The Coronavirus Shock Looks More like a Natural Disaster than a Cyclical Downturn
Writing for the New York Federal Reserve’s Liberty Street Economics Group Jason Bram (The Council of Industry’s 2019 Annual Luncheon Speaker) and Richard Deitz write that “It’s tempting to compare the economic impact of the coronavirus pandemic to that of prior business cycle downturns, particularly the Great Recession. However, a more appropriate comparison would be to the effects of a severe natural disaster. This post tracks the recent path of U.S. unemployment claims, finding a much closer precedent in post-Katrina Louisiana than in the U.S. economy following the Great Recession.”
Powell: Fed Will Act ‘Forcefully, Proactively, and Aggressively’ to Support the US Economy
Yesterday morning, the Fed announced $2.3 trillion in funding supported by the U.S Treasury and money appropriated through the Coronavirus Aid, Relief, and. Economic Security (CARES) Act. In addition to offering more details on a Main Street Lending Program, the Fed also said it will open up a facility dedicated to buying short-term municipal debt and would expand its existing facilities in size and scope.
Powell added that he expects the second quarter to be a “very weak one.” He warned Thursday that the U.S. economy could experience a “false start” if governors reopen non-essential businesses while the threat of coronavirus is still looming, but predicted a “robust” recovery if states wait to reopen until the threat has abated.
GOP, Democrats Hit an Impasse Over Nature of Next Round of Coronavirus Aid
Republicans seek quick passage of small-business aid; Democrats want to combine it with spending for health-care workers, states
In a brief Senate session, Democrats blocked an effort by Majority Leader Mitch McConnell (R., Ky.) to add $250 billion to a small-business aid program that saw overwhelming demand when it launched last week with $350 billion in forgivable loans to support worker pay. Small-business owners have flooded banks with applications, and Mr. McConnell said his bill made no policy changes but simply increased the spending number.
Democrats said the small-business loan program, called the Paycheck Protection Program, needed changes to ensure that less-sophisticated business owners can also access the funds.
Italy Weighs Steps to Join Europe’s Cautious Virus Reopening
Italy is beginning to look at easing its lockdown after Denmark and Austria became the first two European countries to loosen restrictions as governments seek to gradually revive economies crippled by the containment measures without risking a second wave of infection.
After weeks of measures designed to limit contact between people, European governments are seeing growing evidence that shutting down much of modern life is containing the disease. But the scale of the outbreak in the region means officials need to weigh any attempts to restart parts of the economy against the risk of reigniting the spread.