground to a halt virtually overnight, delivering an unprecedented supply shock that quickly turned into a demand shock as 22 million people were thrown out of work in March and April.

Customer-facing service industries, like restaurants, that employ a disproportionate number of low-wage workers, as well as minorities and women, were gutted.

This time around, the Fed acted much faster with bold and decisive action, such as slashing interest rates to near zero, resuming bond buying to keep borrowing costs at rock bottom and making trillions of dollars of lending available to keep credit markets from freaking out.

Congress also moved far more quickly on the spending front, approving some $3 trillion in virus relief aid to help small businesses keep workers on payrolls, laid-off workers remain afloat and state and local governments cope with the public health crisis.

The combined efforts of the Fed and Congress helped power the economy in the third quarter – putting money in people’s pockets to help unleash pent-up demand as lockdown restrictions were rolled back.

That is clear from Thursday’s numbers. Consumer spending – which drives roughly two-thirds of US economic growth – was indeed the hero of third-quarter GDP.

Businesses, such as car dealers building up inventories, exports and a red-hot housing market were also key drivers.

But federal stimulus programmes including the lifeline to small businesses and the $600 federal weekly top-up to state unemployment benefits expired at the end of July – and that waning stimulus is manifesting in metrics that signal the recovery is now shifting into low gear.

In August, personal income in the US declined 2.7 percent – a fall the US Department of Commerce said was “more than accounted for” by the expiration of the federal weekly jobless benefit supplement.

Disparities are also widening. Again – monetary policy is a blunt instrument.

While basement-level borrowing costs helped keep credit flowing to businesses and households – essential for keeping the economy healthy – they have also rewarded asset owners.

Record-low mortgage rates for example, helped drive sales of previously owned homes to a 14-year high in September, while investors chasing bigger returns from risker assets helped US stock indexes recover from the COVID crash earlier this year. The S&P 500 hit a new all-time high at the start of September.

That means many Americans who own their own home and are invested in the stock market and who still have a job are not only doing well, many of them are better off than before the pandemic.

Meanwhile, those who are out of work and who do not own appreciating assets are struggling.

Nearly one in three renters in the US did not pay their rent fully on time in the first week of October, while one in 10 started the month owing back rent, according to a housing payments survey by Apartment List.

Layoffs remain widespread. Some 751,000 Americans filed for state unemployment benefits last week. That is 40,000 fewer than the previous week, but still far above February’s average of just over 200,000 initial weekly jobless claims.

And though the nation’s unemployment rate fell to 7.9 percent in September – a little less than half of its pandemic high in April – it is still miles from February’s unemployment rate of 3.5 percent.

Only 11.4 million of the 22 million jobs lost during lockdowns have been recovered. Many temporary layoffs are turning into permanent job losses.

Federal Reserve chiefs are not exactly known for their plain-talking ways, but Powell was pretty blunt when he laid out the case earlier this month for more fiscal stimulus from Congress: “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” he said.

But more relief hinges on Congress and the White House overcoming their differences to pass another aid package.

Looming over this backdrop of partisan political acrimony is the ever-present threat of COVID-19.

Infections are surging in parts of the US, raising the spectre of more growth-sapping containment measures. In Europe, where cases are spiralling, France and Germany have ordered partial lockdowns.

The course of the virus, the outcome of the election and plateauing recovery are launching the US down an uncertain path.  One that could lead to longer economic recovery.

Let’s block ads! (Why?)



Source link

Continue Reading

Business

COVID-19 cases will strain Ontario hospitals in December no matter what happens: model – CP24 Toronto's Breaking News

Published

 on


The number of COVID-19 cases in intensive care at Ontario hospitals will break the 200 bed threshold sometime in early December, severely hampering the healthcare system’s ability to follow through with all scheduled surgical procedures, new provincial modelling data suggests.

Even with slower case growth than what has been observed in recent weeks, Ontario government epidemiologists said Thursday the ICU bed occupancy due to COVID-19 will hit 200 somewhere in the first week of December, and could near 300 in the worst case scenario by the end of that month.

