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Why GOP can't reopen the economy without Democratic buy-in – CNN

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But the party’s efforts face a paradoxical hurdle: The economy can’t regain much momentum without the participation of big Democratic-leaning metropolitan areas, where both local officials and average residents remain more skeptical about quickly unwinding social distancing measures.
In almost all of the swing states likely to decide the winner in the 2020 presidential race, the largest metropolitan areas account for at least two-thirds, and in several cases more than four-fifths, of the state’s employment and economic output, according to a new analysis by the Brookings Institution’s Metropolitan Policy Program provided exclusively to CNN.
Mayors in many of those metropolitan areas — particularly in states such as Georgia, Texas and Arizona with Republican governors committed to rapidly restarting the economy — have raised alarms about reopening too quickly.
And polls, including last week’s national CNN survey, have consistently found that concern about reopening too fast is greatest among Americans living in large urban communities, which continue to face the highest death tolls from the outbreak, even as it spreads more widely into smaller places.
Three weeks after opening, Georgia business owners chart their own course forward
“The concentration of the economy in bigger, denser, more science-oriented places becomes a real ceiling on effective reopening,” says Mark Muro, senior fellow and policy director at the Metropolitan Policy Program. “Metropolitan economic elites are well informed about the risk and may simply refuse to participate in what they may view as a precipitous opening. This is where behavior is going to have a large say, rather than political or policy positions.”
The daunting equation facing Trump and Republican governors is that no matter how many restrictions they lift on the small-town and rural areas that have become their strongholds, both the national and state economies have little prospect of regaining critical mass unless the GOP can greatly accelerate reopenings in the big metro areas that have been moving away from them politically.
As former Atlanta Democratic Mayor Kasim Reed told me recently, “What the current environment shows is that Republicans need Democratic cities to drive the economy.”

Metro concentration

This dynamic is the result of long-term trends intersecting with the course of the virus.
The long-term trend is greater concentration of economic activity in the nation’s largest metro areas in recent decades. While smaller communities remain heavily dependent on the 20th-century economic powerhouses of agriculture, manufacturing and energy extraction, all of which peaked decades ago in the number of jobs they support, the high-skill, high-paying digitally oriented jobs associated with the 21st-century information economy have increasingly converged on big urban areas with large numbers of well-educated workers.
Large urban areas are also the center of high-end business services (like banking and legal), entertainment, travel, higher education and health care.
In many states, these trends have allowed the large metropolitan areas to soar economically so far past small-town and rural regions that analysts often describe local conditions as a tale of two states.
In a recent study, for instance, the “Urban Lab” at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin noted that what it called “the Texas Triangle — the great region bounded by San Antonio/Austin in the southwest, Houston in the southeast, and Dallas/Fort Worth in the north” accounted for the vast majority of the state’s economic output, attracted 98% of its venture capital and generated much higher wages than the state’s rural areas.
“It is a tale of two Texases,” the group wrote, “one, an urban powerhouse with a rising knowledge economy that craves more educated talent; and the other, smaller towns and open ranges whose legacy agriculture, manufacturing, and oil extraction businesses are contracting.”
The new Brookings data prepared for CNN show how widespread this pattern of metro concentration has become across America, including in the states that both sides consider most likely to decide the 2020 presidential election. Using federal Bureau of Economic Analysis data, Brookings at my request analyzed the share of employment and economic output generated by metropolitan areas of 500,000 people or more in nine states high on the 2020 target list for each party.
The results, Muro said, showed that “in virtually all cases the state is heavily dependent on at least one major metro and in most cases several.”
In Pennsylvania, for instance, larger metropolitan areas account for nearly 95% of the state’s economic output and 89% of its jobs. The Philadelphia metro alone accounts for nearly three-fifths of the state’s output and almost exactly half of its jobs.
The Phoenix area accounts for nearly three-fourths of Arizona’s output and jobs, with the total metro contribution (including Tucson) rising to about 86% of each. In Georgia, Atlanta provides two-thirds of the output and three-fifths of the jobs, with smaller metros raising those numbers slightly higher. In Texas, Dallas and Houston combine for about 55% of output and jobs, and the other large metros raise the share to about three-fourths of the total.
Large metros account for at least four-fifths of total economic output in Florida and Ohio, nearly three-fourths in North Carolina and about two-thirds in Michigan, where Detroit alone contributes about half. The big metros generated only a slightly smaller share of the jobs across those states, (except in Ohio where they contained slightly more.)
Only in Wisconsin, the least urbanized of the major swing states, did large metros account for less than half of the state’s economy, and even there the numbers for Milwaukee and Madison combined still reached 46% of output and 42% of jobs.
Economic experts across these states agree that they can’t regain cruising speed without a revival in these dynamic metro areas. For Texas, there will be no recovery “without those places restarting and getting out in front of this,” says Steven Pedigo, director of the LBJ School’s Urban Lab. “We have this frontier mentality but at the end of the day we are an urban state. The growth triangle is what has kept the state moving and growing.”
Likewise, Jeff Rosensweig, who directs a program on business, public policy and government at the Emory University business school in Atlanta, says flatly that “there’s really no way the state can recover unless there’s a lot more activity going on in Atlanta.”
But these are exactly the places where the disease has hit hardest. William Frey, a Brookings Institution demographer, has painstakingly documented the spread of the disease over the past few weeks into smaller communities, including many that Trump carried in 2016. But urban centers and their inner suburbs still account for two-thirds of all counties facing elevated caseloads, according to Frey’s calculations.
In Arizona, Maricopa County, centered on Phoenix, accounts for just over half of the state’s cases. In Michigan, where the outbreak appears to be finally ebbing, Detroit and its politically pivotal suburbs of Oakland and Macomb counties have accumulated almost two-thirds of the state’s cases.
Philadelphia and its four big suburban counties have likewise experienced almost three-fifths of Pennsylvania’s total. Economist Jed Kolko recently calculated that death rates remain the highest, by far, in the urban centers of large metropolitan areas — even when excluding New York City from the numbers.

