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From Liberty Bonds to Coronavirus Bills
U.S. debt has reached its highest level relative to economy size since World War II and is expected to exceed it in the next year, driven by a gigantic fiscal response to the coronavirus pandemic. The Congressional Budget Office said Wednesday that Federal debt The publicly held company is forecast to meet or exceed 100% of US gross domestic product in fiscal year beginning October 1, the broadest measure of US economic output. This would put the US in the company of a handful of nations. Kate Davidson reports that the debt burden is exceeding their economies, including Japan, Italy and Greece.
The increase in borrowing so far has not worried investors or affect the US’s ability to borrow more. Investors have devoured US Treasury assets for their relative safety. In addition, interest rates are expected to remain low, suggesting that the government still has room for maneuver to borrow.
WHAT YOU NEED TO WATCH TODAY
US unemployment claims are projected to fall from 1.006 million a week earlier to 950,000 in the week ending August 29. (8:30 a.m. ET)
The US trade deficit For July, an increase from 58.7 billion US dollars in the previous month to 58.6 billion US dollars is expected. (8:30 a.m. ET)
US productivity For the second quarter, an annual increase of 8.1% is expected, revised from an earlier estimate of + 7.3%. (8:30 a.m. ET)
IHS Markits The US services index for August is expected to decrease from a preliminary value of 54.8 to 54.7. (9:45 ET)
The Institute for Supply Management The US services index for August is expected to fall to 57.0 from 58.1 in the previous month. (10 a.m. ET)
Andrew Bailey, Governor of the Bank of England will discuss cryptocurrencies and stablecoins at 10 a.m. ET.
Live questions and answers: Raphael Bostic, president of the US Federal Reserve in Atlanta, will meet with Nick Timiraos, chief correspondent for the WSJ, to discuss the economy and the central bank’s response to the coronavirus pandemic at 12 p.m. ET. Watch it live here.
Charles Evans, President of the Chicago Fed speaks to the Lakeshore Chamber of Commerce at 12:30 p.m. ET.
Left a good job in town
Claims for unemployment benefits are likely to have fallen again last week, a possible sign of a slowly improving labor market – and the effects of a new measurement method. Initial weekly jobless claims had stabilized near 1 million in recent weeks, well above the highest record before this year. However, Thursday’s report comes with some uncertainty as it is calculated using a new method of adjusting for seasonal factors. The latest calculations won’t change the overall picture: the pandemic and associated shutdowns caused layoffs to soar to levels unrecorded in data until the 1960s, and the number should be around the level in the short term associated with recessions, Eric Morath reports.
The labor department Post your next jobless claims report today at 8:30 a.m. ET.
Attitudes outperform layoffs. Despite the high number of jobless claims, economists polled by the Wall Street Journal expect 1.3 million new jobs to be created in the August employment report. This is a historically large gain, but it’s still slowing down from May, June and July – and nowhere near enough to offset the losses in March and April. The report comes out Friday at 8:30 p.m. ET.
An employer who hires a lot: the federal government. The Census Bureau hired more than a quarter of a million contract workers last month to help with the ten-year census. That could skew the number of headline jobs. But what the federal government is giving, the local government could take away: Delayed school openings and virtual learning mean fewer bus drivers, supervisors and other educational staff are hired, potentially lowering local government attitudes.
United Airlines plans to cut 16,370 employees as part of efforts to halve the domestic workforce in the face of a pandemic-triggered slump in passenger demand. All in all, US airlines had already cut around 50,000 jobs by the end of June this year and made detailed mandatory cuts in the last few weeks – including 19,000 at American Airlines. Air carriers have been trying to get passengers back on planes for months after the pandemic nearly stopped travel in the spring. Nevertheless, the demand for travel has fallen to around 30% compared to the previous year. Executives believe it will take years – and likely a vaccine – to fully recover, reports Doug Cameron.
Morning Consult economist John Leer says Survey data show that the US workforce is divided into two groups: Those in jobs who are increasingly certain they will keep it and those who have been on leave or laid off and are increasingly concerned that they will be excluded from the workforce as a whole. “The likelihood that laid-off workers will return to their previous employers continues to decline. With qualifications and training restrictions, it is becoming increasingly difficult for them to find work in new industries, as was the case in July and August,” said Dr. Said Leer.
A broad rally in US stocks on Wednesday pushed the Dow Jones Industrial Average above 29,000 for the first time since February, setting the S&P 500 and Nasdaq Composite to new records. The stocks have risen from their lows in March, with help from the Federal Reserve, which cut interest rates and stabilized financial markets, and in hopes of a vaccine or treatment for the new coronavirus. Including Wednesday, the S&P 500 closed higher for nine of the last 10 trading days, report Anna Isaac and Karen Langley.
WHAT WE’LL READ
Everyone is talking about Sweden’s approach to Covid-19. Switzerland has also gone its own way. “Bern has signaled that the economy must have priority in the coming months. As a sign of the upward trend of the wealthy Alpine state, the rules for social gatherings will be relaxed according to the current plans from October so that groups of more than 1,000 people can gather. The ministers spent the week with representatives of the tourism and hospitality industry and discussed how the important winter holiday season in Switzerland can best be boosted. … ‘There was a big shift in focus. What we are seeing in Switzerland now are people who are getting used to the idea of living in a risk society. We ask: How do we live with it? ‘ ” the Financial Times’ Sam Jones reports.
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