ICU bed occupancy of more than 150 in Ontario challenges the healthcare system’s ability to keep with scheduled surgeries and makes it difficult to complete additional surgeries already delayed once during the first wave of the pandemic.

At that level, hospitals are facing significant capacity challenges – they are facing significant threats to the sustainability of their health human resource workforce and they are making decisions to cancel, delay or postpone treatments that are necessary,” Dr. Adalsteinn Brown of the University of Toronto’s Dalla Lana School of Public Health told reporters on Thursday.

The modellers give three scenarios for new case growth going into December.

In one scenario, with one per cent average case growth, Ontario could see more than 2,000 cases per day by the end of December.

At three per cent average case growth, the province could see more than 4,000 cases per day by the end of next month.

At five per cent average case growth, Ontario could see 9,000 cases per day by the end of December.

Ontario’s case growth has been 0.45 per cent per day on average over the past two weeks.

The modellers say “key indicators” of the pandemic have been “flattening” in some regions, but progress is not consistent across the province. 

“It’s best described as a fragile or precarious situation where we would like to see cases continue to flatten or decline before we can say that we are making strong progress,” Brown said.

The doctors who delivered the model said that while the situation remains “precarious,” it is no longer worsening.

Chief Medical Officer of Health Dr. David Williams said the situation is at the point where there is no discussion about placing new regions into lockdown.

“We’re not recommending any new ones go into lockdown at this stage,” he said.

Let’s block ads! (Why?)



Source link

Continue Reading

Business

Nav Canada warns air traffic controllers that job cuts are coming as pandemic crushes revenue – CBC.ca

Published

 on


Air traffic controllers are being warned that layoffs are coming as Nav Canada pursues a “full restructuring” in response to a revenue slump caused by the COVID-19 pandemic, CBC News has learned.

CBC News has obtained a confidential memo sent internally to air traffic controllers on Thursday. In it, Ben Girard, Nav Canada’s vice-president and chief of operations, told staff that the company has seen a $518 million drop in revenue compared to its budget.

He said he’s been pushing the federal government for help, but — unlike some other countries — Canada has not released an industry-specific bailout package yet.

“We anticipate that until air traffic returns to higher levels, which will not occur until the end of this fiscal year, we will continue to operate in a daily cash negative position and this will be made worse as funding from the [Canadian Emergency Wage Subsidy] program is ratcheted back,” Girard wrote. 

Girard did not say in the memo how many air traffic controllers will lose their jobs or which locations will be affected. The memo said it’s looking to reduce the number of “IFR controllers.” These controllers are higher on the pay scale and work at area control centres in Gander, N.L., Moncton, N.B., Montreal, Winnipeg, Toronto, Edmonton and Vancouver.

The workers are responsible for controlling large amounts of airspace between airports using radar. Their job is to make sure planes keep proper distance from one another.

“I know this is very difficult news to hear. It is also very difficult news to deliver,” Girard wrote. “This is a decision that has been made at my level based on what needs to be done to ensure Nav Canada’s financial sustainability.”

Nav Canada manages millions of kilometres of airspace over Canada and used to provide air navigation services for more than three million flights a year. It’s funded through service fees paid by air carriers.

The Canadian Air Traffic Control Association said it is very concerned with the memo. 

“It is the opinion of this union that safety is not being taken into consideration in making sound decisions,” president Doug Best and executive vice-president Scott Loder wrote in a letter to members.

“Safety is the number one priority for Nav Canada and it has somehow taken a backseat to cost containment as the number one and only priority.”

‘We’re facing years of a downturn in air traffic’

In November, Canadian air traffic was down 54 per cent compared with the same time period in 2019, according to the memo.

“Over the summer and fall months, the outlook for the aviation industry has deteriorated significantly and it has become increasingly clear that we’re facing years of a downturn in air traffic that is much larger and broader in scope than we all initially believed, and will be much deeper and longer than any downturn in the history of the industry,” Girard wrote.

