NEWS WRAP

Economic aid becomes political football

• McConnell makes concessions after “Blue State Bailout” remarks
  Senate Majority Leader Mitch McConnell said there would likely be more financial assistance approved for states and local government in a future package Congress passes to address the coronavirus outbreak. The concession represents a shift in the Kentucky Republican’s messaging, after saying he would “be in favour of allowing states to use the bankruptcy route” rather than provide a federal bailout, suggesting it amounted to a “blue state bailout” which was met with widespread criticism. However, the aid will come at a price; McConnell warned the next pandemic being a “lawsuit pandemic” and insisted a future bill include congressional limitations on the liabilities of healthcare workers, business owners and employees. READ MORE HERE
   

• Conservatives form coalition for economic reopening
  A group of US conservatives have banded together to form the “Save Our Country Task Force”, a coalition intended to put pressure on state officials to quickly reopen for businesses. Members include economic commentator Stephen Moore, former House Speaker Newt Gingrich, former South Carolina Senator Jim DeMint, among others. Several involved were also named to President Trump’s coronavirus economic council. “We're just ravaging our economy right now, and the longer this goes on, the more human misery it will cause,” Moore argued. Speaking with CNN, the former Trump campaign advisor said the group will encourage states to reopen “on a rolling basis” and push for a federal payroll tax cut as economic stimulus. READ MORE HERE
   

• Confidence in Fed chair hits 15-year high
  Americans' confidence in the Federal Reserve’s leadership has reached a peak unseen since Alan Greenspan held the reigns in 2005. A recent Gallup poll has shown 58 per cent of Americans have confidence in the Federal Reserve Chairman Jerome Powell, a rating higher than those in his first two years in the role. The poll found that while Americans are more confident in Powell and state governors, largely credited to their economic response to the coronavirus outbreak, the same could not be observed for Trump and congressional leaders. READ MORE HERE
   

• Trump to order meat plants to stay open amid food supply concerns
  President Trump is expected to sign an executive order to require meat processing plants to remain open amid growing concerns about the food supply chain during the COVID-19 pandemic. The executive order will invoke the Defense Production Act to compel beef, pork, poultry and egg plants keep running. The United Food and Commercial Workers Union (UFCW) has raised concerns over the reopening of closed plants and has called for Congress to protect workers with more readily available protective equipment and widespread testing. READ MORE HERE

ANALYSIS

US Q1 GDP will be bad, but will sound worse to Australians than it really is

Dr Stephen Kirchner
Director, Trade and Investment

On Wednesday, the US Bureau of Economic Analysis will release its advance estimate of US GDP for the three months ended in March. There are significant differences in presentation between US and Australian official data on economic activity that need to be kept in mind when seeking to understand the numbers coming out of the United States.

Wednesday’s release is an advance estimate. The United States releases each quarter’s GDP number three times, with each release edging closer to the final estimate. The intent behind the staggered release is to improve the timeliness of the data, at some cost in initial accuracy.

The median market economist is expecting a contraction of 3.8 per cent on an annualised basis following a 2.1 per cent expansion in the previous quarter. The St Louis Fed GDP nowcast points to a 15 per cent contraction.

This sounds like a bigger contraction to an Australian audience than it actually is. Australia reports its GDP data as a quarter on quarter change. The United States, by contrast, assumes that the same quarterly growth rate applies over four quarters or a full year. In other words, the expected contraction of 3.8 per cent annualised is approximately four times larger than the headline measure that would be reported in Australia. This is still a bad outcome, but not as dramatic as it might sound to an Australian audience unfamiliar with US reporting conventions.

In principle, any growth rate can be annualised, but it makes little sense to assume that each quarter of the year will grow at the same rate as the current quarter. This is especially so when measuring the economic impact of COVID-19, which is likely to have a highly variable impact depending on what suppression measures are in place in any given quarter.

The Q1 GDP report will pick-up only the initial impact of the suppression measures that went into place towards the end of the quarter. The larger impact will be in the second quarter, for which the New York Fed nowcast is for a contraction of -7.8 per cent.

COVID-19: BY THE NUMBERS

Unemployment eclipses GFC levels

Weekly US reports of claims for unemployment benefits reveal trends not seen since the likes of the Great Depression. Claims have soared from the long-standing average of 215,000 per week to a monumental weekly average of 5.25 million since 21 March. 

Following the Global Financial Crisis, US unemployment rose to 10 per cent; on its current trajectory, unemployment during the COVID-19 crisis is expected to climb beyond the 16 per cent mark.

As United States Studies Centre Non-Resident Fellow David Uren outlines in his forthcoming research brief "The unequal burden of the COVID-19 labour market collapse", the experience of past recessions is that while unemployment rises rapidly, it takes a substantially longer time to fall.

To track the latest trends and numbers, visit our COVID-19 tracker HERE.

VIRTUAL EVENT

A conversation with John Berry, former US Ambassador to Australia

The United States has been the global epicentre of the COVID-19 pandemic for the past month. Many Australians live and work in New York, and so much of Australia’s deep commercial and financial ties with the United States run through New York.

How are the thousands of businesses that operate between the United States and Australia faring in a period of closed borders? And looking beyond business, what is the role of the US-Australian alliance amid a global pandemic?

To discuss these issues, please join us for a webinar event featuring Ambassador John Berry (ret.), President of the American Australian Association, in a conversation with US Studies Centre CEO Professor Simon Jackman.

WHEN:
Friday 1, May 2020, 1am AEST

COST: 
Free, but registration is essential

UPCOMING PUBLICATIONS

Reports

• Entrepreneurship in Australia and the United States
  Don Scott-Kemmis, Research Fellow, and Claire McFarland, Director of Innovation and Entrepreneurship
   
• ​US-China economic distancing in the era of the great power rivalry and COVID-19
  Dr John Lee, Non-Resident Senior Fellow

Research briefs

• The unequal burden of the COVID-19 labour market collapse
  David Uren, Non-Resident Fellow

To receive a direct notification when they are published, please sign up for our research alerts HERE.

To book a media or corporate briefing, please contact us at: +61 2 9114 2622

VIDEO

Who is winning the politics of the pandemic in the United States?

Did you miss our webinar event with guest speaker Cameron Stewart, Washington correspondent at The Australian, discussing the 'politics of the pandemic' and the upcoming presidential election?

You can now watch Cameron's talk on our YouTube Channel!

THE WEEK IN TWEETS

#BlueStateBailout?