The pace of the U.S. recovery picked up in the past two months, though reopening the economy from the COVID-19 pandemic created increasing strains in attracting workers and filling orders, the Federal Reserve said.
“The U.S. economy strengthened further from late May to early July, displaying moderate to robust growth,” the U.S. central bank said in its Beige Book survey released Wednesday. “Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods.”
The report was based on information collected by the Fed’s 12 regional banks through July 2 and compiled by the Federal Reserve Bank of Boston.
Fed officials are considering how quickly to trim monetary policy support with the expansion of COVID-19 vaccinations brightening the outlook. The Beige Book comes ahead of the Federal Open Market Committee’s next policy meeting, on July 27-28, when it’s set for further talks on the appropriate timing of scaling back asset purchases.
The FOMC has committed to reducing the US$120 billion monthly pace of bond buying after there’s “substantial further progress” on inflation and employment. Several Fed officials, including St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan, have urged the committee to move ahead with planning to withdraw stimulus.
“Healthy labor demand was broad-based but was seen as strongest for low-skilled positions,” the report said. “Firms in several districts expected the difficulty finding workers to extend into the early fall.”
Fed Chair Jerome Powell earlier Wednesday said the U.S. economic recovery still hasn’t progressed enough to begin scaling back asset purchases.
While the U.S. added 850,000 jobs last month — the most in 10 months — payrolls are still nearly 7 million below their pre-pandemic level.
“All districts noted an increased use of non-wage cash incentives to attract and retain workers,” the Fed said in the Beige Book. “Firms in several districts expected the difficulty finding workers to extend into the early fall.”
In the San Francisco district, for example, employers noted a widespread shortage of truck drivers and other workers in the transportation and logistics sector, which exacerbated supply-chain disruptions and delays. Moreover, employers cited a lack of immigrant labor and difficulties in obtaining worker visas.
In Chicago, while job openings were elevated, “workers were being more selective about workplace environment, scheduling flexibility, and pay,” the report found.
On the inflation front, data Tuesday showed the consumer price index surged the most since 2008 in June. Fed officials have largely written off the recent price pressures as owing to transitory factors associated with supply-chain bottlenecks and the reopening of service industries as the pandemic recedes.
“While some contacts felt that pricing pressures were transitory, the majority expected further increases in input costs and selling prices in the coming months,” the Fed said in the Beige Book report.
The Beige Book includes detailed anecdotes intended to give more color to complement formal reports for understanding of the economy.
A number of tourist-dependent locations reported strong recovery from COVID-19 in leisure spending, including New York City; Washington D.C.; Cape Cod, Massachusetts; and beaches that are part of the Richmond Fed district. In New York City, hotel occupancy rates climbed above 60 per cent in June, a post-pandemic high, the report found.
“Some beach communities reported record visitation, as hotels saw record-breaking occupancy and beach short-term rentals were booked solid through the summer and into the fall” in the Richmond district, which includes North and South Carolina coasts.
Restarting a sustainable, export-oriented economy – Business in Vancouver
Clean, sustainable products and services will be key to B.C.’s economic recovery | Chung Chow
This column was originally published in BIV Magazine‘s Trade issue.
As B.C. looks to restart its economy, the demand for our province’s clean and sustainable products and services is surging across a variety of sectors, demonstrating the key role that trade will play in our economic recovery.
Exports increased 24% year-to-date for April – that’s up $3 billion over the same time last year. It’s a big boost for the provincial economy, with a majority of our exports being commodities in great demand. Our stringent environmental standards in wood exports, burgeoning clean tech sector and high standards in labour protections mean that when other markets buy from us, they’re also contributing to a cleaner and more socially responsible global economy.
B.C. was committed to international trade long before the pandemic. It creates new opportunities for businesses, and more importantly, it creates good jobs and prosperity for people in B.C. When businesses export, they are more resilient. Access to more markets means they have a more diverse customer base and aren’t as impacted by fluctuations in their local economies.
We have a program perfectly designed to help small businesses get their goods and services to new markets. It’s called Export Navigator. This program offers businesses free expert guidance on exporting. Businesses get connected with an expert advisor who will help “navigate” them through the export process. It’s hugely beneficial, helping businesses reach new customers for the first time and making the process a lot easier along the way.
We continue to support B.C. businesses in other ways as well. For example, we developed a series of grant programs to meet their unique needs, making over half a billion dollars available in direct supports. The Launch Online program helps businesses improve their online presence to attract and keep customers and meet demand as online shopping hit new heights during the pandemic. The Supply Chain and Value-Added Manufacturing grant helps B.C.-based manufacturers in the aerospace, shipbuilding, food processing and forestry sectors recover and grow, supporting them to seek efficiencies to continually keep goods flowing into the marketplace.