Nav Canada says it is conducting studies of air traffic control towers in Whitehorse, Regina, Fort McMurray in Alberta, Prince George in B.C., and Sault Ste. Marie and Windsor in Ontario that “will result in workforce adjustments.” The company is also looking into closing a control tower in St. Jean, Que.

Nav Canada air traffic controllers were told on Thursday that a workforce adjustment is coming because ‘the aviation industry has deteriorated significantly.’ (Jonathan Hayward/The Canadian Press)

Government ‘pressed’ for help 

The company has been focused on securing liquidity and tapped into the Canada Emergency Wage Subsidy (CEWS) to pay up to 75 per cent of employees’ wages, he wrote. Girard added that these payments are being reduced and will run through December, but Nav Canada isn’t sure if it can continue receiving that wage support.

“While an extension for the CEWS program through June 2021 was recently announced, NAV CANADA’s eligibility is uncertain,” he wrote.

Girard said the federal government has so far failed to come up with a bailout package for the airline sector, despite “significant lobbying.”

Last month, the Globe and Mail reported that the federal cabinet is working on a package for the airline sector that would include low-interest loans. 

Since Sept. 22, Girard wrote, the company has cut more than 700 managers and employees — 14 per cent of its workforce. It also let go of 159 students earlier in the pandemic, he added, and in November cut even more, “leaving just a few in the system.”

Along with the cuts, seven air traffic control towers are being considered for a downgraded level of service, and another 25 sites that are already Flight Service Stations — which provide only advisory services — could face more cuts.

Nav Canada’s board of directors has cut its fees by 20 per cent, and executives and managers have dropped their salaries by up to 10 per cent, Girard wrote.

These cost reductions, as well as access to government support through the wage subsidy program, have saved the company $200 million since March 1, he added. 

“However, that number still pales in comparison to the $518 million reduction in revenues as compared to budget,” Girard wrote.

“Despite these cost-containment efforts, we find ourselves in a situation where we expect our revenues to continue falling far short of our costs for several years, and we continue to require further cost-containment measures and indeed, a full restructuring of our business.

“In an environment where 30 per cent of costs are associated with ‘things’ and 70 per cent of costs are associated with ‘people,’ when all possible cuts with ‘things’ have been done, any further cuts will directly affect people.”

Girard added that he hopes the company can bring back some of the laid-off staff once the pandemic passes.

The Canadian Air Traffic Control Association said it will continue to challenge Nav Canada. The union hopes there will be “enough interest” in departure incentives for older controllers to offer them a package to retire. 

“The views of Nav Canada at this point are violating the vision, mission and overarching objectives of this company,” Best and Loder said in their letter to members.

Let’s block ads! (Why?)



Source link

Continue Reading

Business

Nav Canada warns air traffic controllers that job cuts are coming as pandemic crushes revenue – CBC.ca

Published

 on


Air traffic controllers are being warned that layoffs are coming as Nav Canada pursues a “full restructuring” in response to a revenue slump caused by the COVID-19 pandemic, CBC News has learned.

CBC News has obtained a confidential memo sent internally to air traffic controllers on Thursday. In it, Ben Girard, Nav Canada’s vice-president and chief of operations, told staff that the company has seen a $518 million drop in revenue compared to its budget.

He said he’s been pushing the federal government for help, but — unlike some other countries — Canada has not released an industry-specific bailout package yet.

“We anticipate that until air traffic returns to higher levels, which will not occur until the end of this fiscal year, we will continue to operate in a daily cash negative position and this will be made worse as funding from the [Canadian Emergency Wage Subsidy] program is ratcheted back,” Girard wrote. 

Girard did not say in the memo how many air traffic controllers will lose their jobs or which locations will be affected. The memo said it’s looking to reduce the number of “IFR controllers.” These controllers are higher on the pay scale and work at area control centres in Gander, N.L., Moncton, N.B., Montreal, Winnipeg, Toronto, Edmonton and Vancouver.

