The US economy is facing an accelerating surge in coronavirus cases and harsh new restrictions on business activity without the cushion of meaningful fiscal support, raising fears of a blow to the recovery.
Even though equity markets have rallied strongly on advances in the development of a vaccine, the deteriorating health situation across the country is presenting an imminent threat to the US economy as the winter months approach.
The US has already recorded more than 1m new coronavirus cases so far this month, with the healthcare system in parts of the country now under severe strain. Lockdown measures have been introduced in a number of states and major cities in an attempt to contain the spread.
Whereas the White House and Congress agreed to $3tn in government spending measures to counter the initial pandemic lockdowns in March and April, they failed to reach a deal on further stimulus before the election and have made little if any progress towards an agreement since the vote.
Joe Biden, the US president-elect, has called for a compromise even before he takes office in January given the urgency of the situation, a position that was reinforced on Sunday by Ron Klain, his pick for White House chief of staff.
“There’s a lot of things that are going to have to wait until Joe Biden is president, but this is not one of them,” he told NBC on Sunday, adding that direct help to people and state and local governments to prevent job losses was crucial. “This is a national crisis, it needs bipartisan action now.”
Even Donald Trump, the outgoing president who has waxed and waned over the issue of new coronavirus economic relief for months, said in a tweet over the weekend that he wanted an agreement.
Still, big differences remain between congressional Democrats who are pushing for a broader and more costly package worth more than $2tn, and Republican lawmakers who think the economy needs far less. This has economists worried that no significant agreement will be reached, leaving households and businesses to fend for themselves even as new lockdowns are introduced and workers are furloughed or dismissed.
“From a health perspective and as a result from an economic perspective we’re really not in a good place, there’s really no way to sugarcoat it. We have essentially a fairly long winter ahead of us,” said Gregory Daco, chief US economist at Oxford Economics.
“The vaccine news, the pent-up savings, the possibility of coming back to a new normal in six months’ time are all very encouraging, and a source of optimism, but they do nothing for us today.”
Michael Feroli, a senior US economist at JPMorgan Chase, said if fiscal support ended up being slower or smaller than expected this time, compared with the aid delivered during the first virus wave, it would “definitely present some considerable risks to growth” at a time when momentum was already waning.
JPMorgan Chase data on its own credit and debit card spending released last week showed a notable dip in November, particularly in states suffering big rises in coronavirus cases.
“I wouldn’t say the evidence right now is conclusive that we are entering a double dip. But there are certainly some warning signs out there,” Mr Feroli said.
Nancy Pelosi, the Democratic speaker of the House of Representatives, on Friday said a stimulus package was a top priority for the next few weeks in Congress, during the “lame duck” session before new lawmakers and Mr Biden take office. “This is a red alert, all hands on deck,” she told reporters.
But Mitch McConnell, the Kentucky Republican and Senate majority leader, does not feel the same level of urgency and no serious negotiations have resumed on Capitol Hill.
The lack of fiscal support in the world’s largest economy as the coronavirus crisis worsens could raise pressure on the Federal Reserve to take further action, even though it has already delivered huge amounts of monetary support and lacks the tools to help struggling workers and companies directly.
The Fed refrained from any new policy moves in early November at its policy meeting following the presidential election, but discussed changes to its asset purchase programme that could “deliver more accommodation if it turns out to be appropriate”, as Jay Powell, the Fed chairman, described it in his press conference.
The prospects for such a step is likely to be a key focus when the Federal Open Market Committee next meets in mid-December, but some strategists said the US central bank may be forced to move even sooner.
Steve Englander, head of North America Macro Strategy at Standard Chartered, wrote in a note that the Fed could increase its asset purchases and try to expand its credit facilities for struggling businesses as its next move.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
