AUSTIN, Texas —
It took 15 minutes for the coronavirus to wreck Shelley Hutchings’ carefully calculated financial plans.
Hutchings, a bartender and performer, had lined up gigs in advance of the South by Southwest film, music and technology festival, which draws hundreds of thousands of visitors to Austin each year. She’d expected to earn about $3,000 — enough to pay her taxes and buy a new sewing machine for a tailoring business she runs.
Relaxed, she sat down to watch a movie. Then her phone started vibrating. Cancellations rolled in. One by one, the jobs she’s been counting on were gone. In the face of the spreading coronavirus outbreak, Austin officials had called off the festival just as the first attendees had begun to arrive.
“In 15 minutes, things fell apart,” Hutchings said. “To watch it vanish, all at once, was shocking.”
As Hutchings and hundreds of millions of Americans can attest, damage from the coronavirus has pummeled the U.S. economy with breathtaking speed and force. Hour by hour, day by day, the activities that households take part in and spend money on — plane trips, sporting events, movies, concerts, restaurant meals, shopping trips for clothes, furniture, appliances — are grinding to a halt.
And so, it seems, is the U.S. economy.
Just a month ago, experts had expected any severe economic pain from the outbreak to be confined mainly to Asia and Europe. The U.S. economy, enjoying a record-breaking 11-year-long expansion, would likely keep cruising, it was thought — a bit bruised but not seriously damaged.
Now, forecasters can’t downgrade their outlook for the American economy fast enough.
“The expansion is under threat,” said Philipp Carlsson-Szlezak, chief economist at the Boston Consulting Group. “There’s a very plausible risk this will amount to a recession.’’
On Wednesday, Wells Fargo Securities had predicted a slight drop in the nation’s gross domestic product — the broadest measure of economic output — in the April-June quarter. The next day, as the American stock market endured its deepest plunge since 1987, Wells Fargo economist Jay Bryson wrote that it was “painfully obvious that we need to rethink this forecast’’ and further downgrade the outlook.
How did the picture darken so sharply, so quickly?
The speed of the virus’ spread appeared to surprise economists as it hopscotched to 117 countries, including the United States, infecting a documented total of roughly 150,000 people worldwide and killing more than 5,500. And what health experts agree was the U.S. government’s fumbling early response to the crisis has undermined the confidence of consumers, investors and businesses. Anxieties have escalated.
U.S. officials are bracing for a dramatic acceleration of cases — beyond the roughly 2,200 that have been documented so far in 49 states, Washington, D.C., and Puerto Rico.
For most people, the coronavirus causes only mild or moderate symptoms, like fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia. The vast majority of people recover. According to the World Health Organization, people with mild illness recover in about two weeks, while those with more severe illness may take three to six weeks to recover.
Yet as the gravity of the crisis had seeped into public consciousness, suddenly everyone is shrinking from public gatherings of any real size for fear of contracting the virus, and organizers can’t call off events fast enough.
The NBA and the NHL suspended the rest of their seasons. The NCAA dropped its wildly popular March Madness basketball tournament. Broadway is closed. St. Patrick’s Day parades are scrubbed. Hunkered down at home, Americans are leaving restaurants empty, hotels vacant and jetliners unoccupied.
The danger to the U.S. economy stems from a fundamental reality: Consumers drive roughly 70 percent of growth. When spending halts, the economy can’t grow. And while online shopping will likely surge as people sequester themselves at home, such purchases still account for just a small fraction of overall consumer spending.
“The economy is doomed to recession if the country stops working and takes the next 30 days off,’’ Chris Rupkey, chief economist at MUFG Union Bank, wrote in a research note this week.
Compounding the threat, the very measures that are required to contain the outbreak — quarantines, reduced travel, an avoidance of crowds and gatherings — are sure to stifle economic activity.
The resulting slowdown across the globe has undercut the price of oil, intensifying pressure on energy producers and likely reducing business investment. And many U.S. companies, especially in the airline and energy industries, are heavily indebted and might have to respond to financial pressures by cutting expenses — including jobs.
Despite rebounding Friday on President Donald Trump’s declaration of a national emergency to try to help stem the health crisis, the stock market remains in a bear market — the Dow Jones Industrial Average has shed nearly 22% in just a month — which stands to further dim the confidence of consumers. Investors whose stock market wealth shrinks typically become less likely to spend much.
“You can take to the bank that we’re going to have negative growth in the second quarter,’’ said Nathan Sheets, chief economist at PGIM Fixed Income.
Recessions are defined informally as two consecutive quarters of economic contraction. It isn’t yet clear whether the coronavirus inflicted enough economic damage from January to March to turn GDP negative for the quarter or how deeply the harm will spread into the April-June quarter.
“It’s pretty close now to a 50-50 proposition as to whether we see two quarters of negative growth,” Sheets said. “Even if that condition is not technically satisfied, it’s going to feel pretty bad. It’s going to feel recessionary.’’
Officially, the U.S. unemployment rate remains just 3.5%, a half century low. During the Great Recession of 2007-2009, companies responded to a deteriorating economy by aggressively slashing jobs. This time, Sheets suspects that most of them will hold off on layoffs in hopes that the virus and its economic damage will subside in just a few months. If, however, many companies across the country were to cut jobs, the blow to the economy would worsen. In addition, the slowdowns in Asia and Europe, which are closely intertwined with the U.S. economy, are sure to weaken growth in the United States.
Intervention by the Federal Reserve, by slashing interest rates, and Congress, by moving toward approving financial aid to people affected by the crisis, could help mitigate the economic hardship. So would a relatively swift containment of the virus.
For now, though, the uncertainty is distressing businesses across the country. When Austin’s South by Southwest gathering was canceled, Brent Underwood’s 20-bed hostel lost about 20% of its annual income.
“I’m not sure how we’ll keep our employees,” Underwood said. “I’m not sure how we’ll keep our manager of four years. I’m not sure how we’ll keep the business open.”
Normally, the hostel also receives bookings from people attending events at the University of Texas, and in the fall, from the annual Austin City Limits music festival. Underwood fears his income will suffer further if the university’s graduation and the festival are canceled. He would like to cut expenses. But most of his costs are fixed, including a property tax bill due this month.
Andy Cooley has already had to cut the hours of three of the six workers at his printing company, Central Press in Millbrook, New York, because the foundations, hospitals and schools that are some of his major customers are canceling events. He’s lost orders for printing invitations and programs.
“Earlier today, I received a call cancelling all printing related to a fundraiser happening in May,” Cooley said. “I understand they have to do what they have to do, but the ripple effect is exactly that — we all feel the effect.”
Economists say the U.S. economy has never faced a moment quite like this one. The 9/11 terrorist attacks 19 years ago, devastating as it was, caused only a short-lived downturn. And it presented consumers with starkly different challenge:
“Then the patriotic thing was go out and spend,’’ said Louise Sheiner, policy director for the Brookings Institution’s center on fiscal and monetary policy and a former Federal Reserve economist. “Now, the patriotic thing to do is not go out… It’s like something we’ve never seen.’’
Thomas Grech, CEO of the Queens Chamber of Commerce in New York, urged residents who aren’t quarantined to patronize neighborhood restaurants and corner stores.
“You’ve got to eat,’’ Grech said. “Keep these guys alive because my fear is, if they close, they may not reopen.’’
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Wiseman reported from Washington.
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AP staff writers Joyce M. Rosenberg, Jennifer Peltz and Deepti Hajela in New York contributed to this report.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.
Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.
The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.
Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”
Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.
Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.
This report by The Canadian Press was first published Sept. 10, 2024.
