This Week In The Economy: More COVID Vaccine Approvals, Spike In Jobless Claims As Congress Struggles To Reach Deal, ECB Unveils More Monetary Support, Hard Brexit On The Horizon?
By: Brai Odion-Esene
Tags: Monetary Policy, Macroeconomics, Brexit, Covid 19, Coronavirus Update

This Week In The Economy: More COVID Vaccine Approvals, Spike In Jobless Claims As Congress Struggles To Reach Deal, ECB Unveils More Monetary Support, Hard Brexit On The Horizon?

Welcome to a regular snapshot-review of U.S. and international economic news that aims to 1) provide a window into the challenges and decisions facing businesses today, 2) determine the direction of economic policy — such as the speed at which central banks decide to raise interest rates, and 3) assess what the impact will be for consumers.

More Vaccine Approvals Emergency Use As Infection Rate Continues To Rise

The United States’ Food and Drug Administration (FDA), as well as authorities in other countries, approved COVID-19 vaccines for emergecy use this week — positive news as the number of confirmed COVID-19 cases in the United States and in many parts of the world continues to soar. Globally, there have been 69,664,639 confirmed cases globally, with 23,155,049 active cases and 1,583,242 fatalities.

The elevated infection rate in the U.S. shows no sign of slowing down — at the time of writing there were 15,715,231 confirmed cases, 8,196,969 active and 295,450 deaths.

So far this week (from December 6–10), there have been 956,754 new COVID-19 cases in the United States, compared to 839,671 during the same five-day period last week. On Thursday alone, the U.S. reported 206,805 new infections — compared to 199,813 new cases on the same day last week.

The FDA’s Vaccines and Related Biological Products Advisory Committee this week gave its approval for the emergency use of the vaccine developed by Pfizer Inc. in partnership with BioNTech. The FDA’s Commissioner said in a statement following the vote that the FDA has informed Pfizer “it will rapidly work toward finalization and issuance of an emergency use authorization. The agency has also notified the U.S. for Disease Control and Prevention and Operation Warp Speed, so they can execute their plans for timely vaccine distribution.”

Canada also approved the Pfizer/BioNTech vaccine this week, specifically for those 16 years or older. The Israeli government announced it will begin vaccinating members of the public on Dec. 27, while the United Arab Emirates approved a vaccine developed by China that is said to be 86% effective.

The European Union remains the laggard, with EU Commission President Ursula von der Leyen saying this week that “we aim to authorise the BioNTech/Pfizer vaccine by the end of the year,” while the EU regulator’s decision on the Moderna vaccine should come before mid-January 2021.

Returning to the outbreak rankings, India remains in second place, with its number of confirmed cases now at 9,798,099. Of that number, 365,021 are active and there have been 142,230 fatalities.

Brazil is in third with 6,783,543 cases at time of writing — 671,965 active and 179,801 deaths. Russia is in fourth place with 2,597,711 confirmed cases, with 491,978 active and 45,893 deaths.

France is in fifth place with 2,337,966 cases — 2,106,368 of that number are active, and there have been 56,940 fatalities.

The United Kingdom, which began vaccinating healthcare workers and nursing home residents this week, is now up to sixth place this week with 1,787,783 cases — 1,724,701 active and 63,082 fatalities.

Italy moved up one place to seventh with 1,787,147 cases — 696,527 active and 62,626 deaths. Spain is eighth with 1,720,056 confirmed cases, of that 1,672,712 are active cases and 47,344 deaths.

Argentina is in ninth place with 1,483,376 cases — 124,747 active, and 40,442 fatalities. Colombia is tenth with 1,399,911 confirmed cases, of which 65,007 are active and 38,484 fatalities.

Spike In First-Time Applications For Unemployment Benefits, No Accord Yet On More Fiscal Support

The number of intial claims for state unemployment insurance programs rose last week, up by 137,000 to 853,000 according to the U.S. Labor Department. The previous week’s level was revised up by 4,000 from 712,000 to 716,000.

For the week ending November 28, there were 5,757,000 unemployed Americans continuing to receive unemployment assistance — an increase of 230,000 from the previous week’s revised level.

As for the expiring federal program set up under the CARES act to help the self-employed and gig workers, the Labor Dept said there were 427,609 initial claims for ‘Pandemic Unemployment Assistance’ last week, an increase of 139,375 from the prior week.

During the week ending November 21, there were 8,555,763 continued weekly claims for PUA benefits and 4,532,876 continued weekly claims for ‘Pandemic Emergency Unemployment Compensation’ benefits — another expiring program which provides up to 13 weeks of additional unemployment benefits to individuals who previously collected state or federal unemployment compensation but exhausted those benefits.

Democrats and Republicans, as well as members of the Trump Administration, have been locked in negotiations over another round of fiscal support for the economy but have yet to reach an agreement.

Treasury Secretary Steven Mnuchin unveiled a $916 billion proposal that calls for $600 stimulus checks for individuals and $1,200 for couples in place of enhanced unemployment benefits.

