WASHINGTON, Jan. 2 (Xinhua) — After plunging into the worst recession in decades amid COVID-19 shutdowns in 2020, the U.S. economy has been recovering in recent months.
With alarming case spikes and a long-delayed fiscal relief package, however, the recovery momentum is slipping away. Overshadowed even more by a behind-schedule vaccine rollout, the country will only find an uncertain and challenging economic recovery ahead.
What’s worse, the economic pain inflicted by the pandemic has rippled unevenly across a variety of sectors, companies and communities, with certain service-intensive industries, smaller firms, and low-income Americans taking a disproportionate blow. Economists called this a K-shaped recovery, which widens inequality.
DEEP RECESSION, SLOW RECOVERY
Amid COVID-19 shutdowns, the U.S. economy shrank at an annual rate of 5 percent in the first quarter of 2020, ending a decade-long economic expansion after the 2008 global financial crisis.
Then the economy went into free fall, dropping at a revised annual rate of 31.4 percent in the second quarter as COVID-19 fallout, registering the largest decline since the government began the records in 1947.
Some 22 million jobs disappeared in March-April, pushing the employment rate up to a staggering 14.7 percent. Economists estimated that at least 100,000 small businesses permanently closed in the spring.
As COVID-19 swept the country, U.S. states, under pressure to reopen the economy, started to deliver plans in late April or early May, regardless of warnings from experts that many states were not yet well prepared due to lack of a plan for large-scale nationwide testing and tracing actions.
“The U.S. situation remains bad and confused, with an absence of a national-level strategy for suppressing the virus, and therefore with no reliable strategy for the economic recovery,” Jeffrey Sachs, economics professor at Columbia University and a senior United Nations advisor, told Xinhua in April 2020.
As businesses gradually reopened, the economy saw a robust rebound in the third quarter of 2020, expanding at a revised annual rate of 33.4 percent, though the performance still fell short of the pre-pandemic level.
Meanwhile, the unemployment rate has been falling, yet at a slowing pace in recent months. Weekly initial jobless claims, though largely trending down, increased in four weeks since the start of November, indicating a stalled recovery in the labor market.
The total number of COVID-19 cases in the United States topped 20 million on Friday, according to the Center for Systems Science and Engineering at Johns Hopkins University.
“The recovery is slowing down in the U.S. economy because of the surge in the coronavirus,” Adam Posen, president of the Washington-based think tank Peterson Institute for International Economics, recently told Xinhua via email. “The coronavirus surge was avoidable, but unfortunately our political leadership did not succeed in preventing it.”
LONG-OVERDUE RELIEF
As businesses and families grappled with the pandemic-induced recession, lawmakers approved a 2.2-trillion-U.S.-dollar relief package in late March 2020 to salvage the economy, followed by months of deadlock over the size and scope of the next bailout.
The two parties spent so long to reach a deal because some politicians in Washington considered it not a help for them to win the election, and House Speaker Nancy Pelosi decided to wait for a meaningful size package, Posen said.
Recent COVID-19 spikes and a slowing recovery piled extra pressure on the lawmakers, and they eventually passed a 900-billion-dollar COVID-19 relief package, along with 1.4 trillion dollars in regular government funding for the rest of the fiscal year.
The relief plan allows another round of direct payments for individuals and federal unemployment benefits, both at a reduced level, as well as more funding for the Paycheck Protection Program to support small businesses, and for schools, testing and the distribution of vaccines.
U.S. President Donald Trump, in a last-second statement, asked Congress to boost stimulus checks to 2,000 dollars each for individuals. Democrats embraced the outgoing Republican president’s call, but it was frowned upon by some Republicans. After a hold-up of the legislation for days, Trump signed the bipartisan package into law on Sunday night.
While the long-awaited relief package will likely cushion the impact of COVID-19, economists and some lawmakers considered it not enough to bolster the economy, calling for more aid measures and efforts to reign in the virus.
Officials of the U.S. Federal Reserve forecasted the country’s economy to contract by 2.4 percent in 2020, better than a previous projection in September 2020 of a 3.7-percent decline. For this year ahead, the central bank predicted a 4.2-percent growth.
“Though state revenues have been coming in better than feared, the absence of additional aid will lead to spending cuts and layoffs,” Ryan Sweet, senior director at Moody’s Analytics, said in an analysis, adding that the latest stimulus will likely help avoid a double-dip recession.
K-SHAPED RECOVERY
The United States is going through a K-shaped recovery, as some sectors, companies and workers fared fine or even better after the downturn while the rest experienced a steep decline, U.S. President-elect Joe Biden and some economists said.
Specifically, industries like technology and retail recovered fairly well, but travel, entertainment and food services continued to hover at a low level, with the virus keeping people at home.
A Washington Post article showed that between April and September of 2020, 45 of the 50 most valuable publicly traded U.S. companies turned a profit, but that the majority of firms cut staff and gave the bulk of profits to shareholders.
Meanwhile, low-income families, those without a college degree, and Black and Hispanic Americans were hit hardest by the pandemic and are largely still struggling to recover, said a Pew Research Center survey released in September.
U.S. Federal Reserve Chair Jerome Powell has repeatedly stressed that the burden of the virus-induced economic downturn is not evenly spread. “Those taking the brunt of the fallout are those least able to bear it,” he said.
“Recessions always accelerate inequality,” Posen told Xinhua. “In some ways, this recession is less unequal because of the size and breadth of the unemployment assistance, and because some lower-wage workers have retained their jobs in critical services, unlike in a usual recession.”
In some ways, however, “this recession is more unequal than others because the very wealthiest (top 5 percent or 1 percent) are gaining disproportionately from their equity shares in companies gaining market power,” he added.
Posen said the prospect for the U.S. economy from April through December 2021 is quite good, with the situation expected to improve after the distribution of vaccines.
“What I am unable to forecast confidently is how bad things get between now and the spring with widespread vaccine distribution, and how many people — mostly women — who dropped out of the labor force to look after children and family members are able to come back into employment,” he said. Enditem
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.
