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 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 reelection prospects, given 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 to 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 more well off than before the pandemic.
Meanwhile, those who are out of work and who don’t 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 off of 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 aren’t 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 spiraling, 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.
Ford, minister of long-term care to make announcement in Toronto – CP24 Toronto's Breaking News
Premier Doug Ford and his minister of long-term care are set to make an announcement in Toronto this afternoon.
On Monday, the premier, who provides daily updates on Ontario’s response to the pandemic, released some details of the province’s new COVID-19 vaccine task force, which will be led by retired Gen. Rick Hillier, the former head of the Canadian military.
Ford called distribution of the vaccine a “massive logistical challenge” that could turn into a “logistical nightmare” without the right planning.
“We need military precision. We need the discipline that only a general can bring to this task,” Ford said of Hillier, who served as Chief of the Defence Staff of the Canadian Forces between 2005 and 2008.
Ontario Health Minister Christine Elliott has previously indicated that she expects the province to receive a combined 2.4 million doses of the Pfizer and Moderna COVID-19 vaccines during the first three months of 2021.
Vaccine recipients will require two doses 21 days apart, meaning that the initial shipments will likely only be enough to protect about 1.2 million Ontarians.
Health Canada still needs to approve both vaccines but Elliott said planning for the early rollout of the province’s COVID-19 vaccine program is “well underway.”
“This task force will be made up of representatives from across our government and will include experts in operations and logistics, federal/ provincial relations, health care, public health and immunizations, ethics, information technology and data,” she said.
“They will be advising on the delivery, storage, and distribution of the vaccine, (and) support for health care system partners to deliver a phased vaccination program that will initially prioritize vulnerable populations followed by mass immunization.”
Today’s news conference is scheduled to begin at 1 p.m. and will be streamed live on CP24.com.
Association calls for Halifax restaurants and bars to close amid COVID-19 spread – CBC.ca
The Restaurant Association of Nova Scotia is calling for all restaurants and bars in Halifax to close to dine-in customers for at least the next two weeks because of rising COVID-19 case numbers in the area.
Gordon Stewart, executive director of RANS, said the association’s board of directors held an emergency meeting Monday night and decided unanimously to make the closure recommendation to its members and to Public Health.
Restaurants and bars have been a significant site of COVID-19 transmission in Nova Scotia over the past two weeks, and Stewart said consumer confidence has been “wiped out.”
“It really has hurt. Business has taken a sharp decline. But it’s more than that — it’s that we’re scared that the spread gets so bad that we end up like some of the western provinces right now,” Stewart told CBC’s Information Morning, referring to Manitoba and Alberta, which are experiencing overwhelming coronavirus surges.
Stewart said he’ll leave it to the provincial government to decide what geographical area to shut down, based on the current epidemiology. But he expects it to encompass downtown Halifax, which has been the epicentre of the province’s current outbreak of the coronavirus.
Public Health has not yet endorsed the RANS recommendation. Chief Medical Officer of Health Dr. Robert Strang and Premier Stephen McNeil are scheduled to hold a COVID-19 briefing at 3 p.m. today.
Stewart said the closure recommendation is focused on “full-service” restaurants. He said he supports restaurants in hotels staying open for hotel guests only, and coffee shops staying open for take-out.
The recommendations are not meant for the rest of the province, outside HRM.
Thank you to the restaurants and bars that have already made the hard choice to close to dine-in and to <a href=”https://twitter.com/RestAssocNS?ref_src=twsrc%5Etfw”>@RestAssocNS</a> for this. Let’s do our best to support them: gift cards, take-out and a promise to return when we can. <a href=”https://t.co/d902Xh29Kj”>https://t.co/d902Xh29Kj</a>
Stewart said closing will bring “a lot of repercussions for operators” but he expects it to be effective in slowing the spread of the second wave of COVID-19.
“It’s really not about the economy now. It’s really about the health and the long-term outlook of our communities,” Stewart said.
Over the past few days, many Halifax-area restaurants and bars have already decided to close — some as a precaution and others because of possible COVID-19 exposures on the premises.
Among them is The Old Triangle, where owners closed voluntarily on Monday, only to learn a few hours later that they were in fact the site of a possible exposure.
“Honestly I think it’s the right move,” said Old Triangle co-owner Brendan Doherty of the RANS recommendation.
“We are at a bit of a tipping point so it does make sense to take at least two weeks … to just kind of get reset and get back to where we’ve been.”
“We’ve been very fortunate [inside the Atlantic bubble] … and it’d be nice to go back to that as soon as possible.”
Doherty said a government-mandated shut-down would help his business, and others, because it would allow them to access additional rent relief through federal programs.
“It’s all about cost-saving during a shut down, and rent is the biggest cost we do incur.”
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