The coronavirus pandemic and ensuing global lockdowns led to fears of a systemic meltdown, but the recovery in the U.S. and around the world has been stronger — and faster — than many predicted. But will it last? Looking at the sectors of the U.S. economy more closely, we can divide it into three parts that were impacted very differently: Sectors that were largely unaffected by Covid (ex: finance and housing); sectors that were impacted by lockdowns, but not social distancing that bounced back relatively quickly (ex: autos and durable goods); and sectors that are won’t be able to meaningfully recover until there’s a vaccine (ex: hospitality, travel). We’ve largely exhausted the “easy” phase of the recovery and the next leg hinges on that third group of sectors.
The economic impact of coronavirus continues to surprise. In the spring, previously unimaginable shutdowns pushed economic activity to unimaginable lows. After the initial shock, however, perhaps the biggest surprise has been how fears of systemic meltdown remain unfulfilled — the initial bounce back was far stronger and sooner than expected, and some sectors of the U.S. and other economies have seen complete recoveries to pre-crisis levels of activity.
While the stronger-than-expected recovery aligns with the business experience of many leaders we speak with, they still wonder what drove the gap between expectations and reality — and whether it can last. To answer these questions, we need to look at various recession types and their drivers, how Covid-19 fits in, and what this cycle’s idiosyncrasies are.
Fears Unfulfilled, Hopes Surpassed
As the coronavirus forced the economy into shutdown, a brutal economic contraction unfolded, breaking many (negative) records in the process. Yet, the sustained impact was broadly overestimated — both systemically and cyclically — as the intensity of the shock fueled widespread economic pessimism.
Systemic fears were captured in the popular prediction of a new Great Depression, which would bring sovereign defaults, banking system collapse, and price deflation. Yet after a wobble prices stabilized, sovereign borrowing costs broadly fell across the world despite expansive borrowing, and the banking systems has shown few signs of liquidity problems. (In fact, after hoarding capital banks are looking to return capital again.) The broader systemic fears remain unfulfilled and never looked as perilous as in 2008.
As systemic fears remained unfulfilled, cyclical fears also have proliferated. Unemployment — a cornerstone gauge of economic health — was expected to stay at high levels in the U.S. past the end of 2021. Analysts predicted waves of bankruptcies, a weakening housing market, and a potential collapse after an initial recovery in a “W”-shaped manner.
Yet, here too the surprises have been to the upside. While still unacceptably high, unemployment fell much sooner and faster than thought: By September U.S. unemployment was lower than it was expected to be by the end of 2021. Housing showed remarkable resilience — with prices barely dipping and activity and sales bouncing back to or near the highs since the housing crisis. Many parts of the U.S. economy have returned to pre-crisis levels of activity. Indeed, as the 3Q GDP release last Thursday highlighted, over the last three months growth has been the highest ever recorded. While this does not indicate that the U.S. economy has returned to health or to pre-crisis levels of activity, it is testament to an extraordinarily vigorous rebound after a historically negative second quarter.
These patterns are true around the world: Economic surprise indices, which show an amalgamation of the differences between realized and expected performance, have spiked to record highs everywhere — with the exception for China, where expectations for a full recovery were the baseline.
Why the Covid Recession Outperformed Expectations
While many business leaders have seen these dynamics unfold in real time, they seek to understand the drivers that explain it in order to better see the path ahead. Charting recoveries remains exceptionally difficult (if not as difficult as predicting recessions), but there is value in thinking about the types of recession, their drivers, and impact — as well as about the idiosyncrasies that will shape the remaining recovery path.
There are three dimensions of economic recessions which – when taken together – can help frame the dynamics of recovery. The Covid recession displays distinctive characteristics within this framework that help explain much of what has been on display:
Recession nature. This captures the underlying force — for example, an investment bust, a financial crisis, a policy error or an exogenous shock — that’s afflicting the economy. Despite its brutal intensity, the Covid shock is preferable to an investment bust or a financial crisis that were at the heart of the last two recessions (2001 and 2008/09) because it comes without an overhang of excess investment to work off, which is what delays the onset of recovery and weighs on its trajectory. Indeed, the biggest risk of an exogenous shock is that it morphs into a systemic crisis (traditionally, the fear would be a financial crisis).
