Nonfarm payrolls increased by 1.37 million in August and the unemployment rate tumbled to 8.4% as the U.S. economy continued to climb its way out of the pandemic downturn. CNBC’s Steve Liesman breaks down the data.
America’s Global Relations in the Time of COVID-19
America’s international relationships are always fluctuating. But perhaps now more than ever due to the impacts on globalization from COVID-19. China – until now has had very strong relationships with America, albeit strained. But what impact has COVID-19 had on that and will have on that for the future. In a recent Economic Times article, Deputy Secretary of State Stephen Biegun said:
“For a very long time, there had been a desire to extend to China special privileges and benefits, and even the benefit of the doubt among them, to bring China into a more modern and prosperous future. Twenty years ago when that initiative was launched in earnest with China’s entry into the World Trade Organization, the bet by most policymakers was that eventually, the weight of the institutions that China was joining would slowly redirect the Chinese political system and Chinese interests to a point where China would become much more invested in a rules-based order.”
And what about the rest of Asia? Japan has had diplomatic ties with the western giant since the late 1950s. But now – even without adding coronavirus to the mix – there is the departure of Prime Minister Shinzo Abe. According to an official statement, Abe has: “made the U.S.-Japan alliance, and our overall relationship, the strongest it has ever been.”
For close to 10 years, Abe has been a staunch friend of America. Once that partnership is gone, and give the issues China is now facing with America, this could severely impact the entire east-west alliance.
In addition, over the years America has become more dependent on Asian relations, especially Chinese ones, most notably in pharmaceutical and other related-health industries. But the pandemic is negatively effecting that now.
Economic Implications of COVID-19
COVID-19 has – and continues to have – a huge impact on America’s economy. A team from the BBVA Research has published its Q3 2020 Economic Outlook. Led by Nethaniel Karp, chief BBVA economist, the results found that the coronavirus has actually brought to the forefront previously concealed troubles in the economy. Indeed, it is believed that what we are now dealing with is potentially the worst recession since World War II.
The 2020 growth baseline has been maintained at -5.1 percent and 3.5 percent in 2021. And with no signs of the virus coming to a halt or a vaccine being found any time soon, there is no real sign that the economy will recover either. Some parts of the economy continue to reopen but there are many that remain shuttered. Many individuals are still concerned about venturing out which also doesn’t help the economy.
Nonetheless whatever kind of level of return to normal activity there is will be helpful. In addition, some US states will fare better than others depending on their level of infection and their willingness to come out and re-enter active life.
During the Pandemic are Any Industries Thriving?
Pretty much all the business and economic news over the last few months has simply been dire and grim to say the least. People and executives worldwide are despairing, feeling hopeless, wondering if they will ever get back into business again let alone thrive. Somehow though, some industries actually are thriving. Here, we take a brief look at three of them.
The first one is obvious: industrial cleaning chemicals. According to the Global Industrial Cleaning Chemicals Market, the industry size was measured at $16290m. By the end of 2026 it is anticipated that this figure will increase to $20930m. between 2021 and 2026, the CAGR will be 3.6 percent.
The second industry that is thriving and is predicted to continue to grow during the next few years is the delivery and takeout food. While it is anticipated that the restaurant industry will suffer a huge loss in the foreseeable future, take out food will have the opposite effect. One particular example of this is Beyond Meat, which has encountered a soaring of 194.9% in grocery sales during Q2 2020.
A third industry is the hair dyeing market. During the lockdowns people had to figure out what to do with their hair on their own – many for the first time ever. Experimenting with DIY hair dyeing kits became the norm and many of the big names such as Estee Lauder, Avon Products and L’Oreal witnessed an increase in sales in this area.
US Job Situation
There has finally been a drop in unemployment numbers. But this is not exactly a call to bring out the champagne. There has been such an increase in unemployment numbers within the last few months due to COVID-19 that it is quite hard not to see an increase. Let’s take a look at what some of this means.
Looking at the numbers for the end of June. Thankfully unemployment dropped to 11.1% (which is still very high). Nearly 5 million jobs were added in June which was a lot more than was estimated by economists. In addition, June marks the second consecutive month that there has been this level of growth…but it does have to be seen in context in that 20 million jobs were lost in April during lockdown.
But looking toward the future it has been recognized that since many more individuals are now working from home and businesses are allowing for this, more jobs will also be created. There will be more opportunity and wages could increase since there is less money being spent on office maintenance. This will definitely comprise some of the direction of the future.
