Economics | The Guardian

ONS survey shows 44% of respondents’ reserves will not last until end of year

The New York governor is replacing elected representatives with private, unaccountable monopolists, and lawmakers across the US are doing the same thing

Economy shrunk by 2% in first quarter as result of coronavirus, but slump is not unprecedented

Fiscal hawks are using the same lines as they did in 2009. But there’s no reason to fear a sovereign debt crisis

Up to 11,000 jobs, including pest and weed control, to be created but critics call for greater emphasis on climate change

Relaxation of government subsidy rules benefiting wealthier EU states, says European Commission presidentUrsula von der Leyen conceded that companies in rich countries including Germany have been given an unfair advantage by the relaxation of the EU’s state aid rules, as she called for agreement on a pan-European rescue package.In a speech to the European parliament in Brussels, the European commission president suggested that the single market was in danger of breaking up as wealthier member states spent their way out of the current crisis. Continue reading...

The pandemic is pushing the UK into a historic slump. The government is now the spender of last resortTo grasp how low are the expectations for the economy, consider this: on Wednesday it was announced that the UK’s national output had just had its biggest drop since the great crash of 2008 – and the immediate response of many analysts was surprise that it hadn’t fallen further. Even so, the statistics make grim reading. Over the first three months of this year, GDP shrank 2% on the previous quarter. The economy was already slowing in February, and then came the UK’s first coronavirus deaths. In March alone, GDP plunged nearly 6% – the greatest contraction since records began in 1997. Amazingly, most of that would have happened over just the last week of the month, the first full week of the government’s lockdown. The impact was drastic: travel agent demand collapsed, car plants shut and exports fell off a cliff. The winners were few and far between: the computer industry got a boost as those having to work from home bought laptops, while the paper industry had an amazing few weeks. All that hoarding of toilet roll proved good for someone.However grim those numbers look, they are just the beginning. The near unanimous view among economists is that the UK is diving into what the chancellor, Rishi Sunak, warns is a “significant recession”. However bad that sounds, it is probably a gross understatement: the Bank of England is forecasting the worst recession in over 300 years. Continue reading...

The second world war did not lead to recession and unemployment, thanks to the Keynesian policies of the Labour government, writes Dennis LeechThe Bank of England forecasts a fall in GDP of 30% due to the pandemic, and says it is the worst recession in 300 years (Business live, 7 May). We need to get this into perspective. There have been at least two other episodes in recent history when there was a massive supply shock of comparable severity: the two world wars necessitated structural changes that dwarf what the Bank is forecasting.The cost of the war effort – men, uniform plus weapons production – was counted as part of GDP although it contributed nothing directly to living standards. This highlights a limitation of GDP: it only measures output, not welfare. Today’s equivalent of fighting the enemy is the lockdown to stop the virus spreading, but this is not counted as production so represents a direct loss from GDP. A meaningful comparison means adjusting wartime output. Continue reading...

Data reveals pandemic has caused severe decline in supply and demand for products

UK GDP has suffered its biggest quarterly fall since 2008, as the coronavirus lockdown hits the economy

Britain’s budget deficit expected to hit £337bn this year after spending surge

As Complicité’s The Encounter goes online, its creator discusses the need to rebuild British culture ‘from the ground up’

Given emerging scale of Covid-19 crisis, talk of rapid bounce back could be wishful thinking

Progressives missed an opportunity after the last crash. To fix our broken economy after Covid-19, we need bold new ideas

UK economy shrank by 2% in first quarter after record monthly plunge, ONS data shows

The scheme has been estimated to cost the Treasury £12bn per month for 7.5m employees

Economy commissioner Paolo Gentiloni says bloc needs a sound plan to avoid divisionsThe risk of an uneven economic recovery from the coronavirus crisis poses an “existential threat” to the European Union, one of its most senior economic policymakers has said.Paolo Gentiloni, a former Italian prime minister and now the EU’s economy commissioner, said the bloc also had a “historic opportunity” as it charts a plan to rescue Europe’s economy. Continue reading...