Policy response. This decisively shapes the recovery path and is a clear silver lining of the Covid recession. The speed, feasibility, and effectiveness of fiscal policy has been demonstrated, above all in the U.S. There remains a common misperception that virus caseloads and Covid deaths are strict determinants of economic performance. In reality, the correlation is weak — precisely because a strong economic policy response effectively bridges some of the economic damage from less successful virus control efforts. Think of how U.S. efforts at virus control largely failed relative to other rich nations — in Europe, for example — yet U.S. real growth has still come out ahead. The much bolder U.S. policy effort explains that outcome. Yet, the ultimate impact of policy is to prevent a different type of contagion — household and firm bankruptcies and a wobbly banking system — and this is where structural damage comes in.
Structural damage. This is the key determinant of a recession’s shape. When a recession leads to a collapse in capital expenditures and pushes workers out of the labor force, an economy’s productive capacity declines. That’s what happened in the U.S. in 2008 as the financial crisis disrupted capital stock growth and made it much harder to return to pre-crisis levels. The Covid recession is more favorable in this respect as there is no “overhang” from the last expansion which did not see excesses in investment or lending that now has to be worked off. Additionally, the fast policy response — unlike in 2008 — contained bankruptcies and drove a strong V-shape recovery in capital goods orders. So far, the Covid recession looks likely to have avoided major structural damage.
It’s quite possible that we were prepared for the worst with the Covid recession because the late and sluggish recovery from the Great Recession is still on our minds. And using the drivers outlined above we can see why: It started as an investment bust that turned into a financial crisis, which in turn impaired financial sector balance sheets and household balance sheets. This was met with a policy response that was quite delayed and kicked in after significant damage was already done. If that serves as in an implicit baseline for how recoveries play out, then the better than expected Covid trajectory should not surprise us.
Can the Covid Recovery Continue to Surprise to the Upside?
To gauge the next leg of recovery we need to go beyond the above drivers – think of them as the necessary foundations for a continued strong recovery – and look at the idiosyncrasies of the Covid recession for sufficient conditions that show how the strength could be delivered.
Looking at the sectors of the U.S. economy more closely, we can divide it into three parts that were impacted very differently given the nature of the virus-driven recession. This suggests the “easy” phase of recovery is exhausted:
Sectors unaffected by Covid, such as housing and utility consumption, financial services, and off-premise food. Using a household budget as an analogy, you can think of these as “fixed costs” that cannot be reduced easily. This amounts to about 46% of U.S. consumption and never dipped.
Sectors affected by lockdowns, but not by social distancing, such as autos and other durable goods. These sectors took a big hit from physical lockdowns, but once those were lifted, they bounced back strongly, often fully — and sometimes even exceeding pre-crisis levels. These sectors represent about 16% of the U.S. consumption.
Sectors that are directly vaccine dependent, such as transportation, recreation, and food service. Some of these sectors bounced back after the lockdown, while others remain unable to meaningfully recover to pre-crisis activity levels because of the risk of exposure to the virus. These sectors represent about 38% of U.S. consumption.
The next leg of a strong recovery thus hinges on that third group of sectors as the recovery potential of the second group is largely exhausted (and the first never dipped). This really moves the question of vaccines front and center. A timeline for the creation of a safe, effective vaccine that provides immunity for a significant time and can be rolled out quickly is fraught with uncertainty. Currently crowdsourced forecasts project a reasonable expectation that a vaccine will become available and meaningfully distributed (i.e. to those most vulnerable and those most at risk of spreading the virus) around Q2 2021.
How It Could All Go Wrong From Here
Neither the necessary nor the sufficient conditions outlined above are guaranteed. A lot can go wrong, and indeed fears of another economic collapse are common in public discourse.
The truly bad scenario is often captured in warnings about a “W-shaped” recession, which would imply another phase of negative growth. In other words, after the collapse (Q2) and the very strong bounce (Q3) we would need Q4 (or Q1 2021) to be a second window of negative growth.
How likely is this scenario? It would almost certainly require a renewed surge of the virus and stringent lockdown that would hamper the second group of sectors. Hospital capacity will prove the ultimate constraint on policy makers’ balancing act between keeping economic activity high and the population safe. While another lockdown is possible, as we’re seeing in Europe, in the U.S. selective shutdowns are more likely given political dynamics, leaving room for growth to stay above zero.