America’s Economy: Looking Ahead
What will we learn from the experiences of COVID-19 when it comes to our business actions? According to Jim O’Neill, to be successful in the future firms will have to work on socio-environmental in conjunction with profit maximization. In this video he explains.
Coronavirus and US Consumer Confidence
Shockingly consumer confidence in the US economy is on the up according to the Consumer Confidence Index. In fact, it is highest since it has been in nearly 10 years. Economists are also surprised by this figure.
Bloomberg economists put the index at 90.5 but it was actually substantially higher at 98.1. According to Conference Board Senior Director Lynn Franco:
“The re-opening of the economy and relative improvement in unemployment claims helped improve consumers’ assessment of current conditions. Looking ahead, consumers are less pessimistic about the short-term outlook, but do not foresee a significant pickup in economic activity. Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it’s too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels.”
Another source of optimism is the White House’s call to bosses to make a “Pledge to America’s Workers,” in an effort to work toward the creation of more jobs and strengthening of the economy. To date – according to the White House – over 430 companies have signed it. A Press Release stated:
“The Coronavirus pandemic has highlighted the need to build and expand high-quality pathways that will lead to good jobs and rewarding careers for all Americans, especially those most affected by this crisis. The Trump Administration remains committed to supporting the millions of workers who need assistance right now while building a resilient, agile workforce for the future.”
How Long will it Really Take for the Economy to Bounce Back
In our last piece we spoke about how some finance experts believe that the American economy is bouncing back ahead of schedule. But now we have other experts predicting that it is going to be an extremely long haul and that the next 10 years will see the country recovering.
An analysis by the Congressional Budget Office indicating that a reduction in economic output in America over the next decade will reach $7.9 trillion. That damage – for now leaving aside inflation costs – will translate to $15.7 trillion. The CBO did however add a caveat, pointing out the huge level of uncertainty and unknown surrounding the pandemic.
Capital Economics Group Chief Economist Neil Shearing said:
“While the slump in output caused by the virus seems to have bottomed out, the recovery is likely to be slow going and uneven. Most economies are still likely to be below their pre-virus paths of GDP by the end of our central forecast horizon in 2022,”
He gave three reasons for this:
- Tremendous Loss: We tend to forget – as we see the economy recovering – that so much output was lost during lockdown.
- Consumer Spending Predictions: these remain unclear from high frequency data we are receiving.
- Reopening Worries: Governments and policy makers are still trying to figure out the best way to re-open, “shift[ing their decisions] from crisis mode to recovery.”
Another issue to consider – as pointed out by a recent Bloomberg analysis – is that while businesses are beginning to re-open, given that this is within a context of rising COVID-19 cases, panic is mounting and this will likely negatively impact the economic recovery as well.
Optimism on Post-COVID-19 US Economic Recovery
When the shutdown began due to COVID-19, stores and businesses worldwide were forced to close operations and thousands of people joined the unemployment lines, no one for a second imagined a recovery would be anything but traumatic. But there has been some good news for the US economy; it seems that recovery is happening and that it is actually ahead of the estimated schedule. In May of 2020 America gained 2.5 million jobs and unemployment actually dropped to 13.3 percent, rendering it the highest gain in job creation since numbers were recorded by the Bureau of Labor Statistics in 1939.
Of course these numbers do have to be taken in context. April saw huge losses so comparatively that number might not be as positive as it initially appears. Indeed, nearly 21 million jobs were lost in April of 2020.
And there is also the issue of the “misclassification” rendering the numbers inaccurate too. Many were rendered as employed but not at work but the reality was not that they were working from home for example but they were temporarily laid off with no guarantee of a return to work and if so, in what capacity. That would have put the unemployment figure in May actually at 16.1%.
Nonetheless, given that unemployment figures for May were estimated at approximately 20 percent, today’s numbers look good. As President Trump stated during a a press conference:
“We’re going to be back and we’re opening our country. And if you look at the lockdown governors … the ones that are most energetic about opening, they are doing tremendous business and that’s what these numbers are all about.”
With a trillion-dollar rescue package and much larger unemployment aid, the recession has been guided through government aid as well.
Re-Opening of the US Economy
Last month the re-opening began. Throughout the country different states began opening their economies for business along with certain guidelines. Nonetheless there are some concerns about the timing with some experts warning against the potential of catalyzing a second wave and thus an even greater spike in re-infection and economic hardship.