Pandemic Journal (# 13): World Economic Recession 

The COVID-19 pandemic has caused a global economic recession (if not depression). Many people have lost their jobs. Stores are closing. Governments are facing huge reductions in tax collections and thus big reductions in expenditures or large deficits.

In the U.S. alone, as of April 18, 33 million people recently have filed applications for unemployment insurance benefits. Moreover, “Some economists expect a fresh surge of claims in future weeks as workers who were previously unable to file because of backlogged state systems are counted, and as states begin to accept applications from people who are newly eligible.” Economists believe that the national unemployment rate for April  could reach 20%.[1]

On April 24, the U.S. Congressional Budget Office forecasted a $3.7 trillion federal government deficit, a 5.6% U.S. economic contraction and an unemployment rate of nearly 12% by year’s end.[2]

“Laid-off workers need money quickly so that they can continue to pay rent, and credit card bills and for groceries. If they can’t, the hole that the larger economy has fallen into ‘gets deeper and deeper, and more difficult to crawl out of.’” As a result, many banks are confronting defaults on  loans and mortgages.

“Pain is everywhere, but it is most widespread among the most vulnerable. For example, 52 percent of low-income households — below $37,500 a year for a family of three — said someone in the household had lost a job because of the coronavirus, compared with 32 percent of upper-income ones (with earnings over $112,600) [while] forty-two percent of families in the middle have been affected as well. Those without a college education have taken a disproportionate hit, as have Hispanics and African-Americans.”

J.P. Morgan “sees GDP in the U.S. falling at an annualized rate of 40% in the three months through June, the eurozone tumbling 45%, with the U.K. economy expected to contract by 59.3% and Japan by 35%. Some forecasts are for a relatively quick rebound, though the outlook depends on how quickly and thoroughly the coronavirus can be contained.”[3]

On April 24, President Trump signed into law for $484 billion of relief for small businesses and hospitals and for expansion of coronavirus testing capacity.[4]

Here is local bit of good news. On April 27, the State of Minnesota will be allowing the opening of manufacturers and offices that don’t have face-to-face interaction with clients and weren’t deemed critical industries that were exempt from the stay-at-home order. Roughly 20,000 companies in this category with 100,000 employees now have the option to reopen if they complete and publicize plans to maintain social distancing, worker hygiene and workspace cleanliness. On the other hand, HealthPartners, a Minnesota-based nonprofit group operating seven hospitals, dozens of clinics and a large health insurance business, announced that it was furloughing 2,600 workers due to suspension of nonemergency surgeries.[5]

Bill Gates, the wealthy co-founder of Microsoft and now co-chair of the Bill & Melinda Gates Foundation, has said that the U.S. and other countries would be aided in returning to normal if we were able to make the following innovations. Create coronavirus tests that are self-administered. Adopt consistent standards about who gets tested. Implement consistent, reliable means for contact tracing. Voluntary adoption of digital tools that help one remember where you have been and whom you have contacted. Develop drugs for treating the virus. Develop a vaccine and a fair, effective way for its distribution and use.[6]

Conclusion

 While I worry about all of the unemployed, their families and the general condition of the U.S. (and global) economies, I am grateful that I am retired and thus not personally involved in these wrenching struggles.

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[1] Chaney & Guilford, Millions of U.S. Workers Filed for Unemployment Benefits Last Week, W.S.J. (April 23, 2020); Cohen, Jobless Numbers Are ‘Eye-Watering’ but Understate the Crisis, N.Y. Times (April 23, 2020); Siegel & Van Dam, 4.4 million Americans sought jobless benefits last week, as economic pain continued across the United States, Wash. Post (April 23, 2020); Rugaber, 26 million have sought US jobless aid since virus hit, StarTribune (April 23, 2020); Taylor, Coronavirus relief pushing US deficits to staggering heights, Assoc. Press (April 24, 2020); Kiernan, Coronavirus Projected to Trigger Worst Economic Downturn Since 1940s, W.S.J. (April 24, 2020).

[2] The federal budget will be nearly $4 trillion in 2020, the C.B.O. says, N.Y. Times (April 24, 2020).

[3] Hannon & Sparshott, Global Economy Hit by Record Collapse of Business Activity, W.S.J.(April 23,2020).

[4] Duehren & Hughes, House Approves $484 Billion bill to Aid Small Business, Hospitals, W.S>J. (April 23, 2020).

[5]  Olson & Horwatt, Restrictions could be lifted on up to 100,000 Minnesota workers by Monday, StarTribune (April 24, 2020); Snowbeck, COVID-19 fallout: HealthPartners to furlough 2,600 workers, StarTribune (April 24, 2020).

[6] Gates, Here are the innovations we need to reopen the economy, Wash. Post (April 23, 2020)economic recession

 

Pandemic Journal (# 13): World Economic Depression

The COVID-19 pandemic has caused a global economic depression. Many people have lost their jobs. Stores are closing. Governments are facing huge reductions in tax collections and large deficits.