And while positive growth remains our expectation for Q4 and 2021, a host of other risks lingers. A continued failure to extend fiscal stimulus measures could diminish the slope of recovery — or in the extreme turn it negative. A broader political failure — perhaps related to a contested election outcome — is also on the list of risks.
What It Means for Businesses
In times of crisis it’s tempting to be pessimistic and fearful, particular if the drivers are unfamiliar or the risks pose credible systemic threats. However, this inclination to pessimism and retreat also carries risks itself and we should remind ourselves that 14% of firms across all sectors typically grow both revenues and margins during downturns. This is not just idiosyncratic luck — i.e. being in the right sector and seeing a demand boost because of the nature of the crisis — it’s driven by a firm’s ability to see beyond the acute phase of a crisis and exploit its idiosyncrasies to drive differential growth in new areas. While monitoring the overall macro landscape remains important, leaders should not underestimate the importance of measuring, interpreting, and exploiting the dynamics of their own sectors and markets in order to be able to invest and flourish during the recovery and the post-crisis period.
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San Diego Padres outfielder Tommy Pham is expected to make a full recovery after being stabbed in the lower back Sunday, the team announced Monday.
Pham was attacked during an incident outside an establishment, the San Diego Union-Tribune reported, citing unnamed sources. Per the report, an argument involving people Pham didn’t know was ongoing near Pham’s car, and when he asked the people to move away from his car, he was stabbed.
The newspaper reported that the wound pierced all three layers of skin but did not reach any other organs. He underwent surgery on the affected area, per the Union-Tribune, and the Padres announced that he was in good condition Monday afternoon.
The team added that the San Diego Police Department is investigating the incident.
Pham added in a statement released through the club, “I’d like to thank the incredible medical staff at UC San Diego Health for taking such great care of me last night. I truly appreciate the hard work of the (San Diego Police Department) as well as they continue their search for the suspects. While it was a very traumatic and eye-opening experience for me, I’m on the road to recovery and I know I’ll be back to my offseason training routine in no time.”
Pham, 32, joined the Padres from the Tampa Bay Rays in a multiplayer trade last December, and he hit .211 with three homers and 12 RBIs in 31 games during the 2020 regular season. He went 9-for-24 (.375) with a homer and three RBIs in six playoff games.
A 15th-round draft pick of the Cardinals in 2006, Pham finally debuted with St. Louis in 2014. He played with the Cardinals through July 31, 2018, when he was dealt to the Rays.
In 577 career games, Pham has a career .273 average with a .369 on-base percentage, a .463 slugging percentage, 82 homers and 251 RBIs.
FILE PHOTO: The Chief Economist of the Bank of England, Andy Haldane, listens from the audience at an event at the Bank of England in the City of London, London, Britain April 27, 2018. REUTERS/Toby Melville
September 19, 2020
LONDON (Reuters) – Britain is recovering faster than anyone had expected from the economic impact of COVID-19, but businesses need better incentives and access to finance to invest in technology, Bank of England chief economist Andy Haldane said.
“UK GDP had, by July, recovered around half of its Covid-related losses, rebounding further and faster than anyone expected,” Haldane said in an article for the Mail on Sunday newspaper written jointly with the former chairman of John Lewis Partnership, Charlie Mayfield.
Britain’s central bank said in a policy statement on Thursday the economy was recovering faster than it had forecast in August, though prior to that several policymakers had struck a more cautious tone than Haldane.
Haldane said he was writing in his capacity as chairman of a government commission to boost economic productivity.
(Reporting by David Milliken; Editing by Chris Reese)
The Australian job market is gradually returning to pre-COVID levels, however the race to recovery is not equal among all states and territories.
According to SEEK’s August Employment Report, there are three distinct rates in which states and territories are recovering. Western Australia, South Australia, Tasmania and Northern Territory have either fully rebounded or were at levels comparable with August 2019, with the job market in Queensland, New South Wales and the Australian Capital Territory also remaining steady.
However, the Victorian job market showed a more dire result.
Impacted by the strict lockdown which has been in effect since July 7, the state reported a stark 17.6 per cent drop in job ads from July 2020 to August 2020 and a year-on-year dip of 56.1 per cent. This was also on top of a 12.8 per cent fall between June 2020 and July 2020.
