USA - Economy
The government reported on 30 July 2020 that the US economy shrank at a dizzying 32.9 percent annual rate in the April-June quarter, by far the worst quarterly plunge ever, as the coronavirus outbreak shut down businesses, threw tens of millions out of work and sent unemployment surging to 14.7 percent.
Wall Street retreated on 20 March 2020 as New York state ordered all non-essential workers to stay home to contain the spread of the new coronavirus. The Dow Jones Industrial Average fell 913 points, or 4.5 percent, to 19,173. The tech-heavy Nasdaq dropped 271 points, or 3.8 percent, to 6,879. For the week, the Dow was down 4,011 points, or 17.3 percent. The index marked the largest one-week drop since October 2008, shortly after the collapse of Lehman Brothers.
The Dow was about 650 points lower than when President Donald Trump took office in January 2017. On Friday, the US Federal Reserve rolled out more emergency support as it enhanced efforts with other major central banks to ease a global dollar-funding crunch. But investors accelerated their sellling of stocks after New York Governor Andrew Cuomo ordered that most workers remain at home, and all non-essential businesses close.
On the oil market, WTI futures in New York fell to the $19 / barrel level. That was its lowest in 18 years. Concerns were spreading across markets that economic activities will be significantly restricted, and the coronavirus will plunge the US and other major economies into recessions.
Wall Street's tech stocks continued a bull run on 06 august 2020, with the key Nasdaq index hitting record highs for a seventh day in a row and breaking above 11,000 points. The Nasdaq rose 1 percent, or 11 points, at 11,109 on Thursday. The Nasdaq is up almost 24 percent for the year, helped by strong quarterly earnings at tech majors such Amazon, Microsoft, Apple and Google's Alphabet. The Dow Jones Industrial Average, the broadest stock indicator on the New York Stock Exchange, closed the day up 0.7 percent at 27,369. The Dow was down 4 percent on the year. The S&P 500, a barometer for the top 500 US stocks, settled up 0.6 percent at 3,349. The S&P 500 was up nearly 4 percent on the year.
Nearly 40% of lower-income Americans lost work as the coronavirus pandemic began its assault on the U.S. economy in March or early April, according to the Federal Reserve. Thirty-nine percent of people with a household income below $40,000 lost work over that period, according to the report, an annual survey of U.S. household finances. Conversely, that was true for just 19% of Americans with a household income between $40,000 and $100,000, according to a Fed spokesperson. For those with an income exceeding $100,000, the disparity was even greater: Only 13% lost work.
By April 2020, fifty-five percent of adults with family income less than $40,000 said they were doing okay financially, versus 95 percent of adults with income greater than $100,000. There was a strong relationship between family income and individuals’ likelihood of receiving medical care in 2019. Among those with family income less than $40,000, 38 percent went without some medical treatment in 2019, slightly up from 36 percent in 2018. Higher income households were less likely to skip medical care due to cost. In 2019, 23 percent of those with incomes between $40,000 and $100,000 and 9 percent of those making over $100,000 went without care. Moreover, as family income rises, the likelihood a person reported being in good health increases substantially. Among those in families with income less than $40,000, 75 percent reported being in good health, compared to 93 percent for those in families with income greater than $100,000.
U.S. workers filing for jobless benefits normally are paid slightly less than half their normal salaries. But these payments are currently being augmented during the pandemic with $600-a-week supplements from the federal government for four months, through July 2020.
By 03 June 2020, overall, 42.5 million workers had sought unemployment compensation, more than a quarter of the U.S. labor force of more than 164 million. The number of Americans filing for initial unemployment benefits surged to 6.65 million in the week ending March 28, the US Bureau of Labor Statistics said, obliterating the previous record 3.3 million set only the week before. The numbers likely understate the true scale of people thrown out of work, given the self-employed and gig workers only gained eligibility to state and federal unemployment benefits after Trump signed an historic $2.2 trillion virus relief package into law. In the United States, nearly 17 million Americans lost their jobs since mid-March as a result of the economic fallout of the coronavirus pandemic. About 6.6 million people filed for unemployment benefits in the first week of April, data released by the US Labor Department showed. This was in addition to the more than 10 million in the weeks before that.