Urban residents still feel cautious

A variety of data sources — from cell phone tracking devices to activity at online restaurant reservation services — show that in communities of all sizes of Americans are edging back into the economy as states loosen restrictions. But several recent polls have consistently found residents of large urban areas expressing more caution than those in rural areas about returning to anything approaching normal activity.
In last week’s national CNN survey, for instance, only 36% of urban residents said they felt comfortable resuming their normal routines, much less than the 55% of rural respondents who expressed such confidence, according to figures provided by CNN polling director Jennifer Agiesta.
And while a slight majority of rural residents said in the survey that the worst of the outbreak was behind us, a 55% majority of urban residents said the worst was still to come. The two groups offered mirror-image verdicts on Trump’s handling of the outbreak, with three-fifths of urban residents disapproving and three-fifths of rural residents approving. On all three questions, suburban residents fell in between, though generally much closer to the urban respondents.
Polling released earlier this month by the nonpartisan Pew Research Center likewise found that nearly three-fourths of urban residents said they worried that states would lift restrictions too fast (rather than too slowly), and only 1-in-6 said there should be fewer restrictions in their areas right now. Rural residents were considerably more likely to say that they worried about lifting restrictions too slowly and wanted fewer limits today (although in each case only about one-third of rural respondents took those positions).
These contrasting experiences and attitudes have fueled a second wave of conflicts over reopening between Republican governors and state legislative majorities whose political base is centered on smaller communities and the primarily Democratic leadership of the largest metro areas. Republican governors in Georgia, Texas and Arizona, as well as other states, have preempted Democratic mayors in their largest cities from continuing stay-at-home rules.
Texas GOP Gov. Greg Abbott conspicuously invalidated an ordinance in Harris County (Houston) imposing fines on people who would not wear masks in public. Acting on a legal challenge brought by GOP legislators, the Republican majority on the Wisconsin state Supreme Court last week struck down an extension of the statewide stay-at-home order imposed by Democratic Gov. Tony Evers (in a ruling cheered by Trump). Republican legislators in Michigan are pursuing similar litigation against the statewide order imposed by Democratic Gov. Gretchen Whitmer.