“Victoria experienced a further decline in job ads in August, as we continue to see the impact of the lockdown on businesses,” said SEEK’s Managing Director Kendra Banks in a statement to news.com.au. “However, this is less than the drop Victoria had throughout the country’s first wave of COVID-19, which indicates businesses are finding new ways to operate and adapt to the situation.”
Nationally, although August was the first month since the beginning of the pandemic which saw job ads decline by 2 per cent, this was mainly driven by Victorian numbers. Excluding Victoria, the total amount of job ads actually rose by 1.8 per cent.
AUGUST JOB AD VOLUMES BY EACH STATE
– Western Australia, up 7.9 per cent month-on-month, up 4.2 per cent year-on-year
– South Australia, up 8.5 per cent month-on-month, up 3 per cent year-on-year
– Tasmania, up 7.8 per cent month-on-month, up 2.7 per cent year-on-year
– Northern Territory, up 9.2 per cent month-on-month, down .07 per cent year-on-year
– Queensland, down 1.2 per cent month-on-month, down 14.2 per cent year-on-year
– Australian Capital Territory, down 3.9 per cent month-on-month, down 22.1 per cent year-on-year
– New South Wales, up 1.7 per cent month-on-month, down 30.6 per cent year-on-year
– Victoria, down 17.6 per cent month-on-month, down 56.1 per cent year-on-year
– Australia, down 2 per cent month-on-month, down 29.1 per cent year-on-year
When it came to which industries were looking for new hires, healthcare and medical, information and communication technology and manufacturing, transport and logistics topped the list.
Human resources and recruitment, and banking and financial services also rose by 12 and 7 per cent. Some of the in-demand positions listed in these sectors include compliance and risk officers, retail and branch members and financial planners.
However, it was the advertising arts and media industry which showed the largest month-on-month growth of 16 per cent. This news comes after the Australian Bureau of Statistics revealed in April 2020 that the arts and recreation sector was the worst hit by shutdowns. At the time, research from the Grattan Institute estimated the unemployment rate for those employed in the creative and performing arts sector could rise to 75 per cent. This figure nearly tripled the national estimate that 26 per cent of the Australian workforce would lose their jobs due to the COVID-19 shutdowns.
Currently, Australia is in recession for the first time since 1974 with the Reserve Bank of Australia estimating unemployment to peak at 10 per cent.
This article was created in partnership with SEEK.
Canada’s economy added 245,800 jobs in August, a fourth-straight month of gains that has recouped nearly two thirds of employment losses from the pandemic.
The hiring lowered the jobless rate to 10.2 per cent, from 10.9 per cent in July, and brings the number of jobs recovered since the height of the pandemic to 1.9 million.
Canada lost 3 million jobs in March and April. Economists had forecast a 250,000 increase and an unemployment rate of 10.2 per cent in August.
While the initial quick recovery in Canada’s labour market is welcome, economists predict it will fade, with many of those initially displaced by the pandemic already back at work and the economy as open as it can be for now.
The latest numbers capture the reopening of Toronto, Canada’s biggest city and one of the last to ease restrictions due to high COVID-19 counts. Ontario posted 142,000 new jobs last month.
But without any further lifting of COVID-19 restrictions anytime soon, future job gains are likely to be gradual.
Of the August gains, 205,800 were in full-time and 40,000 part-time.
China’s appetite for Australian tropical rock lobsters is recovering but export demand is still well down on normal levels and prices remain low, according the country’s largest producer.
MG Kailis is Australia’s largest producer of tropical rock lobsters, or painted crayfish
A quota of 195 tonnes is hand-caught between Cairns and Papua New Guinea and sent almost exclusively to export markets in China and the US
Demand for the luxury item remains down but the industry is still selling product with the help of federally-funded freight flights
MG Kailis Group, which accounts for nearly the entire 195-tonne quota in Queensland’s lucrative east coast and Torres Strait fisheries, was forced to ground its fleet and lay off 40 crew members in January.
But after a two-month shutdown, divers have been back in action for about four months in the remote waters of Far North Queensland extending from Cairns to Papua New Guinea.
The company’s fishing operations manager, Leon Evans, had been overseeing regular unloads in the port of Cooktown, but admitted the appetite for live lobster in China was a long way from where it was.
