Analysis: slow recovery

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Beyond the victims ‘ health, the COVID-19 has also been particularly painful for the job.

The recovery post-pandemic promises to be slow, if not long. Beyond the victims on the health plan, the COVID-19 has also been particularly painful for the job.

The u.s. federal Reserve (Fed) released on Wednesday its first economic forecasts since the beginning of the pandemic. If the recovery is underway, the recovery of losses suffered wants to be far, far away. Summary simply, the target rate around zero is called to last until 2022.

“The weaknesses in advance of the economy, labour market and inflation that the rates should remain a long time at the current level. “The monetary committee of the Fed,” all 17 participants see interest rates stay between 0% and 0.25% by the end of 2021. Only two participants anticipate a higher rate in 2022, the other 15 provision for another year of status quo, ” says Francis Généreux senior economist at Desjardins group.

The Fed is forecasting a drop in GDP of 6.5% in 2020, followed by a rebound 5 % next year which will add a surge of 3.5% in 2022. A recovery in two years is all the longer that the u.s. economy has plunged 4.8 % annual rate in the first quarter and that it could tumble 20% to 30% in the second, and this, in spite of the massive aid into two components, as authorized by Congress, equivalent to about 12 % of GDP, is estimated.

20 million

This is the number of Americans without work since February, when the economy was operating in the final full-employment and in spite of the encouraging signals sent by the statistics of may on the unemployment.

A help that will transform into a budget deficit abyss. The data published on Wednesday pointed to a slight improvement of one month, with a deficit of 399 billion in may, sharply down compared to April leaded by the aid program in two parts. But this represents the double of the deficit of may 2019. And the bar of 3100 billion for the year 2020 is expected to be taken, predicts Oxford Economics. It already amounts to nearly 1900 billion since the beginning of the year, compared to 739 billion over the same period of 2019.

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Using direct

This forecast does not take into account a possible third component to the plan of direct assistance to individuals and businesses, which could be later adopted and recognized in income in the year 2021, adds the economic research firm.

Because the leaders of the central bank have not been without a focus on employment. Despite the encouraging signals sent by the statistics of may on the unemployment, more than 20 million Americans remain without work since February, when the economy was operating in the final full-employment, prevent they. The Fed is seen reaching 9.3% for the entire 2020, down to 6.5% in 2021 and 5.5 % in 2022. It was 3.5 % before the pandemic.

For number of workers affected, the loss of employment caused by the coronavirus is not temporary. Which represents so much uncertainty for all sectors, but more for those, cyclic, dependent on the discretionary income of consumers and households. These latter are few in the union, or the presence of SMES is dominant, with its share of workers in vulnerable or part-time. Sectors that can hardly coexist with the distancing, even with teleworking. Oxford Economics gave the example of the industries of construction, agriculture, transport, retail trade and accommodation-catering, where less than 20 % of the workers can rely on telework.

The economic damage of the pandemic have been felt across the spectrum of demand, was measured by the rating agency Morningstar, DBRS, with a fall of 6.8 per cent of private consumption in the United States in the first quarter, the sharpest contraction in forty years. For its part, the business investment fell 7.9 %, primarily in equipment purchases. It was worse in Canada, the strikes and the oil shock adding to the health crisis, with private consumption falling by 9 %, but business investment, falling down only 1.4 %.

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