CNN Business/Anneken Tappe
The economy as we knew it might be over, Fed Chairman says
The Covid-19 pandemic brought the economy to a screeching halt, and while it has started its long road to recovery, the economy we knew is probably a thing of the past, said Federal Reserve Chairman Jerome Powell on Thursday.
“We’re recovering, but to a different economy,” Powell said during a virtual panel discussion at the European Central Bank’s Forum on Central Banking.
The pandemic has accelerated existing trends in the economy and society, including the increasing use of technology, telework and automation, he said. This will have lasting effects on how people live and work.
While technological advances are generally positive for societies over the long term, Powell said, on a short-term basis they create disruption, and as the market adjusts to the new normal the pain isn’t shared evenly.
For example, it’s likely that lower-paid workers, as well as those in jobs requiring face-to-face interactions, such as retail or restaurant workers, will shoulder most of the burden of this shift. These groups, heavily skewed towards women and minorities, have already been among those most affected by pandemic layoffs, Powell said.
The post-pandemic economy is also at risk of being less productive: women have been forced to quit their jobs due to child care responsibilities during the crisis, and children aren’t getting the education they deserve, Powell said.
Generally speaking, inequality holds the economy back, the central banker said.
“Even after the unemployment rate goes down and there’s a vaccine, there’s going to be a probably substantial group of workers who are going to need support as they’re finding their way in the post-pandemic economy, because it’s going to be different in some fundamental ways,” Powell said.
Washington has spent trillions of dollars to boost the economy in the wake of the pandemic. But jobless workers are still in a tough spot: some benefits have already dwindled and more are set to expire at year-end. Economists are hopeful that the next administration will manage to pass another stimulus bill to help workers and businesses as the recovery continues.
CNBC/Elliot Smith and Holly Ellyatt
European markets end lower as optimism over coronavirus vaccine wanes; Rolls-Royce falls 8%
The pan-European Stoxx 600 closed about 0.8% lower provisionally, with bank stocks shedding 2% to lead losses as almost all sectors and major bourses slipped into negative territory.
It comes as a resurgence in Covid-19 cases in the continent shakes investor sentiment, despite Pfizer and BioNTech’s announcement Monday that their Covid-19 vaccine candidate appeared to be more than 90% effective in its phase three clinical trials.
France’s total number of cases rose to 1.86 million on Wednesday, overtaking Russia to become the worst-affected country in Europe. Italy meanwhile surpassed the 1 million infections mark for the first time, while the U.K. became the first country in Europe to suffer over 50,000 deaths.
On Wall Street, the Dow Jones Industrial Average and S&P 500 opened lower on Thursday as markets continued to churn following big gains earlier in the week. The Nasdaq Composite, meanwhile, gained 0.3% as tech shares rose slightly.
Back in Europe Thursday, preliminary figures showed the U.K. economy grew by a record 15.5% in the third quarter, slightly lower than the 15.8% expansion expected by economists. U.K. GDP remains 9.7% below its December 2019 level.
Gold rises 1% on vaccine skepticism, surging virus cases
Gold rose 1% on Thursday on market skepticism over the logistics of a potential COVID-19 vaccine roll-out as cases continued to surge in the United States, while hopes of more fiscal and monetary stimulus offered support to the safe-haven metal.
Spot gold rose 0.9% to $1,882.11 per ounce by 10:36 a.m. EDT (1536 GMT), while U.S. gold futures climbed 1% to $1,880.10.
“The (gold) market is focused on stimulus and on the number of COVID-19 cases, those are continuing to rise,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
Regarding the vaccine, “we don’t know how the distribution is going to work … It seems like even if they had the vaccine, they probably won’t be aggressive on going out, getting it,” Streible added.
The United States continued to notch up grim records, with a worsening outbreak in the northeast of the country adding pressure on top of an already reeling Midwest.
Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell, but the pace of decline has slowed and further improvement could be limited by a raging COVID-19 pandemic.
Yahoo Finance/Brian Cheung
Central bank heads warn of ‘challenging’ few months ahead despite COVID-19 vaccine
The leading central bankers in the world offered a cautious outlook on the global economy despite the developments on a COVID-19 vaccine, as the case count spikes in the United Kingdom, the Eurozone, and the United States.
Federal Reserve Chairman Jerome Powell said Thursday that this week’s positive developments on Pfizer Inc’s experimental coronavirus vaccine are “good and welcome” in the medium term. But he cautioned that the U.S. economy is not on track for a full recovery just yet.
“It’s just too soon to assess with any confidence the implications of the news for the path of the economy especially in the near term,” Powell said at a European Central Bank conference on Thursday. “With the virus spreading, the next few months could be challenging.”
Powell’s sentiment on the vaccine was echoed by his central banking counterparts in London and Frankfurt, who also spoke on the same panel.
European Central Bank President Christine Lagarde said she does not want to be “exuberant” about the vaccine, noting that there are still questions about the ability to produce such a vaccine en masse and the ability to efficiently administer it.