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Welcome to the worst economy ever – CNN

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This is the worst economy ever. That’s according to Federal Reserve Chairman Jerome Powell, who previewed some truly awful economic data headed our way when he spoke to reporters Wednesday.
“We are going to see economic data for the second quarter that is worse than any data we have seen for the economy,” Powell said. “There are direct consequences of the disease and measures we are taking to protect ourselves from it.”
It’s worse for minorities than for white Americans. Powell noted that a few months ago, the US labor market was the best ever for minorities. But as stay-at-home orders have shuttered restaurants, movie theaters, retailers and many other businesses, a disproportionate number of non-white Americans have lost their jobs.
“It is heartbreaking, frankly, to see that all threatened now,” Powell said of previous gains in non-white unemployment.
Read a deep dive into the economic data for the first part of the year, when the coronavirus stopped a booming economy in its tracks.
Health care hurt the economy. But not for the reason you think. Incredibly, one of the biggest drivers of decline was the health care industry. As hundreds of thousands of Americans contracted a deadly virus, overwhelming hospitals in New York especially, it was the suspension of money-making elective procedures that created one of the biggest hits to the economy.
Nonessential health care, essential meat processing. While much of the economy remains shut by the government, President Donald Trump essentially deemed meat processors essential to national security and has said, despite safety concerns, that they must stay open.
Tyson Foods, one of the largest meat processors, has promised two $500 bonuses for some workers. And they are ramping up safety in their plants.
It’s notable, however, that a good portion of the workers in meat processing plants are immigrants and minorities.
Read this story from CNN Business, which quotes a meat plant worker who tested positive for Covid-19 and doesn’t think many of his coworkers will return to the shuttered plant at the moment:
“I’m still trying to figure out: What is he going to do, force them to stay open? Force people to go to work?” he asked.
Human sacrifice zones. David Michaels was the Assistant Secretary of Labor for Occupational Safety and Health during the Obama administration. He slammed Trump’s executive order during an appearance on CNN.
“What President Trump has done is said, ‘We solved the bottleneck, we’re going to make you stay open,'” Michaels said. “It is a disaster for workers. We’re making these workplaces, these meat packing plants into human sacrifice zones.”

Very good news

There’s great hope about a drug called remdesivir to treat Covid-19. And the government broke normal protocol to tell us all about it.
Recovering more quickly — New data suggests patients with severe Covid-19 who took remdesivir could recover faster than patients who didn’t take it, the National Institute of Allergy and Infectious Diseases said Wednesday.
Fauci feels good — “The data shows that remdesivir has a clear-cut, significant, positive effect in diminishing the time to recovery,” said the institute’s director, Dr. Anthony Fauci.
It’s not a 100% recovery rate, but… — “Although a 31% improvement doesn’t seem like a knockout 100%, it is very important proof of concept,” Fauci said. “What it has proven is that a drug can block this virus.”
Telling us early — Normally, data about a drug’s efficacy wouldn’t be released this early from a preliminary trial.
But “whenever you have clear-cut evidence that a drug works, you have an ethical obligation to immediately let the people in the placebo group know so that they can have access,” Fauci said.

‘Operation Warp Speed’

The Trump administration is launching a project to accelerate the development of a potential coronavirus vaccine, a senior administration official told CNN’s Jim Acosta. The project, called “Operation Warp Speed,” has the goal of manufacturing hundreds of millions of doses that can be made available to Americans by the end of the year, the official said. Read more here.
This is great! And I don’t want to complain about it (I suggested a real-deal Manhattan Project in this newsletter this week). But why are they just now doing this? Why didn’t they do this months ago, before tens of thousands of Americans died?

