The virus drives the economy: Morning Brief

Thursday, June 25, 2020

Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. 


There can’t be an economic recovery without a public health recovery

Stocks sold off sharply on Wednesday as all three major averages fell more than 2%.

Rising case counts and hospitalizations in Texas, Arizona, and Florida — among other states — continue to make clear there has been no nationwide containment of the coronavirus.

The spread of the virus has slowed considerably in the New York City metro area which was hardest hit in the spring, but data from this region now overstates the current state of the pandemic in the country. A record 38,762 positive tests were recorded in the U.S. on Wednesday, the highest since the pandemic began.

And while the pandemic has been a deteriorating situation for a few weeks now, Wednesday’s action is a

Read More

IMF expects global economy to contract by a record 4.9% in 2020

The International Monetary Fund further downgraded expectations for the global economy in 2020 and 2021, projecting negative growth for all regions of the world for the first time in the history of its forecasts.

The IMF on Wednesday released an update of its World Economic Outlook, in which it projected the global economy contracting by 4.9% in 2020, a downward revision from its April forecast of a 3% contraction. A -4.9% print on global output is now the worst in the WEO’s history.

“The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast,” the IMF report reads. The IMF said consumption and services dropped beyond expectations and described the hit to the global labor market as “catastrophic.”

The report forecasts US growth of -8.0% in 2020, a notable downgrade

Read More

Here’s what the market is saying about rising coronavirus cases and the economy

Florida, once positioned to be an exemplar among states preparing to relax lockdowns, has now become a cautionary tale — joining California, Arizona and Texas in a string of areas experiencing a resurgence in coronavirus cases.

Nevertheless, a volatile Wall Street, while still prone to retrenchment, remains firmly entrenched in a bull market bolstered by aggressive stimulus from the U.S. government and the Federal Reserve. The market’s helter-skelter tone is largely reflective of the competing impulses of a nationwide rise in COVID-19 diagnoses, and expectations for an economic revival. 

For weeks, analysts have lamented the dichotomy between Wall Street and a real economy. Yet Paul Schatz, Heritage Capital’s president, told Yahoo Finance this week that current prices aren’t actually disconnected from economic reality at all.

“The market action is discounting economic activity 3-6 months down the road,” he said. “Although short term sentiment is frothy…long term investors…are still hunkered down

Read More

Powell urges Congressional help for unemployed, municipalities as economy recovers from coronavirus

Federal Reserve Chairman Jerome Powell on Wednesday specifically recommended that Congress extend unemployment insurance benefits, support state and local governments, and funnel more help to cash-strapped small businesses. 

Historically, the central banker has shied away from providing recommendations on what policies Congress should pursue. However, Powell expressed concern that an emerging recovery from the coronavirus pandemic could prompt lawmakers to curtail support prematurely.

“I would think that it would be a concern if Congress were to pull back from the support that it is providing too quickly,” Powell said in virtual testimony to the House Financial Services Committee. He repeated that both the Fed and Congress should be prepared to do more based on the trajectory of the recovery.

Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in late March, those laid off from their jobs during the crisis are entitled to receive up to $600 a

Read More

The US economy is officially in recession

The National Bureau of Economic Research said Monday that the COVID-19 crisis has officially launched the U.S. economy into a recession, thus ending the longest economic expansion on record.

The NBER’s business cycle dating committee calls recessions based on broad checks on employment and production activity. 

The committee said that it had determined that economic activity had peaked in February, citing sharp drops in employment and personal consumption following that month. The recession declaration ended the 128-month economic expansion that began in June 2009, which eclipsed the 1990s recovery as the longest on record.

When the NBER declares a “peak,” it essentially marks the beginning of a period of “significant decline.”

Since the first cases of Coronavirus took form in the United States, over 42 million Americans have lost their jobs and turned to unemployment benefits. Stay-at-home measures and businesses closures have halted economic activity on an unprecedented scale.


Read More