As the chancellor announces plans to extend the unprecedented scheme to pay the wages of millions of workers, whole sectors of the economy remain shut because of Covid-19, causing a recession unseen in Britain for centuries. Larry Elliott explains what it will mean for the countryThe coronavirus lockdown has resulted in the UK’s biggest economic downturn for 300 years, with shops shuttered, factories closed and millions of workers told to stay at home while the government pays their wages.Now, with restrictions beginning to lift, the Guardian’s economics editor, Larry Elliott, tells Anushka Asthana that the economic damage is becoming apparent. For once thriving businesses, such as the independent bakery Sable d’Or in north London, the future appears bleak. Its owner, Mohamed Ladjassa, tells us how he was forced to cut staff as customer numbers dwindled. Continue reading...

Expansion of quantitative easing ‘quite possible’ and negative interest rates kept under reviewThe severity of Britain’s economic downturn could force the Bank of England to increase its stimulus, according to one of the central bank’s senior officials.Ben Broadbent, deputy governor for monetary policy, said it was “quite possible” officials would vote to expand the quantitative easing (QE) programme to prevent the situation worsening as businesses remained closed and millions of workers were forced to stay at home.Related: 'Get a grip': Mervyn King warns of Covid-19 threat to UK economyRelated: UK unemployment to double and economy to shrink by 14%, warns Bank of England Continue reading...

Rishi Sunak says programme will run for further four months as coronavirus crisis continues

Chancellor says 304,000 firms had benefited in sharp increase in lending during pandemic

The chancellor was right to extend the job retention scheme to the end of October. But the devil will be in the detail as the economy reopensThe job retention scheme unveiled by Rishi Sunak in March is estimated to be costing the government about £14bn a month. Rarely has money been better spent. By covering up to 80% of the wages of 7.5 million employees, the chancellor has ensured that economic catastrophe did not follow hard on the heels of a public health emergency. The unprecedented cost and scale of the scheme was testament to its necessity, after the economy entered into forced hibernation because of Covid-19. Without it, as both supply and demand for goods and services collapsed, the ranks of the unemployed would quickly have swollen to a size not seen since the 1930s. In the US, for example, which has no equivalent to Mr Sunak’s scheme, the number of jobless rose by 20 million in April alone.The government has made serious, lethal mistakes during the pandemic. This was one thing it got right. Yet the murmurs of disquiet in Mr Sunak’s party – not noted for its love of expensive state interventions – had become audible as the policy’s June expiry date approached. Earlier this month, Sir Graham Brady, the chair of the 1922 backbench committee, irresponsibly suggested that the furlough scheme may have left people “a little too willing to stay at home”. A “senior government source” briefed journalists that widespread “addiction” to life on furlough had taken hold. Continue reading...

A German scheme is more generous and allows staff to work part-time while France pays 70% of gross salaryThe chancellor, Rishi Sunak, has announced that the UK’s job retention scheme – under which the state now pays 80% of the gross wages (up to a £2,500 per month maximum) of one in four UK workers – is to be extended until the end of October.Sunak also said that employers would be asked to contribute towards the £14bn a month cost of the scheme, and that it would soon allow part-time work to help businesses reboot their trade. Continue reading...

Economist discusses the effects of pandemic on economies, societies and globalisation

Rolling coverage of the latest economic and financial news, as McDonalds prepares to reopen drive-through sites and Ryanair outlines plans to restart some flights

Government support during lockdown has been a big success – but some workers may still lose their jobs in autumn

While deaths continue, most people will stay at home out of choice, whatever the government does

Professor argues US president is stabbing citizens in back while pretending to be saviour

Polls finds majority would like ministers to prioritise health and wellbeing over GDP during coronavirus crisis

The mental and physical stresses caused by fear of layoff have left many workers feeling suicidal

The new Bank of England governor’s predictions about a swift bounce-back don’t inspire confidenceAndrew Bailey, the governor of the Bank of England, is only a few months into the job and already his reputation for sound management of the economy is in danger. Last week he published a scenario for the next two years that amounted to his best guess on the depth of the recession in front of us, and the prospects for a recovery.The recession would be deep, he said. Most likely the deepest in more than 300 years. It would last for much of the year and cause severe hardship to many, with increases in unemployment not seen since the 1980s.Carney was expert at conveying the sense of being one of a few wise heads able to comprehend the magnitude of a crisis Continue reading...