In the U.S. alone, as of April 18, 33 million people recently have filed applications for unemployment insurance benefits. Moreover, “Some economists expect a fresh surge of claims in future weeks as workers who were previously unable to file because of backlogged state systems are counted, and as states begin to accept applications from people who are newly eligible.” Economists believe that the national unemployment rate for April  could reach 20%.[1]

On April 24, the U.S. Congressional Budget Office forecasted a $3.7 trillion federal government deficit, a 5.6% U.S. economic contraction and an unemployment rate of nearly 12% by year’s end.[2]

“Laid-off workers need money quickly so that they can continue to pay rent, and credit card bills and for groceries. If they can’t, the hole that the larger economy has fallen into ‘gets deeper and deeper, and more difficult to crawl out of.’” As a result, many banks are confronting defaults on  loans and mortgages.

“Pain is everywhere, but it is most widespread among the most vulnerable. For example, 52 percent of low-income households — below $37,500 a year for a family of three — said someone in the household had lost a job because of the coronavirus, compared with 32 percent of upper-income ones (with earnings over $112,600) [while] forty-two percent of families in the middle have been affected as well. Those without a college education have taken a disproportionate hit, as have Hispanics and African-Americans.”

J.P. Morgan “sees GDP in the U.S. falling at an annualized rate of 40% in the three months through June, the eurozone tumbling 45%, with the U.K. economy expected to contract by 59.3% and Japan by 35%. Some forecasts are for a relatively quick rebound, though the outlook depends on how quickly and thoroughly the coronavirus can be contained.”[3]

On April 24, President Trump signed into law for $484 billion of relief for small businesses and hospitals and for expansion of coronavirus testing capacity.[4]

Here is local bit of good news. On April 27, the State of Minnesota will be allowing the opening of manufacturers and offices that don’t have face-to-face interaction with clients and weren’t deemed critical industries that were exempt from the stay-at-home order. Roughly 20,000 companies in this category with 100,000 employees now have the option to reopen if they complete and publicize plans to maintain social distancing, worker hygiene and workspace cleanliness. On the other hand, HealthPartners, a Minnesota-based nonprofit group operating seven hospitals, dozens of clinics and a large health insurance business, announced that it was furloughing 2,600 workers due to suspension of nonemergency surgeries.[5]

Bill Gates, the wealthy co-founder of Microsoft and now co-chair of the Bill & Melinda Gates Foundation, has said that the U.S. and other countries would be aided in returning to normal if we were able to make the following innovations. Create coronavirus tests that are self-administered. Adopt consistent standards about who gets tested. Implement consistent, reliable means for contact tracing. Voluntary adoption of digital tools that help one remember where you have been and whom you have contacted. Develop drugs for treating the virus. Develop a vaccine and a fair, effective way for its distribution and use.[6]

Conclusion

While I worry about all of the unemployed, their families and the general condition of the U.S. (and global) economies, I am grateful that I am retired and thus not personally involved in these wrenching struggles.

===============================

[1] Chaney & Guilford, Millions of U.S. Workers Filed for Unemployment Benefits Last Week, W.S.J. (April 23, 2020;); Cohen, Jobless Numbers Are ‘Eye-Watering’ but Understate the Crisis, N.Y. Times (April 23, 2020); Siegel & Van Dam, 4.4 million Americans sought jobless benefits last week, as economic pain continued across the United States, Wash. Post (April 23, 2020); Rugaber, 26 million have sought US jobless aid since virus hit, StarTribune (April 23, 2020).

[2] The federal budget will be nearly $4 trillion in 2020, the C.B.O. says, N.Y. Times (April 24, 2020).

[3] Hannon & Sparshott, Global Economy Hit by Record Collapse of Business Activity, W.S.J.(April 23,2020).

[4] Duehren & Hughes, House Approves $484 Billion bill to Aid Small Business, Hospitals, W.S.J. (April 23, 2020).

[5]  Olson & Horwatt, Restrictions could be lifted on up to 100,000 Minnesota workers by Monday, StarTribune (April 24, 2020); Snowbeck, COVID-19 fallout: HealthPartners to furlough 2,600 workers, StarTribune (April 24, 2020),

[6] Gates, Here are the innovations we need to reopen the economy, Wash. Post (April 23, 2020).

 

Minnesota Facing Slowdown in Labor Force Growth

The State of Minnesota currently is experiencing many positive economic circumstances. First, “most people who want a job have one, with the state’s unemployment rate floating around 3.4 percent. Meanwhile, nearly seven in 10 working-age Minnesotans either have or are looking for jobs, ensuring employers have a robust talent pool from which to hire.” [1] Second, smaller towns and cities in the rural parts of the State are affirmatively seeking younger people to move in. [2]

However, “[o]ver the next ten years, Minnesota is forecast to have far fewer people entering the labor force than previous decades — a problem for employers, who may have problems filling critical jobs as baby boomers retire and others drop out of the workforce.”

This problematic future was endorsed by Cameron Macht, a regional analysis and outreach manager at the Minnesota Department of Employment and Economic Development. He said, “It’s definitely a major issue for employers in the state, and looking forward it may become an even bigger deal.”

There are at least three key factors contributing to this problem.