Little change in big cities

But the concentration of economic activity in the biggest cities suggests this is something of a pyrrhic victory for Trump and the GOP. In Wisconsin, local officials in Milwaukee and Madison, the state’s two most economically vibrant regions, immediately reimposed stay-at-home orders. “The immediate implication” of the state’s most bustling economic centers opting out of reopening “is a very slow recovery” for Wisconsin, says David Ward, an economic consultant in the state.
Remaining closed isn’t an option for mayors in the states where GOP governors have precluded stronger local action. But Democratic mayors and county officials in urban centers such as Atlanta, Austin, Dallas, El Paso and Phoenix have publicly expressed concerns that the restrictions are being lifted too fast.
In Phoenix, Democratic Mayor Kate Gallego posted a video on Friday urging residents to continue “to stay home as much as possible” and to wear masks whenever they are outside — just days after Republican Gov. Doug Ducey held a photo op lunch with legislators in a Phoenix restaurant where none of the participants wore a mask. Asked why Gallego continues to urge caution, Annie DeGraw, her communications director, said, “We are still so far behind on testing that it’s hard for us to even get a handle on where the virus is, where the hot spots are.”
Ducey’s office did not return a request for comment. Though state health officials have organized a testing “blitz” each Saturday in May to accompany reopening, Arizona has ranked at or near the bottom of the 50 states in the number of coronavirus tests conducted per capita.
Reed, the former Atlanta mayor, predicts that economic activity in big cities will lag so long as mayors remain unconvinced that reopening is safe. “I think you will continue to see the public defer to the local mayor, and that’s the signal that everybody will be waiting to hear from,” he said. “So while the economy is opening, I don’t think there is anywhere near the level of activity you would have if the mayor of Atlanta or Houston or San Antonio were in line with the governor’s policies.”
A new study led by Harvard economist Raj Chetty similarly concluded that “consumer spending, employment … the number of small businesses that are open, and time spent at work” changed little in Georgia, South Carolina and other states after their governors lifted stay-at-home orders.
Muro likewise expects a slow reemergence in the big population centers. He says he’s had repeated conversations over the past week with economic development groups in major metropolitan areas around the country that are skeptical of the rapid restart that Trump and many governors are promoting.
“I can tell you in the last 36 hours I’ve had multiple conversations with very senior CEO groups very, very concerned about what’s coming out of their governor’s office,” he said. “Metro business elites tend to prefer a science-based, prudent, graduated approach to these issues. … There is just a very visceral sense of caution.”

Cities bluer and small towns redder

These economic trends have a clear political overlay. While Trump has solidified the GOP’s hold on small-town and rural America, he’s accelerated its decline inside the largest metro areas. In 2016, he lost the nation’s 100 largest counties by a combined margin of around 15 million votes, and in 2018 the GOP lost House seats in a wide array of white-collar suburbs around cities from coast to coast.
In virtually every state, the largest metropolitan areas, which are driving economic innovation and growth, have become the clear backbone of the Democratic electoral coalition, while the GOP has grown more reliant on squeezing bigger margins out of smaller places that have not benefited as much from the new dynamics.
For years, a cadre of conservative-leaning urban critics have predicted that residents and businesses eventually will flee the expensive housing and high taxes of the big-city centers and relocate to red-leaning areas on the metropolitan fringes.
Now some of those same voices say the vulnerability to contagion exposed by the pandemic — combined with the outbreak’s spurring of telecommuting — will propel an exodus from the dense population centers. That might happen to some extent, Muro acknowledges, though he believes the underlying economic forces encouraging the “clustering” of talent and investment capital remain too powerful to significantly reverse.
But whatever the long-term prognosis, the economic dominance of the largest metro areas won’t diminish between now and November. And that means Trump can’t hope to truly revive the economy without more buy-in from the communities and voters who were the most skeptical of him from the outset — and have been the most badly battered by the outbreak this year.

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The extreme impacts from the lockdown economy: Morning Brief – Yahoo Canada Finance

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Monday, June 1, 2020” data-reactid=”16″>Monday, June 1, 2020

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Employment down, savings up, and an uncertain summer for the U.S. economy

June is here.

And as summer has arrives across the country, so too does something resembling a resumption of economic activity.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="We’ve noted recently that economic data has stopped getting worse, building the case that the most severe impacts of the lockdown-related economic stoppage are behind us.” data-reactid=”22″>We’ve noted recently that economic data has stopped getting worse, building the case that the most severe impacts of the lockdown-related economic stoppage are behind us.