The workers are responsible for controlling large amounts of airspace between airports using radar. Their job is to make sure planes keep proper distance from one another.

“I know this is very difficult news to hear. It is also very difficult news to deliver,” Girard wrote. “This is a decision that has been made at my level based on what needs to be done to ensure Nav Canada’s financial sustainability.”

Nav Canada manages millions of kilometres of airspace over Canada and used to provide air navigation services for more than three million flights a year. It’s funded through service fees paid by air carriers.

The Canadian Air Traffic Control Association said it is very concerned with the memo. 

“It is the opinion of this union that safety is not being taken into consideration in making sound decisions,” president Doug Best and executive vice-president Scott Loder wrote in a letter to members.

“Safety is the number one priority for Nav Canada and it has somehow taken a backseat to cost containment as the number one and only priority.”

‘We’re facing years of a downturn in air traffic’

In November, Canadian air traffic was down 54 per cent compared with the same time period in 2019, according to the memo.

“Over the summer and fall months, the outlook for the aviation industry has deteriorated significantly and it has become increasingly clear that we’re facing years of a downturn in air traffic that is much larger and broader in scope than we all initially believed, and will be much deeper and longer than any downturn in the history of the industry,” Girard wrote.

Nav Canada says it is conducting studies of air traffic control towers in Whitehorse, Regina, Fort McMurray in Alberta, Prince George in B.C., and Sault Ste. Marie and Windsor in Ontario that “will result in workforce adjustments.” The company is also looking into closing a control tower in St. Jean, Que.

Nav Canada air traffic controllers were told on Thursday that a workforce adjustment is coming because ‘the aviation industry has deteriorated significantly.’ (Jonathan Hayward/The Canadian Press)

Government ‘pressed’ for help 

The company has been focused on securing liquidity and tapped into the Canada Emergency Wage Subsidy (CEWS) to pay up to 75 per cent of employees’ wages, he wrote. Girard added that these payments are being reduced and will run through December, but Nav Canada isn’t sure if it can continue receiving that wage support.

“While an extension for the CEWS program through June 2021 was recently announced, NAV CANADA’s eligibility is uncertain,” he wrote.

Girard said the federal government has so far failed to come up with a bailout package for the airline sector, despite “significant lobbying.”

Last month, the Globe and Mail reported that the federal cabinet is working on a package for the airline sector that would include low-interest loans. 

Since Sept. 22, Girard wrote, the company has cut more than 700 managers and employees — 14 per cent of its workforce. It also let go of 159 students earlier in the pandemic, he added, and in November cut even more, “leaving just a few in the system.”

Along with the cuts, seven air traffic control towers are being considered for a downgraded level of service, and another 25 sites that are already Flight Service Stations — which provide only advisory services — could face more cuts.

Nav Canada’s board of directors has cut its fees by 20 per cent, and executives and managers have dropped their salaries by up to 10 per cent, Girard wrote.

These cost reductions, as well as access to government support through the wage subsidy program, have saved the company $200 million since March 1, he added. 

“However, that number still pales in comparison to the $518 million reduction in revenues as compared to budget,” Girard wrote.

“Despite these cost-containment efforts, we find ourselves in a situation where we expect our revenues to continue falling far short of our costs for several years, and we continue to require further cost-containment measures and indeed, a full restructuring of our business.

“In an environment where 30 per cent of costs are associated with ‘things’ and 70 per cent of costs are associated with ‘people,’ when all possible cuts with ‘things’ have been done, any further cuts will directly affect people.”

Girard added that he hopes the company can bring back some of the laid-off staff once the pandemic passes.

The Canadian Air Traffic Control Association said it will continue to challenge Nav Canada. The union hopes there will be “enough interest” in departure incentives for older controllers to offer them a package to retire. 

“The views of Nav Canada at this point are violating the vision, mission and overarching objectives of this company,” Best and Loder said in their letter to members.

Let’s block ads! (Why?)



Source link

Continue Reading

Trending