Trump and Kushner have their own reality

On Tuesday, Trump told a reporter the US would soon be able to meet a Harvard-researcher-recommended benchmark of 5 million tests per day.
That same day Trump’s person in charge of testing said that would never happen.
“There is absolutely no way on Earth, on this planet or any other planet, that we can do 20 million tests a day, or even 5 million tests a day,” Adm. Brett Giroir, the assistant secretary of health, told Time Magazine.
He called the Harvard recommendation an “Ivory Tower, unreasonable benchmark.”
A great success? Really? Presidential adviser and son-in-law Jared Kushner bragged about the level of testing in the US during an interview on Fox News. He predicted much of the country would essentially be back to normal in June, and called the whole thing a success.
“Now that the tests are out there, it’s really about scaling supply chain, really in a historic manner and pace. So somebody asked me why it took so long, you should look at how did we do this so quickly? What’s really happened, it’s really extraordinary. So we don’t want to let Dr. Fauci down and we will make sure we get enough tests into the market,” he said.

Data vs. decisionmaking

It does not appear any states have met the vague White House-endorsed benchmark of 14 days of downward virus trajectory. About half are starting to open up anyway.
Among the notable openers — Georgia and Texas — there has certainly not been a decrease.
We’ve actually got a chart for new infections in every US state. See them here.
And while anyone looking objectively at the curve of infections and deaths might wonder why things have plateaued, Kushner says that “we are on the other side of the medical aspect of this.”
State of denial still. CNN’s Stephen Collinson put it extremely well (as he always does), when he stated the clear fact that Trump still doesn’t grasp the enormity of this:
Humanity is facing three crises at the very least — medical, economic and social — that will cause financial and geopolitical reverberations for years. The grim state of the economy was underscored Wednesday morning when it was reported that first-quarter GDP fell 4.8%, the worst contraction since the Great Recession.
Yet Trump says he sees “light at the end of the tunnel” and acts as if America is nearly home free.

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Swiss Economy Slumps the Most in Decades – Yahoo Canada Finance

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Swiss Economy Slumps the Most in Decades

(Bloomberg) — Switzerland’s economy slumped the most in at least four decades as a result of the coronavirus pandemic, with private consumption and investment plummeting.

First-quarter gross domestic product plunged 2.6%, data from the State Secretariat for Economic Affairs showed. That’s worse than the 2.1% hit forecast by economists in a Bloomberg survey and the biggest three-month contraction since the start of the time series in 1980.

Like neighboring France, Italy and Germany, Switzerland responded to the pandemic by winding down much of public life. The hotel and restaurant sector experienced a 23.4% drop in output, according to the data on Wednesday.

Although the Swiss economy fared slightly worse than Germany’s in the first quarter, the contractions in France and Italy were far more severe.

Swiss government subsidies have kept a lid on unemployment and helped companies avoid a cash crunch, but the SECO still expects the economy to shrink 6.7% this year before staging a slow recovery in 2021.

Machine industry group Swissmem said that 80% of its member companies were forced to apply for short-time work, and that the full impact of the pandemic wouldn’t be felt by the sector until the second or third quarter of this year.

To prevent the rallying haven franc from hurting the economy still further, the Swiss National Bank has stepped up the pace of its currency interventions. Its deposit rate is already at a record low of -0.75%.

(Updates detail on hospitality sector in 3rd paragraph)

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Australia Economy Contracts as End to Recession-Free Run Looms – BNNBloomberg.ca

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(Bloomberg) — Australia’s economy contracted in the first three months of the year, setting up an end to the nearly 29-year run without a recession as an even deeper slowdown looms for the current quarter.

Gross domestic product fell 0.3% from the final three months of 2019, the first quarterly drop since 2011, compared with a forecast 0.4% decline, statistics bureau data showed in Sydney Wednesday. From a year earlier, it expanded 1.4%, matching estimate

The result sets up an end to Australia’s record run of avoiding two consecutive quarters of negative GDP, having dodged recessions during the 1997 Asian Financial Crisis, the Dot Com Bubble and the 2008 global financial crisis. The current quarter will see a deep contraction, with almost 600,000 jobs lost in April alone and much of the economy in lockdown to contain the coronavirus.

Fiscal and monetary policy are working in tandem to rebuild the economy. The Reserve Bank of Australia has taken the cash rate near zero and lowering the cost of borrowing with its 0.25% bond yield target. The government has injected tens of billions of dollars into the economy to help tide businesses and households through the lockdown.

