The Economy Under COVID-19: Notes from the Trenches

There are currently two crises underway simultaneously. The advance of the novel coronavirus is taking a terrible toll in terms of physical and emotional well-being. At the same time, job losses resulting from ‘social distancing’ are sending the economy into a tailspin. To fight on both fronts, governments are advancing rescue packages of never-seen-before dimensions. Every day, the tremendous number of factors in play reconfigure in a new way. These ‘from the trenches’ notes attempt to shed some light along a murky pathway.

Coming as a shock to no-one, the Bank of Canada has followed the Federal Reserve’s lead and dropped its key policy-setting interest rate near zero. North of the border, on Friday March 27, the ‘overnight rate’ was lowered to 0.25%.

A zero percent interest rate is effectively negative given an inflation rate of +2.0% year over year. Keep in mind, though, that inflation will soon be going on its own down and up journey. Long-term, it will be lifted by all the stimulus spending and quantitative easing that is about to take place. Short-term, however, prices for the base materials (i.e., commodities) that go into everything are dropping like a rock. In the last recession, U.S. deflation went to -2.1% year over year. In Canada, it bottomed at -1.0%.

President Trump has extended his end-to-social-distancing target to April 30th.

The ‘official’ count of coronavirus infections in Canada, on a per capita basis, is currently about half the U.S. figure. Neither country is believed to have anything like an accurate measure of how many people have truly been impacted by COVID-19 to date.

The survival efforts of many companies in these tough times are being aided by the likes of TEAMS, Zoom and GoToMeeting. What an extraordinary piece of luck it’s been that the pandemic has arrived just when video conferencing apps have come into their own. (Business enterprises at the time of the Spanish flu had no such recourse.)

Sporting activities in many countries outside the U.S. and Canada have been shut down, including golf. In North America, whether a golf course is open or closed is hit or miss. Besides, people are getting onto courses through neighboring back yards and the police have better things to do than chase down illegal duffers. To combat contact spread of the coronavirus, the etiquette of the game is being changed in the following ways: the flag is to be left untouched in the hole; rakes are to be no longer available in sand traps; and players are encouraged to walk courses rather than ride and steer carts.

Read the previous article here: The Economy Under COVID-19: Notes from the Trenches – March 30, 2020.

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.