The ranks of Americans thrown out of work by the coronavirus ballooned to more than 20 million in just four weeks, an unprecedented collapse fueling widening protests and propelling President Donald Trump’s push to relax the nation’s social distancing guidelines. Trump planned to announce new recommendations later in the day, despite warnings from business leaders and governors that more testing and protective gear are needed first. The government said 5.2 million more people applied for unemployment benefits, bringing the running total to about 22 million out of a U.S. work force of roughly 159 million — easily the worst stretch of U.S. job losses on record. Some economists said the unemployment rate could reach 20% in April, the highest since the Great Depression of the 1930s.
By 07 May 2020, 33.5 million US workers had filed for jobless compensation since the pandemic shut huge sectors of American commerce starting in mid-March, according to the Labor Department, including factories, shops, restaurants, white-collar offices and sports leagues. The total amounts to about one of every five US workers. The number of claims has far exceeded those made during the Great Recession in 2008.
In a pair of articles in March 2016, The Economist wrote that American firms’ profits are too high. It questioned why “steep earnings are not luring in new entrants” and worried that companies may be “abusing monopoly positions  or using lobbying to stifle competition.” Among other steps, it called on the U.S. government to modernize its antitrust apparatus, loosen copyright and patent laws, and scrutinize technology platforms like Google and Facebook. In short, its prescription was that “America needs a giant dose of competition.”
In April 2016, the Council of Economic Advisers (CEA) wrote that “competition appears to be declining in at least part of the economy.” It found evidence that industry concentration is rising, firms are enjoying higher rents, and dynamism is declining.
Nobel laureate Paul Krugman asserted in April 2016 that “growing monopoly power is a big problem for the U.S. economy,” observed that “profits are at near-record highs,” and blamed a drop in competition. Writing a column in the New York Times’ the same month, Professor Chris Sagers lamented “the administration’s failure to enforce the antitrust laws.”
Economic thought underwent significant changes in the 1970s as the prevailing Keynesian theories had difficulty accounting for emerging economic events.
The Keynesians, who had dominated macroeconomics since the 1930s, placed great faith in government's ability to "fine tune" the economy by constant adjustments in taxation, government spending, and the money supply ("demand management"). They stressed the importance of the "multiplier effect" (whereby a government spending increase or tax cut would expand GNP by a multiple of the amount of the change in spending or taxes), and the short-run tradeoff between inflation and unemployment, otherwise known as the Phillips Curve.
In the Keynesian perspective, policymakers could direct the economy simply by choosing the most desired combination of unemployment and inflation rates. As the post-Keynesian models became more sophisticated and complicated, macroeconomists became increasingly confident of their ability to forecast, prescribe policy, and control economic fluctuations.
Throughout the 1950s and 1960s, Keynesians nurtured the hope that activist demand management could fine-tune the economy along a path that kept it at the top of its performance year after year. This goal was stated numerically as "4-4-1": 4 percent real GNP growth, 4 percent unemployment, and one percent inflation. When the economy strayed from this ideal standard, demand management was used.
Another school of thought, generally called monetarism and led by Milton Friedman, emphasized the role of fluctuations in the money supply in predicting short-term fluctuations in the economy. The monetarists saw inflation tending to be primarily a monetary phenomenon.
The Friedman-Phelps hypothesis was extended and elaborated by Robert Lucas, Thomas Sargent, Robert Barro, and others whose contributions have generally come to be called the "new classical macroeconomics." Building on John Muth's studies of rational expectations, Lucas emphasized that economic agents (firms, workers, investors, consumers, and so on) tend to get confused in the very short-run between changes in relative and absolute prices.
|Join the GlobalSecurity.org mailing list|