No other advanced nation denies healthcare and work protections, or loosens lockdown while fatalities mountNo other nation has endured as much death from Covid-19 nor nearly as a high a death rate as has the United States.Related: Donald Trump's four-step plan to reopen the US economy – and why it will be lethal | Robert ReichAround the world, governments are providing generous income support. Not in the USAmerican workers are far less unionized than workers in other advanced economiesRelated: Mothers will be hardest hit if the economy reopens too fast | Jessica ZuckerRobert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a columnist for Guardian US Continue reading...

Thatcher’s simplistic aversion to borrowing still haunts fiscal policy, but interest rates have been falling for many yearsIt is clear Boris Johnson has favoured his health advisers as he looks to ease the lockdown. Worries about a second coronavirus outbreak have clinched victory over concerns about keeping much of industry and commerce in a state of suspended animation.After weeks of pleading by the Treasury to get the nation back to work, No 10 has opted to play it safe with people’s health, and particularly older people. And no wonder, after a hapless first few months in which the UK leapt to fourth place in probably the most ignominious league table in modern history – that of Covid-19 deaths per 100,000 population – behind Belgium, Spain and Italy.There are too many savings in the world looking for a safe haven for the demand for bonds ever to fall Continue reading...

More than 20m Americans lost their jobs in April – and Friday’s report suggests there might be much more trouble ahead

Oil price rises and shares end week on a high despite growing economic damage from coronavirus pandemicGlobal markets rose on Friday despite mounting economic damage from the coronavirus pandemic, as tensions eased between the White House and Beijing.Share prices on Wall Street and in Europe ended the week on a high amid rising hopes that lockdown measures could be lifted soon to reboot growth and that a full-blown global trade war could be averted.Related: US Nasdaq index recovers all of 2020's losses triggered by Covid-19 Continue reading...

Business models reliant on maximum footfall are at odds with social distancing, leaving space for local shops and mutual aid

Former Bank of England governor attacks government’s response to pandemic

Unemployment rate rose to 14.7% from just 4.4% in March as the coronavirus pandemic shuttered the global economy

We celebrate VE Day with the need to forge new trading relationships and with the grotesque economic burden of the coronavirus

With biggest plunge in output in 300 years being predicted, we explore why the last great recession happened

Britain’s central bank warns that the spread of Covid-19 and the measures to contain it could wipe 14% off UK GDP this year

Bank outlines scale of Covid-19 shock in 2020 with forecast for deepest recession in 300 years

Pace of layoffs tests states’ unemployment benefits fund as 33m jobless Americans make claims in past seven weeks

We urgently need a fairer tax system so that rich people like me help solve the fallout from coronavirus, not just profit from it

Threadneedle Street says the economy hasn’t been as bad as this for 300 years – so it can only can get better

Recessions tend to centre on one part of the economy; coronavirus has hit them all. The road to recovery will be long

The Treasury cannot afford to spend £10bn a month indefinitely, but a cliff-edge end to Covid-19 wage subsidies is not the answerWhat’s the safest way for Rishi Sunak to wind down his wage-support furlough scheme? Well, start by finding the correct language. The imagery in the current political talk about “weaning” businesses off an “addiction” is absurd.When the chancellor introduced the coronavirus job retention scheme on 20 March, he said it was to “protect, as far as possible, people’s jobs and incomes”. There will be trouble if, less than two months later and with lockdown still in place, companies and their workers are portrayed as needy infants or addicts who should know better. Continue reading...

Rishi Sunak promises gradual end to coronavirus wage subsidies as concerns grow

Rolling coverage of the latest economic and financial news, as American companies slash payrolls at an unprecedented rate