“Our lobster is primarily a sashimi-style lobster so therefore, being a luxury item, people are a little less likely to go out and spend money on high-end products like that, so the demand’s still there but it’s not as good as it was,” he said.
“We’ve had to stagger our unloads around how much we could actually fit on planes and we were down to one plane there for a long time and that was a bit of a heart-in-the-mouth type moment.”
BERLIN (Reuters) – German tax receipts stabilized in July with the expected plunge in fiscal revenues caused by lockdown measures to contain the COVID-19 pandemic proving less steep than originally feared, the finance ministry said on Thursday.
Tax receipts of the federal government and the 16 regional state governments edged down by 0.3% year-on-year after tumbling in the previous months, the ministry said in its monthly report.
The German economy, Europe’s largest, contracted at its steepest rate on record in the second quarter as consumer spending, company investment and trade collapsed during the peak of the coronavirus pandemic.
From January to July, tax revenues fell 8%, less than an estimated drop of nearly 10% for the whole year, the finance ministry said.
The ministry pointed to recent increases in industrial output and exports, adding that business and consumer sentiment surveys also pointed to a further improvement.
“For the coming months, industrial production is expected to recover further,” the ministry said.
The government said in April it expected the economy to shrink by 6.3% this year and rebound in 2021 with an expansion of 5.2%. This means that the economy is unlikely to reach its pre-crisis level before 2022.
The government is expected to update its growth forecasts and tax revenue estimates in September.
Chancellor Angela Merkel and Finance Minister Olaf Scholz hope that a massive stimulus package, worth more than 130 billion euro ($155 billion) including a temporary VAT cut to boost domestic demand, will help the economy return to growth.
Parliament has suspended the constitutionally enshrined debt brake, allowing the federal government to increase annual new borrowing by a record 217.8 billion euros this year.
(Reporting by Michael Nienaber; Editing by Madeline Chambers)
“I got the all clear from the surgeon the other day with the CT scan but he wants me to wait another month to make it six months from the date of injury, just to be sure,” Currie said.
“It’s hard for them to tell when it’s fused … (if I was to fall) whether it is ready to cop an impact like that.”
Currie was in top form prior to the setback, riding feature wins for power stables Tony and Calvin McEvoy, Ciaron Maher and David Eustace and Godolphin.
But the forced outage has in effect rejuvenated the nine-time Group 1 winner.
“I have been removed from that (COVID toll on winter racing), which might be a blessing in disguise, I’ll come back refreshed and hopefully be able to pick up a few rides over the spring,” Currie said.
“I’m looking forward to hopefully getting back on Hanseatic … to trial him and possibly ride him again this time in, I’d like to.”
Currie has pounded the pavement to get back up to speed, along with doing weights and the exercise bike.
Racing Victoria also loaned the jockey a mechanical horse to use.
“I have been doing quite a lot of running the last month and half because the first three months I was in a neck brace and couldn’t really do anything,” Currie said.
“I’ve built it up to 60km a week now … and a bit on the bike, I can’t ride a normal bike just in case I fall off.
“It’s a shame with the pools closed (due to COVID), I always liked to use the pool a fair bit, so probably means I’m doing a bit more running.”
MORE RACING NEWS
Currie still experiences some numbness, “a different sensation” in his left thumb and two fingers, which “may never go away”.
“It doesn’t affect my strength or anything, it’s just a different feeling,” Currie said.
“It’s there but it’s not an inconvenience at all … (it’s) definitely not stopping me from doing anything at the moment, but the test will be when I do get back to track work.”
Currie has kept busy with his daughters, a four-year-old and six-month-old, but the appetite for racing has not diminished since the setback.
“I broke my neck before and it probably weighed on me more then, than it does now,” Currie said.
“Obviously no-one wants to fall off and hurt themselves, but I’m no more chance of falling off now than anyone else, or what I was 12 months ago.
“If I could ride work now I would be back at the track tomorrow.”
A critically-ill man from the New South Wales South Coast has twice been denied an exemption from undergoing quarantine in a “dirty” hotel in Sydney, despite medical advice he self-isolate at home.
Stephen Evans was diagnosed with stage four oesophageal cancer in April 2018.