But this still leaves the economy a long way from healed.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="As Bank of America outlined in a note last month, the current recovery is likely to play out in three phases: lockdown, transition, recovery. We are now in the transition phase. But what this phase might look like continues to be informed by some of the jarring data coming out of the economy’s March-April lockdown phase.” data-reactid=”24″>As Bank of America outlined in a note last month, the current recovery is likely to play out in three phases: lockdown, transition, recovery. We are now in the transition phase. But what this phase might look like continues to be informed by some of the jarring data coming out of the economy’s March-April lockdown phase.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="What we know is that tens of millions of workers have lost jobs. Last Thursday, initial jobless claims data brought total filings for unemployment insurance since this crisis began to north of 40 million.” data-reactid=”25″>What we know is that tens of millions of workers have lost jobs. Last Thursday, initial jobless claims data brought total filings for unemployment insurance since this crisis began to north of 40 million.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="And on Friday, the April data on personal income, outlays, and savings served as another stunning entry in the history books. In response to mass unemployment, we know that consumers saved at a record rate, cut spending at a record rate, and saw incomes rise due to enhanced unemployment benefits passed through the CARES Act.” data-reactid=”26″>And on Friday, the April data on personal income, outlays, and savings served as another stunning entry in the history books. In response to mass unemployment, we know that consumers saved at a record rate, cut spending at a record rate, and saw incomes rise due to enhanced unemployment benefits passed through the CARES Act.

Taken together, this data really tells the simplest story of what happened in the U.S. economy during the most severe stage of this crisis — millions of people lost jobs and saved every penny they could as a result. How we go forward from here will be informed by fiscal policy, the spread of the virus, and how many workers are re-employed quickly.

“Consumer spending fell off a cliff in April, collapsing by 13.6% [month-over-month] while the annual momentum plunged to its weakest pace on record,” Lydia Boussour, senior U.S. economist at Oxford Economics, said in a note to clients. “Meanwhile greater benefit payments temporarily lifted income momentum to its strongest pace on record.”

The CARES Act boosted personal income in April while spending rose at a record pace amid massive job losses during the most severe stage of shelter-at-home policies hurting economic activity. (Source: Oxford Economics)
The CARES Act boosted personal income in April while spending rose at a record pace amid massive job losses during the most severe stage of shelter-at-home policies hurting economic activity. (Source: Oxford Economics)

Boussour added that, “Amid extreme uncertainty, the savings rate spiked from 12.7% to 33.0% — the highest rate ever. This underscores how the global coronavirus recession is leading to more frugal consumer behavior which will dampen the recovery. This is particularly true as the boost from social benefits will gradually erode over time leaving households more financially constrained.”

And so it seems that Congress was able to keep U.S. consumers afloat while shelter-at-home policies and fears about the future kept most of those excess dollars coming into consumer stashed away. Savings during this initial phase of the pandemic and the recession could, it seems, help boost the economy into the second half of the year.

Michael Gapen at Barclays said in a note published Friday that, “under the assumption households have not spent the entirety of safety net payments already, the potential good news in the report on April personal income is that households have, on net, likely accumulated sizeable cash savings that could be spent in upcoming quarters should the U.S. economy successfully emerge from economic lockdowns.”

April’s personal income and spending data, then, serves as evidence of the consumer holding what amounts to economic dry powder as we emerge from shelter-at-home policies.

How quickly the labor market heals, however, is likely to be more important in shaping how eager consumers are to resume consumption in the months ahead.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This coming Friday, the May jobs report is expected to show the unemployment rate rose to 19.6% last month with another 8 million Americans losing their jobs, according to estimates from Bloomberg. In the view of some economists, the stubbornly high level of initial jobless claims shows that businesses which initially closed on a temporary basis early in this crisis are now closing permanently.” data-reactid=”45″>This coming Friday, the May jobs report is expected to show the unemployment rate rose to 19.6% last month with another 8 million Americans losing their jobs, according to estimates from Bloomberg. In the view of some economists, the stubbornly high level of initial jobless claims shows that businesses which initially closed on a temporary basis early in this crisis are now closing permanently.

The more time that passes without answers for businesses and consumers, the more these temporary disruptions become permanent. Which is the whole story of the “transition” economy and the summer of 2020 — how many temporary changes can be prevented from becoming permanent.

The fewer the better. And the clock is ticking.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="By&nbsp;Myles Udland, reporter and co-anchor of&nbsp;The Final Round. Follow him at&nbsp;@MylesUdland” data-reactid=”52″>By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

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South Korea Unveils $62 Billion 'New Deal' to Reshape Post-Virus Economy – BNNBloomberg.ca

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(Bloomberg) — The South Korean government unveiled a 76 trillion won ($62 billion) ‘New Deal’ spending plan to reshape the economy in the aftermath of the pandemic after slashing its growth forecast for the year.

The plan, first outlined by Moon in April, aims to refocus the economy through 2025 by supporting job growth and new industries. It will partly be funded by a third extra budget now being drafted, according to a statement on the policy outlook for the second half.