First, working-age residents who are not working or looking for jobs now amount to about 30 percent of this group. “Many are in Greater Minnesota [the rural parts of the State], where in some counties nearly half of the adult population has dropped out of the workforce.”

Second, in excess of half of the state’s workforce dropouts are 65 and older — a number that is likely to increase as more baby boomers reach retirement age.

Third, roughly  60% of this group are women. Among those staying home, lack of sufficient childcare could be of concern, and Census data shows about a quarter of married couples with children under 18 reported at least one spouse outside the workforce.”

“Foreign-born populations also affect these rates, as they accounted for both a 60 percent jump in labor force growth from 2007 to 2017 but a 25 percent increase in those outside the workforce.”

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[1] Hargarten, Minnesota faces a labor growth slowdown. This data helps explain why, StarTribune (Sept. 1, 2019).

[2] Rural Minnesota Endeavoring To Attract Young People, dwkcommentaries.com (Sept. 2, 2019).

 

President Obama’s Strategic Timing of Announcement of U.S.-Cuba Reconciliation

With God’s leading or nudging the U.S. and Cuba to reconciliation, the timing of the announcement of that historic change on December 17th was due to more prosaic factors from the U.S. perspective.

Pressures for an announcement as soon as possible were several. The health of U.S. citizen, Alan Gross, was reportedly declining in a Cuban prison, and President Obama and Secretary of State John Kerry legitimately believed that reconciliation would be destroyed if he died in that prison. As we now know, the U.S. and Cuba had been engaged in secret negotiations for 18 months, and delaying the announcement ran the risk of a leak of the existence of the negotiations that would upset, if not destroy, the reconciliation. Less immediate was the upcoming Summit of the Americas in April 2015 with the U.S. needing to have a position on host country Panama’s invitation to Cuba to attend the Summit.

In addition, U.S. domestic political considerations pointed towards a December announcement before the Republican-controlled 114th Congress opened in early January and as soon as possible (the next day) after the adjournment of the 113th so that there would be no resulting interference with the completion of the many items of unfinished business of the current Congress. December also is the traditional time for exercise of presidential clemency (pardons and commutation of sentences), the latter of which was used for the release of the remaining three of the Cuban Five on December 17th.

All of these considerations suggest why the President on December 16th (the day before the announcement about Cuba) quietly signed the $1.1 trillion appropriation bill even though it contained a repeal of an important provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act regulating financial institutions that Senator Elizabeth Warren passionately resisted.  The President did not want a lack of funding to interfere with or torpedo the reconciliation.

Within a week of the announcement we learned that the U.S. GDP for the third quarter had increased 5.0%, the strongest quarterly performance in a decade, and the U.S. stock market reacted with a record close on December 23 with the Dow Jones Industrial Average at 18024.17, registering its 36th record close this year. Unemployment is below 6.0%. The FY 2014 deficit is below its 40-year average. The Affordable Care Act has reduced uninsured Americans by 25%, and overall health-care spending has slowed significantly. The U.S. Dollar is stronger against other world currencies. The federal government’s bailouts of banks and the auto industry that rescued the economy from a total collapse at the start of the Obama presidency were closed out with a net profit to the taxpayers of $15.4 billion. Low world oil prices help the American consumer and weaken regimes hostile to the U.S., especially Russia, Iran and Venezuela. An amazing economic performance! (Packer, A Pretty Good Year for Government, New Yorker (Dec. 23, 2014); Higgins, Oil’s Swift Fall Raises Fortunes of U.S. Abroad, N.Y. Times (Dec. 25, 2014).)

President Obama, using the “fourth quarter” analogy of his favorite sport of basketball, obviously has concluded that he would be engaged in a vigorous “fourth quarter” (the last two years of his eight years in office) to do as much as possible of what he believes to be in the national interest of our country. Indeed, at the first Cabinet meeting after the huge Republican victories in this year’s midterm election, Obama gave every Cabinet member a white card that said, “We are entering the fourth quarter, and really important things happen in the fourth quarter.” Timothy Egan, a New York Times’ columnist, says Obama has “been liberated by defeat” and “in finally learning how to use the tools of his office, Obama unbound is a president primed to make his mark.” He is “marching ahead of politicians fighting yesterday’s wars,” who are forced “to defend old-century policies, and rely on an aging base to do it.” Moreover, Obama now “has Pope Francis as a diplomatic co-conspirator,” leaving Republican opponents of Cuban reconciliation to try to lecture “the most popular man on the planet.”  (Osnos, In the Land of the Possible, New Yorker (Dec. 22 & 29, 2014); Eagan, Obama Unbound, N.Y. Times (Dec. 20, 2014).)

Finally the merits of reconciliation and these reflections on the timing of the announcement resurrect my personal support of the President. Given the Administration’s problems with the implementation of the Affordable Care Act and other administrative issues, I was beginning to think that Obama’s lack of prior administrative experience was a reason why he would not be the great President I expected him to be. Now, however, his achieving reconciliation with Cuba is a masterful demonstration of his intellectual, administrative and political skills.

Congratulations, Mr. President!