While he underwent surgery and chemotherapy in Australia, Mr Evans was last month granted special permission by the Department of Home Affairs to go to Germany for a highly-specialised lung procedure not available in Australia.
Mr Evans’s procedures over his lifetime, including the latest operation in Germany, have left him immunocompromised.
Over the years he has had half his oesophagus removed, a third of his stomach and part of his lungs.
Because of these special circumstances, Mr Evans’s doctors recommended that upon his return to Australia he should self-isolate on his rural property in Broulee, in order to safely recover.
His doctors also argued it would be difficult for him to undergo quarantine in a hotel since he had to sleep in a specially designed, elevated bed, and cook specialist food.
But NSW Health have now twice denied that request, saying Mr Evans has to remain in hotel quarantine for the designated 14 days.
‘If I lie flat I can die in my sleep’
Mr Evans flew to Germany on June 22, had surgery on June 23, and was released from intensive care to return to Australia late last week.
He assumed that, because the Department of Home Affairs had granted special permission to travel to Germany, he would be able to comply with quarantine measures at home.
Since returning to Australia, Mr Evans said his recovery had been difficult.
He is on a strict diet due to his condition and said he had not been able to eat properly since entering hotel quarantine.
“It has taken me two years to learn what I can eat,” he said.
“We ordered some food from Woolies and we wanted to get a toaster and a little frying pan so we could cook what I can eat.
“They went through our bag and took our little fry pan and toaster away.”
Mr Evans is also unable to sleep in the hotel bed.
“I have to sleep in a chair,” Mr Evans said.
Two doctors have separately written to NSW Health outlining Mr Evans’ condition and the threat to his life if he is not quarantined in his own home.
The requests were denied on all occasions.
Doctors appeal to NSW Health for exemption
In a letter to NSW Health, seen by the ABC, Mr Evans’ oncologist wrote it was “without doubt” in his medical interests to self-isolate at home.
“Stephen has been dealing with life-threatening cancer and now needs to recover from major surgery,” the doctor wrote.
“Stephen has consistently and diligently adhered to all medical advice throughout his treatment course with me … I do not have any reason to doubt his compliance with a minimum of two weeks of strictly adhered self-isolation at home.”
Another doctor and Mr Evans have also written to the NSW Quarantine Exemption Unit outlining his conditions and requirements.
“Stephen was only released from intensive care less than a week ago,” Mr Evans’s GP said.
In one of the letters sent in reply to Mr Evans, NSW Health said allowing him to leave self-isolation could endanger the community.
“A senior NSW Health Medical Officer, acting as a delegate of the Minister of Health and Medical Research, has carefully considered the reasons for your request and considered the risks to the community,” the letter read.
“I regret to advise you that your request for exemption is not provided.”
In a follow-up letter, a spokesperson from NSW Health said: “Unfortunately after the new information was reviewed we are still unable to grant your exemption.
“We understand completing hotel quarantine is challenging with your current medical condition however we need to balance this with the requirement to implement the Public Health (COVID-19 Air Transportation Quarantine) Order 2020.”
Property burnt down during Black Summer bushfires
Most of Mr Evans’ farm was destroyed in the Black Summer bushfires. After spending much of the year rebuilding his home, he said being stuck in hotel quarantine was not another problem he needed.
If allowed home to self-isolate, he would be spending that time in a caravan on the property that had been specially tailored to his needs.
“It is completely wrong, and every doctor and nurse that I have talked to since I have been back cannot believe they have got me here,” he said.
“[The hotel] is just dirty, it might have had a deep clean but it is not what it should be.”
NSW Health did not answer the ABC’s specific questions about Mr Evans’s situation.
The department issued a statement saying that while they recognised hotel quarantine could be “difficult” for individuals, it was “a necessary step that has been taken for the safety and health of all NSW citizens”.
“NSW Health has established a dedicated team of senior clinicians who assess every request for exemption from hotel quarantine. This team must balance the need to keep the community safe with the needs of individuals who have returned from overseas,” the statement said.
“Requests for exemption are taken very seriously, and any request which is not granted is discussed in detail with each applicant.
“The health hotels are managed 24/7 by a team of medical, nursing and allied heath clinicians, and patients are also monitored by the virtual service run through Royal Prince Alfred Hospital.
“Anyone needing acute care in any hotel quarantine location is transferred to hospital.”