The economic recovery may be fizzling; How to Save a Half-Open Economy; Congress to Start Negotiations on Next Round of Coronavirus Aid; Step 1 of cultivating mentors
Investors' eyes are on Congress as it returns to work today because so much is riding on our leaders' ability to quickly pass what would be the fifth coronavirus relief package this year. Below are seven articles about the current state of our economy and the key issues Congress is grappling with...
1) Here's the Washington Post: After the fastest recession in U.S. history, the economic recovery may be fizzling. Excerpt:
If there were still hopes of a "V-shaped" comeback from the novel coronavirus shutdown, this past week should have put an end to them. The pandemic shock, which economists once assumed would be only a temporary business interruption, appears instead to be settling into a traditional, self-perpetuating recession...
After two surprisingly strong months, the economy could begin shedding jobs again this month and in August, Morgan Stanley warned Friday. Many small businesses that received forgivable government loans have exhausted their funds while some larger companies are starting to thin their payrolls in preparation for a longer-than-expected downturn.
Fresh labor market weakness would represent a profound disappointment for millions of American workers and President Trump, who is eager to highlight economic progress with only a few months remaining before the November election.
"'Stalling' is the word I'm using," said Jim O'Sullivan, chief U.S. macro strategist for TD Securities. "But the risk there is that the numbers start turning negative again."
2) And here's the Wall Street Journal: U.S. Companies Lose Hope for Quick Rebound From COVID-19. Excerpt:
Big U.S. companies are deciding March and April moves won't cut it.
The fierce resurgence of COVID-19 cases and related business shutdowns are dashing hopes of a quick recovery, prompting businesses from airlines to restaurant chains to again shift their strategies and staffing or ramp up previous plans to do so. They are turning furloughs into permanent layoffs, de-emphasizing their core businesses, and downsizing production indefinitely...
Executives who were bracing for a monthslong disruption are now thinking in terms of years. Their job has changed from riding it out to reinventing. Roles once thought core are now an extravagance. Strategies set in the spring are obsolete.
"It's going to be a different game," said Bill George, former CEO of medical-device company Medtronic PLC and a senior fellow at Harvard Business School. Mr. George said many companies now need to explore strategies they might have once deemed unthinkable, from hospital chains embracing a long-term shift to telemedicine to apparel makers figuring out how to market and sell their wares in an environment where many stores don't reopen.
3) Daniel Alpert's warnings in Business Insider are even more dramatic: The government needs to step in and save American businesses or the US is going to spiral into a second Great Depression. Excerpt:
- We have now entered the post-PPP Payroll Lay Off Phase (PLOP) of the COVID-19 Pandemic Recession of 2020 in the United States.
- Efforts by the federal government to soften the blow to businesses and households were bold – but we can see clearly now, not sufficient.
- America is still hemorrhaging jobs – many of them more than once.
- The thing that stands between the present severe, sharp recession, and a second Great Depression, is doing everything possible to ensure that when the virus is tamed and making sure employers will still be around to pay their workers.
4) In the New York Times, here's what economists and other experts say needs to be done: How to Save a Half-Open Economy. Excerpt:
When states began to order businesses to close and residents to stay home as the coronavirus outbreak spread, economists likened the policy to a medically induced coma: shutting down all but the most vital functions to focus on the underlying affliction.
Now the patient is awake, but the malady remains.
A surge in coronavirus cases has forced several states to reimpose restrictions and dashed hopes of a rapid economic rebound. But a widespread return to the shutdown policies that dominated in March and April seems unlikely.
Instead, the economy looks likely to remain in a sort of limbo, neither fully open nor fully shut, for months or even years...
This new phase poses a unique challenge for policymakers. Economists across the political spectrum say it would be a mistake for the federal government to cut off support for workers and businesses while the economy remained weak. But those policies may need to be revamped to help the worst-hit industries and regions — and will have to change as the crisis evolves.
5) Here's FiveThirtyEight: Economists Think Congress Could Create An Economic Disaster This Summer. Excerpt:
Congress has less than a month to hammer out a deal on the next round of stimulus before expanded unemployment benefits expire. State and local governments are starting to feel the pinch of budget shortfalls. And while the U.S. got a piece of (relatively) good news in last week's jobs report, which featured an unemployment rate 2.2 percentage points lower in June than it had been in May, the economy has been thrown back into chaos in the meantime, with a number of states pulling back on their reopenings amid spiking COVID-19 infections and hospitalizations.
Our newest survey of economists highlights just how consequential governmental decisions over the next month may be: On average, these economists think that a refusal by Congress to extend unemployment benefits or bail out state and local governments is just as likely to hurt the economy as local economies staying open in spite of COVID-19 spikes – or even closing because of the virus.
6) The WSJ has an overview of where things stand in Congress: Congress to Start Negotiations on Next Round of Coronavirus Aid. Excerpt:
Congress returns to work Monday with just weeks to craft new agreements on aid to households and protections for businesses, urged on by signs of a faltering economic recovery, a resurgent coronavirus pandemic and a looming deadline for enhanced unemployment payments.
Some early areas of potential compromise have emerged on pulling together what would be the fifth coronavirus package since the beginning of the year. Both parties appear eager to pass another bill, a step to which Republicans had long been hesitant to commit, as new doubts about when work, school and family life will return to normal shattered hopes of a quick rebound.
7) One of the key issues is whether to renew the $600 a week in federal unemployment benefits that 25 million Americans are receiving. Here's the WSJ: As $600-a-Week Jobless Aid Nears End, Congress Faces a Quandary. Excerpt:
Some 25 million Americans are set to lose $600 a week each in federal unemployment benefits at the end of the month, one of the thorniest issues Congress faces when it returns to Washington this week to consider another coronavirus relief bill.
Many people view the payments as a lifeline, and analysts say the $15 billion a week in federal spending has provided vital support to an economy staggering from the effects of the pandemic. But critics say the money, paid on top of regular state jobless benefits, discourages some Americans from returning to work as businesses try to reopen, holding back the recovery.
A University of Chicago study found 68% of unemployed workers who are eligible for benefits receive more in jobless payments than their lost earnings – with the median payment 34% more than their former weekly paychecks.
The White House and Congress approved the extra payments, which expire July 31, earlier this year as the pandemic pushed unemployment toward the highest levels recorded since the Great Depression. Democrats are pushing to extend them through January, while Trump administration officials and top GOP lawmakers are exploring whether to continue them at a reduced amount.
Some Republicans have advocated for ending them, though Democrats would be unlikely to agree to a bill that does so.
8) And finally, in Friday's e-mail, I outlined the five steps to cultivating mentors:
- Pick a target
- Pre-contact preparation
- Initial contact
- Follow-ups
- Long-term relationship building
Here's more on the first step:
Before you can cultivate a mentor (or develop a friendship), you first have to pick a target – who do you want to be your mentor or friend? A mentor is an experienced and trusted adviser who can help you in your life and career (and ideally become a great friend).
Typical candidates might be your: boss (or someone else at work, ideally very senior), someone who can help you build your business (investor or board member), a professor/teacher, a sports coach, or simply someone you really admire and would like to learn from and become friends with.
Be realistic, however. Neither the pope nor Barack Obama are likely to become your mentors. That said, sometimes aiming high pays off (for me, it was Warren Buffett and Charlie Munger).
Tomorrow I'll share my thoughts on Step 2...
Best regards,
Whitney