The extra spending will help an economy forecast to grow by just 0.1% this year, the slowest expansion since the 1998 Asian financial crisis. The latest projection was more optimistic than the contraction expected by the Bank of Korea and private economists, but the government acknowledged downside risks to its view should a second virus wave emerge.

South Korea’s trade-dependent economy is suffering as the pandemic hits overseas markets. New virus clusters have also sprung up at home, raising fear among the public and potentially hindering a domestic recovery. President Moon Jae-in’s administration has so far announced 250 trillion won in measures to prop up the economy, including direct support, loans and funds to stabilize financial markets.

While previous measures have been focused on helping the economy ride out the pandemic, the government’s long-term spending plan envisions the creation of 550,000 jobs by 2022. The plan seeks to have 100,000 specialists in artificial intelligence and software programming.

Some 31 trillion won will be spent on the project by 2022, when Moon’s term ends. Another 45 trillion won will be spent by 2025.

The focus is to promote the use of fifth generation wireless networks and artificial intelligence across industries and foster digitalization in South Korea’s least developed areas. Investment will also support startups focusing on green technologies, while the country seeks to make its manufacturing sector more energy-efficient.

South Korea to Make 5G, AI Centerpieces of ‘Korean New Deal’

Part of the new-deal fund will be used to retrain workers and expand employment insurance for universal coverage.

To accelerate South Korea’s economic recovery this year, the government said it will use funds from the upcoming extra budget to issue discount coupons to encourage spending. It will also lower the consumption tax on car purchases during the second half of the year. Tax incentives will be offered to companies that increase investment by more than their average in the past three years, the statement said.

The government said inflation will probably slow to 0.4% this year, slightly better than the BOK’s 0.3% estimate. It sees zero job growth, down from 300,000 in 2019. Exports are expected to fall 8% this year while imports drop 8.7%.

©2020 Bloomberg L.P.

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South Africa partly lifts lockdown to try to fix battered economy – The Guardian

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By Tim Cocks

JOHANNESBURG (Reuters) – South Africa partly lifted a two month-old coronavirus lockdown on Monday, letting people outside for work, worship, exercise or shopping, and allowing mines and factories to run at full capacity to try to revive the economy.

President Cyril Ramaphosa was widely praised when he ordered one of the world’s strictest lockdowns at the end of March, confining people to their homes, forcing miners and manufacturers to slash operations by half, and banning the sale of alcohol and cigarettes.

But the measures have battered the economy of Africa’s most industrialised nation, which was already in recession before the virus, owing mostly to power cuts at its dysfunctional state provider, Eskom.

The central bank expects it to contract by 7% this year.

The government hopes Monday’s move to “level 3” lockdown will sputter businesses to a start. It will inevitably increase the number of coronavirus infections, which over the weekend jumped past 30,000.

“The move to level 3 … marks a significant shift in our approach to the pandemic,” Ramaphosa was quoted in South Africa’s Independent as saying on Sunday at an editors’ forum.

South Africa has so far had fewer than 700 COVID-19 deaths, while vastly more people – half of whom live below the official poverty line – are at risk from hunger because of the shutdown.

Industry officials said the outlook for the manufacturing sector remained bleak, despite the opening up. Output fell for the ninth consecutive month in February.

Philippa Rodseth, executive director of the Manufacturing Circle association, said she expected demand to come “first and foremost in medical textiles and equipment and PPE (personal protective equipment), although that’s not going to contribute to overall aggregate demand”.

Ramaphosa’s move to re-open so quickly, long before new COVID-19 infections reach their peak, has been controversial.

Schools had been ordered to open on Monday for the last years of primary and secondary school, but teachers’ unions and governing associations urged their staff to defy the order, saying schools were not equipped to keep staff and pupils safe.

The education ministry backed down late on Sunday, saying pupils would only return the week after next. Teachers will report this week for training and to receive protective gear.

However, Western Cape province, which is run by the opposition Democratic Alliance, announced that its schools would re-open for those grades as planned on Monday, because they were well-equipped.

The province is the main coronavirus hotspot, with two thirds of cases.

The Marxist main opposition Economic Freedom Fighters (EFF) have meanwhile accused authorities of sacrificing poor and vulnerable workers to the interests of a wealthy elite.

The EFF and others have also criticised the government’s decision to re-open churches and other places of worship if they limit to 50 people, despite the risks of spreading the virus.

(This story corrects to make clear central bank expects economy to contract by 7%, not 4%).

(Additional reporting by Nqobile Dludla and Alexander Winning; Editing by Nick Macfie)

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