The crash will almost certainly be accompanied by a surge in unemployment, especially in countries with weaker worker rights, such as the United States
Washington (AFP) - Amid growing evidence of the damage inflicted on the US economy by the coronavirus pandemic, Senate Republicans on Thursday introduced a $1 trillion emergency stimulus package.
Many economists now say the United States is already in a deep recession and in desperate need of federal funds as the latest economic data show a surge in layoffs and manufacturing shutdowns rippling across the country.
As the government clamps down on gatherings and calls for strict social distancing to stop the virus from spreading further, the US has recorded 10,755 cases of new coronavirus infection, 154 of them fatal.
But authorities expect the number to rise steeply in the coming days because of increased levels of testing after initial delays.
Forecasts now show the world's largest economy will crater, contracting between 12 to 14 percent in the April-June period.
President Donald Trump has pledged to "go big" to support the economy, and his administration has eschewed the traditional Republican aversion to debt and deficits.
Senate Majority Leader Mitch McConnell said Thursday legislators would continue working until the measure, including a provision to give cash to individuals, is approved.
"It's not an ordinary policy, but this is no ordinary time," he said on the Senate floor. "The American people need help, and they need it fast."
But not all his fellow Republicans appear to be on board, with some reportedly opposed to direct payments.
And Democratic congressional leaders warn they will not support a measure that puts corporations before workers.
"To earn Democratic support in the Congress, any economic stimulus proposal must include new, strong and strict provisions that prioritize and protect workers, such as banning the recipient companies from buying back stock, rewarding executives, and laying off workers," Senator Chuck Schumer and House Speaker Nancy Pelosi said in a joint statement.
Amid the continued uncertainty over the virus and how soon the government stimulus will be deployed, data has shown surging layoffs, especially in the hotel and travel industry.
They have also demonstrated a spike in workers applying for unemployment insurance, a collapse in manufacturing and a freeze falling over the hot housing market.
The Philadelphia Federal Reserve Bank's monthly survey of manufacturing showed activity "fell precipitously this month" with the index plunging from a three-year high of 36.7 to -12.7, its lowest reading since July 2012 and the biggest one-month drop on record.
- Already in recession -
"The sector will be in deep recession for the foreseeable future," Ian Shepherdson of Pantheon Macroeconomics said in an analysis, warning that much worse lies ahead.
The US economy relies almost entirely on consumers and the service sector, both of which have been hit hard.
For the week ending March 14, the number of people filing for unemployment insurance for the first time jumped to its highest level since September 2017, according to the Labor Department.
The increase was "clearly attributable to impacts from the COVID-19 virus," the department said, noting layoffs in the hotel and food services industries.
The biggest jumps were seen in Washington, site of the first US outbreak, Nevada, home to entertainment hub Las Vegas, and California, according to the raw data.
Congress on Wednesday approved a $100 billion package, which the House had passed overnight Friday last week, that provides free coronavirus testing, paid sick leave and expanded unemployment benefits.
And the Treasury this week announced a measure to allow companies and individuals to defer payment of up to $1 million in taxes for three months, which Mnuchin says will temporarily keep $300 billion in the economy.
The new $1 trillion package will include immediate cash payments and funding to keep small businesses afloat and pay their workers, as well as a lifeline to hard-hit airlines.
Treasury Secretary Steven Mnuchin urged rapid passage of the measure calling this "an unprecedented situation."
He said the government had "no problem issuing more debt," and since the Federal Reserve has taken its benchmark lending rate to zero, "we are going to take advantage of lower interest rates."
He explained that $500 billion of the total would be used to send $1,000 to each person and $500 per-child in the next three weeks, or $3,000 for a family of four, and then another payment six weeks later if needed.
Trump, in his now-daily White House briefing, again expressed optimism the damage will be short-lived.
"I believe when this is defeated, this hidden scourge is defeated, I think we're going to go up very rapidly, our economy, and get back to where it was and beyond," Trump said, adding he does not want the funds used by companies to buy back their stock.