A bipartisan group of House and Senate lawmakers released more details of their $908 billion relief bill this week, and it includes a $300 weekly boost to unemployment insurance benefits for 16 weeks, through the end of April 2021. It would also extend pandemic unemployment insurance programs that are set to expire at the end of December for another 16 weeks.

Are The EU and UK Heading For A Hard Brexit?

Negotiations between the European Union and the United Kingdom over the latter’s exit from the bloc has been deadlocked for months now, at a standstill over disagreements related to fishing rights, how to ensure fair competition, and what the enforcement mechanism should be in the event either side reneges on the deal.

This week so both sides acknowledge talks are not going well, with the possibility that the new year begins with no trade agreement and a hard Brexit.

The UK government noted in a statement following a meeting this week between Prime Minister Boris Johnson and EU Commission President Ursula von der Leyen that “the situation remained very difficult and there were still major differences between the two sides.”

Johnson went a step further and warned in televised comments that there is a “strong possibility” that the U.K. and the EU don’t agree a free trade agreement by January 1.

“I do think we need to be very, very clear, there is now a strong possibility — a strong possibility — that we will have a solution that is much more like an Australian relationship with the EU than a Canadian relationship with the EU,” he said.

The EU Commission released four contingency measures in the event there is no deal on January 1. These cover:

Basic air connectivity : A proposal for a Regulation to ensure the provision of certain air services between the UK and the EU for 6 months, provided the UK ensures the same.

: A proposal for a Regulation to ensure the provision of certain air services between the UK and the EU for 6 months, provided the UK ensures the same. Aviation safety : A proposal for a Regulation ensuring that various safety certificates for products can continue to be used in EU aircraft without disruption, thereby avoiding the grounding of EU aircraft.

: A proposal for a Regulation ensuring that various safety certificates for products can continue to be used in EU aircraft without disruption, thereby avoiding the grounding of EU aircraft. Basic road connectivity: A proposal for a Regulation covering basic connectivity with regard to both road freight, and road passenger transport for 6 months, provided the UK assures the same to EU hauliers.

A proposal for a Regulation covering basic connectivity with regard to both road freight, and road passenger transport for 6 months, provided the UK assures the same to EU hauliers. Fisheries: A proposal for a Regulation to create the appropriate legal framework until 31 December 2021, or until a fisheries agreement with the UK has been concluded — whichever date is earlier — for continued reciprocal access by EU and UK vessels to each other’s waters after 31 December 2020.

Meanwhile a letter from the House of Lords EU Goods Sub-Committee warned that the UK is not ready for a no-deal Brexit.

“The Committee is seriously concerned that the Government is so far behind in its preparations,” it said, “to give two examples: firstly, some important customs IT systems are still in testing; and secondly, funding for new customs infrastructure had not, by December 2020, been released. Contingency plans, where they have been made, are weak and undeveloped.”

“We are not confident that all the necessary technological, physical and welfare arrangements will be in place in time to avoid or mitigate significant disruption following the end of the transition period,” the letter said.

ECB Provides More Support For Euro Area Economy, Ups Bond Buying

The European Central Bank this week announced additional measures to support economic activity in the Euro Area, increasing the size of the pandemic emergency purchase programme (PEPP) by €500 billion to €1.85 triillion.

It also extended the timeline for purchases under the PEPP to at least the end of March 2022, while adding that the ECB’s Governing Council “will conduct net purchases until it judges that the coronavirus crisis phase is over.”

They also prolonged the reinvestment of principal payments from maturing securities purchased under the PEPP until at least the end of 2023. The ECB also made adjustments to its program for providing very cheap loans to banks, extending the period over which considerably more favourable lending terms will apply by twelve months, to June 2022. The central bank also raised the total amount that banks will be entitled to borrow from 50% to 55% of their stock of eligible loans.

The ECB also extended the duration of lower collateral requirements for participating in the lending program until June 2022.

In her press conference following the meeting, ECB President Christine Lagarde warned that the resurgence in COVID-19 cases and resulting lockdown measures means eurozone economic activity will likely contract in the fourth quarter of 2020.

“While activity in the manufacturing sector continues to hold up well, services activity is being severely curbed by the increase in infection rates and the new restrictions on social interaction and mobility … . Overall, the incoming data and our staff projections suggest a more pronounced near-term impact of the pandemic on the economy,” she said.

Looking at Europe’s largest economy, The ZEW Indicator of Economic Sentiment for Germany showed the assessment of the economic situation worsened again.

Lagarde said the actions taken by the ECB will contribute to preserving low borrowing costs over the pandemic period, supporting the flow of credit to all sectors of the economy. “At the same time, uncertainty remains high, including with regard to the dynamics of the pandemic and the timing of vaccine roll-outs,” she said, adding “we will also continue to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook.”

“While the news about the prospects for vaccine roll-outs in the near future is encouraging, downside risks remain related to the implications of the pandemic for economic and financial conditions,” Lagarde said.