From natural resources and agrifoods to manufactured goods and high-tech goods and services, B.C. has a lot to offer to the world. We are a responsible, low-carbon producer of natural resources and manufactured goods, and we are working hard to make sustainability a larger part of B.C.’s brand and our global competitive advantage. Our priority is to help B.C.-based businesses start up, scale up, access global markets and succeed in the highly competitive world marketplace. The more we export, the more new dollars we bring into B.C. and generate revenue that supports government investments in health care, education and critical infrastructure.
We stand behind the high-quality goods that B.C. has to offer to the world. Globally, companies large and small are increasingly applying environmental, social and governance filters to their investment decisions. We are committed to growing our economy in a sustainable way, and are working on a new trade diversification strategy that will provide us with the opportunity to develop an updated, forward-looking and ambitious approach that aligns closely with these principles, while ensuring that our exporting businesses are maximizing the opportunities afforded to them through Canada’s existing free trade agreements. Our recently announced Mass Timber Demonstration Program is an example of how we are advancing technologies that can showcase to the world the possibilities of building with a more sustainable and environmentally friendly product from B.C.
The pandemic leaves behind many lessons and creates a once-in-a-generation opportunity for B.C. to redefine itself. We know the pandemic is not impacting everyone equally, with women and visible minorities being disproportionately impacted. This is why we are committed to continuing to grow strong, robust industries that can provide good jobs for all of B.C.’s diverse populations.
Growth in trade will be a big part of our economic recovery, and as we transition through our restart plan, we will continue to engage with businesses, industry and key stakeholders to ensure we’re supporting their efforts to expand globally.
Our goal is to diversify our trade sectors to include not just our natural resources, but clean tech, high tech, agritech and advanced manufacturing. We need to support our exporters and encourage new exporters to expand our opportunities in global markets and strengthen our resilience.
We’re committed to invest in people and in businesses to restore economic growth and we are confident that the entrepreneurial spirit of B.C.’s business community will rise to the challenge as we work together to build a better future with meaningful jobs and a strong, sustainable economy for all.
Ravi Kahlon is B.C.’s minister of jobs, economic recovery and innovation. George Chow is the province’s minister of state for trade.
This column was originally published in the July 2021 issue of BIV Magazine. The digital magazine can be read in full here.
ECB Lifts Restrictions on Bank Dividends as Economy Rebounds – Bloomberg
The European Central Bank said it will lift a cap on how much lenders can return to shareholders with dividends and share buybacks, while urging them to remain cautious given uncertainty in the pandemic.
The ECB “decided not to extend beyond September 2021 its recommendation that all banks limit dividends,” the central bank said in a statement on Friday. “Instead, supervisors will assess the capital and distribution plans of each bank as part of the regular supervisory process.”
Reopening economy buoys B.C.’s job market – Business in Vancouver
B.C.’s labour market outperformed most of the country in June with a 1.6% (42,100-person) monthly gain and outpaced the national increase of 1.2%.
The province moved through steps 1 and 2 of its restart plan, highlighted by the reopening of restaurant in-house dining and larger organized events, travel and other recreation. The labour market has fully recovered employment losses from the previous two months, exceeding pre-pandemic levels by 0.6%. The latter marks the best performance among all Canadian provinces, reflecting shallower economic restrictions from the pandemic, solid performances in the commodities and technology sectors and a robust housing market.
However, full-time work has similarly lagged, with levels 1.6% lower than in February 2020, while part-time work rose 9%. B.C.’s unemployment rate fell to 6.6% from 7% in May and marked the lowest level since the pandemic began.
Metro Vancouver performance was consistent with employment growth of 1.5%, although unemployment remained higher at 7.4% of the labour force.
There was strong rehiring for accommodation/foodservices (up 12%) employees as dining restrictions were largely lifted. This contributed half of the net monthly increase. Significant gains were also recorded in finance/insurance/real estate (up 4.1%), health care/social assistance (up 3%) and business/building/other support (up 5%). Gains align with broader business and office reopenings. A drop in resource employment and construction were partial offsets to services-driven growth.
Hiring momentum will continue with Stage 3 of the restart plan underway, which allows for larger events, fairs and trade shows, reopenings of casinos and normalization of fitness classes and gyms, while domestic tourism partly offsets international travel restrictions.
The Lower Mainland’s housing frenzy continued to cool through June as affordability erosion and satiation of demand pulled forward by the pandemic cut sales. Meanwhile, both buyers and sellers are likely taking a step back to pivoting attention to other activities as social restrictions ease.
Multiple Listing Service sales spanning Metro Vancouver and Abbotsford- Mission (Lower Mainland) reached 6,007 units last month. While still up a lofty 46% from a year ago, this is compared with a 217% increase in May. •
Bryan Yu is chief economist at Central 1 Credit Union.
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