The American economic rebound weaker than expected

The United States created 661,000 jobs in September, dropping the unemployment rate to 7.9%. Struck by Covid-19, the world’s largest economy is in the middle of the road: it has recreated 11.4 million of the 22 million jobs lost in March and April, which had jumped the unemployment rate to 14.7 %. Except that the second half of the course promises to be very difficult, and economists are forecasting an inverted square root recovery, with a slowdown in growth at mid-rebound. At this rate, it would take nearly a year and a half for the job market to return to its pre-crisis levels, notes the New York Times.

Without an effective vaccine, whole sections of the economy will not see a return to normal. This is true in leisure and tourism: Disney has announced the dismissal of 28,000 employees who were until now on technical unemployment, due to the non-reopening of the amusement park in California, Disneyland. It is in the air: United Airlines and American Airlines announced, in early October, the loss of 32,000 jobs; these companies were prohibited from laying off workers until the end of September if they wanted to keep the federal state subsidies that were granted to them at the start of the crisis.

This is also the case in education, which is essentially going virtual again, Americans being much more careful than Europeans about the contamination of children: 355,000 jobs were cut in August in private and public education. Local authorities are slashing staff, especially teachers, for lack of a federal bailout plan (216,000 fewer jobs). The number of Americans who say they have lost their jobs permanently is now 3.8 million against 2 million in April, indicating the lack of hope of a return to normal.

The end of federal aid and the slowdown in the recovery have slowed the rebound in consumption

The economy was put on a drip by the Federal Reserve (zero interest rate and provision of liquidity that allowed companies to get into debt and avoid bankruptcy), while households benefited from federal aid (check for 1,200 dollars and unemployment benefit of 2,400 dollars per month until the end of July). Thus, paradoxically, the monthly income of Americans has been, since April, higher than its level in February, before the crisis. Even in August, when it fell 2.7%, it was still 2% above February’s level.

The end of federal aid and the slowdown in the recovery, however, led to a slowdown in the rebound in consumption: after an increase of 9% and 7% in May and June, spending only increased by 2% and 1%. in July and August. In return, households saved massively, which could soften the shock of the coming months: the savings rate, which was around 8%, has jumped to 20% on average since March. It fell back to 14% in August.

The budget deficit is expected to reach abysmal levels, rising from $ 1 trillion to $ 3.2 trillion, or nearly 16% of GDP

GDP, which fell at an annual rate of 5% and 31% in the first and second quarters, rebounded by around 3% from July to September, according to estimates by the Wall Street Journal.

These employment figures are the last to be released ahead of the November 3 election, and they’re bad for Donald Trump: unemployment has never been so high on the eve of an election (it was 7, 8% on the eve of Barack Obama’s re-election in 2012 and 7.3% before Ronald Reagan’s second term in 1984). Mr. Trump will be the only president to end his term with fewer jobs than when he arrived. Before the Covid-19 crisis, unemployment was 3.5%, the lowest for fifty years. The budget deficit will reach abysmal levels, going from 1 trillion to 3,200 billion dollars, or nearly 16% of gross domestic product, according to experts in Congress. Federal debt will return to post-war levels and exceed 100% of GDP.

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As the election approached, Republicans and Democrats were unable to agree on a new stimulus package insisted on by the Federal Reserve. The announcement of Donald Trump’s Covid-19 contamination and then his hospitalization led Wall Street to unscrew, Friday: the S&P 500 index fell by 0.96%, while the technology-rich Nasdaq lost 2, 22%.

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