With the containment of the health crisis allowing activity to resume, how quickly businesses can get back on their feet, workers regain employment and households resume spending is the critical question.

“The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely,” RBA Governor Philip Lowe said Tuesday after keeping borrowing costs unchanged.

“However, the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the pandemic is likely to have long-lasting effects on the economy,” he said. “In the period immediately ahead, much will depend on the confidence that people and businesses have about the health situation and their own finances.”

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Australia’s Economy Contracts, Ending Three-Decade Expansion – Yahoo Canada Finance

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Australia’s Economy Contracts, Ending Three-Decade Expansion

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(Bloomberg) — Australia’s economy contracted in the first three months of the year, setting up an end to a nearly 29-year run without a recession as an even deeper slowdown looms for the current quarter.

Gross domestic product fell 0.3% from the final three months of 2019, the first quarterly drop since 2011, brought down by a collapse in household spending, statistics bureau data showed in Sydney Wednesday. Economists had forecast a 0.4% drop. From a year earlier, the economy expanded 1.4%, matching estimates.

The Australian dollar edged a little lower after the release, and traded at 69.32 U.S. cents at 1:06 p.m. in Sydney.

The result sets up an end to Australia’s record run of avoiding two consecutive quarters of shrinking GDP, having dodged recessions during the 1997 Asian Financial Crisis, the Dot Com Bubble and the 2008 global financial crisis. The current quarter will see a deep contraction, with almost 600,000 jobs lost in April alone and much of the economy in lockdown to contain the coronavirus.

Treasurer Josh Frydenberg, speaking after the release, accepted this fate when asked directly whether the economy is now in recession.

“The answer to that is yes,” he told reporters. “That is on the basis of the advice that I have from the Treasury Department about where the June quarter is expected to be.”

Fiscal and monetary policy are working in tandem to rebuild the economy. The Reserve Bank of Australia has taken the cash rate near zero and lowered the cost of borrowing with its 0.25% bond yield target. The government has injected tens of billions of dollars into the economy to help tide businesses and households through the lockdown.

With the containment of the health crisis allowing activity to resume, the critical question is how quickly businesses can get back on their feet, workers regain employment and households resume spending.

“Growth should resume in the September quarter, but the impact of COVID-19 will surely cast a long and lingering shadow over the global economy and Australia’s recovery,” said Callam Pickering, an economist at global jobs website Indeed Inc. who previously worked at the central bank. “Continued support from fiscal and monetary policy will be necessary throughout 2020 and beyond.”

Today’s report showed:

Household spending tumbled 1.1%, shaving 0.6 percentage point off GDP, driven by a 2.4% drop in services expenditure. Restrictions particularity impacted spending on travel, hotels, cafes and restaurantsGovernment spending jumped 1.8%, adding 0.3 percentage point. Payments to provide support during the pandemic are expected to rise in the current quarterThe savings ratio advanced to 5.5% from a downwardly revised 3.5% in the fourth quarterDwelling construction fell 1.7%, reflecting continued weakness in approvalsNon-mining business investment fell 1.7%, while mining investment rose 3.6% as miners invest in new technologies and automation

Rising commodity prices are boosting miners’ profitability, with the terms of trade 2.9% higher in the first three months of 2020, pushing the current account surplus to a record A$8.4 billion ($5.8 billion). Yet, miners will be keeping a watchful eye on the nation’s currency, which has surged almost 20% in the past two-and-a-half months.

What Bloomberg’s Economists Say

“Typically backward looking national accounts releases contain an array of hidden trends that are often overlooked. Mining investment has climbed to a 7-year high, Australia’s terms of trade have risen and exploration intentions are elevated. This bodes well for the recovery.”

James McIntyre, economist

The economic outlook is improving as the restrictions are lifted, but will continue to be constrained by closed borders that are hitting tourism and education exports. The government is discussing a fresh round of fiscal stimulus to try to put residential construction back on its feet.

(Updates with Treasurer and economist comments)

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