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This Week In The Economy: Delta Variant Jitters, Bipartisan Infrastructure Deal Advances In Senate, Fed Waiting On More Economic Progress, IMF Sounds Alarm on Vaccine Inequity

This Week In The Economy: Delta Variant Jitters, Bipartisan Infrastructure Deal Advances In Senate, Fed Waiting On More Economic Progress, IMF Sounds Alarm on Vaccine Inequity

This Week In The Economy: Delta Variant Jitters, Bipartisan Infrastructure Deal Advances In Senate, Fed Waiting On More Economic Progress, IMF Sounds Alarm on Vaccine Inequity

COVID-19 Delta Variant Spurs CDC U-Turn

The highly-infectious Delta variant once again dominated the news cycle this week. Unpublished research by the U.S. Center for Disease Control indicates that the Delta variant causes more severe illness and spreads as easily as chickenpox, according to an internal CDC presentation obtained by the Washington Post.

The CDC also updated its guidance this week for fully vaccinated Americans, urging them to “wear a mask in public indoor settings in areas of substantial or high transmission.”

They also recommended that fully vaccinated people wear a mask regardless of the level of transmission, particularly if they are immunocompromised or at increased risk for severe disease from COVID-19, or if they have someone in their household who is immunocompromised, at increased risk of severe disease or not fully vaccinated.

They also said fully vaccinated people who have a known exposure to someone with suspected or confirmed COVID-19 be tested 3–5 days after exposure, and to wear a mask in public indoor settings for 14 days or until they receive a negative test result.

Finally, the CDC recommended “universal indoor masking for all teachers, staff, students, and visitors to schools, regardless of vaccination status.”

U.S. President Joe Biden said the updated guidance from the CDC “ makes clear that the most important protection we have against the Delta variant is to get vaccinated. Although most U.S. adults are vaccinated, too many are not. While we have seen an increase in vaccinations in recent days, we still need to do better.”

The White House this week unveiled new measures to encourage more Americans to get vaccinated and slow the spread of the Delta variant. The actions include:

  • Every federal government employee and onsite contractor will be asked to attest to their vaccination status. Those who do not will be required to wear a mask on the job no matter their geographic location, physically distance from all other employees and visitors, comply with a weekly or twice weekly screening testing requirement, and be subject to restrictions on official travel.
  • The Department of Defense will be required to look into how and when they will add COVID-19 vaccination to the list of required vaccinations for members of the military.
  • Small- and medium-sized businesses will now be reimbursed for offering their employees paid leave to get their family, including their children, vaccinated.
  • Urge school districts nationwide to host at least one pop-up vaccination clinic over the coming weeks. The Administration is directing pharmacies in the federal pharmacy program to prioritize this and to work with school districts across the country to host vaccination clinics at schools and colleges.

The Center for Disease Control reported that as of July 29, 397,464,625 total doses of the COVID-19 vaccine have been distributed to states, compared to 391,998,625 last week. Of this week’s overall number, 344,071,595 shots have been administered. Of the doses administered, 189,945,907 Americans have received at least one shot (57.2% of the entire population), and 163,868,916 have been fully vaccinated (49.4%).

Worldwide, there have now been 4,066,651,074 vaccine doses administered, but the massive gaps remain in terms of access:

Globally, there have now been 196,741,728 confirmed cases of COVID-19, with 4,201,788 fatalities. The U.S. now has 34,861,501 confirmed cases, and there have been 617,177 fatalities.

India has 31,571,299 confirmed cases. Of that number, 411,806 are active and there have been 423,244 fatalities. The data shows almost 27% of India’s population has received at least one jab of the COVID-19 vaccine, and 7.5% are fully vaccinated.

Brazil remains in third place with 19,839,369 cases at time of writing — 714,881 active and 554,497 deaths. Russia is in fourth place with 6,242,066 confirmed cases — 495,447 active and 157,771 deaths.

France is in fifth place with 6,079,239 cases — 5,624,797 of that number are active, and there have been 111,795 fatalities.

The United Kingdom remains in sixth place, two weeks on from the government’s decision to fully re-open the economy and remove the caps on all social gatherings. It now has 5,801,561 cases, and has had 129,515 fatalities.

Turkey is in seventh place with 5,682,630 cases — of that number 187,945 are active and 51,184 dead.

Argentina is in eighth place with 4,905,925 cases — 257,908 active and 105,113 deaths. Colombia is ninth with 4,766,829 confirmed cases, 88,874 active and 120,126 fatalities.

Spain moved up to tenth place with 4,422,291 cases and 81,442 deaths.

U.S. Senate Advances $1T Infrastructure Bill

The U.S. Senate this week voted to advance the $1.2 trillion infrastructure package negotiated by a bipartisan group of senators, voting 67–32 to take the first procedural step toward debating the measure.

The bill includes funding for roads, bridges, broadband and other physical infrastructure. According to a factsheet provided by the White House:

  • $110 billion of new funds for roads, bridges, and major projects
  • $73 billion investment in clean energy transmission
  • $65 billion investment in high-speed internet through broadband infrastructure deployment
  • $50 billion to make infrastructure more resilient to the impacts of climate change and cyber attacks
  • $55 billion investment in clean drinking water
  • $21 billion in environmental remediation to address legacy pollution
  • $17 billion in port infrastructure and $25 billion in airports
  • $11 billion in transportation safety programs
  • $39 billion of new investment to modernize public transit systems
  • $66 billion in rail to eliminate the Amtrak maintenance backlog
  • $7.5 billion to build out a national network of EV chargers

It remains to be seen if this bill will pass the Senate in its current form, and how it will be received in the House of Representatives where the Democratic-majority remains skeptical of the Senate effort.

This is also only the first act, and it will be followed up by the massive $3.5 trillion “human infrastructure” package that is expected to be passed via reconciliation.

Federal Reserve Sees Ongoing Economic Improvement, But Support Still Needed

The Federal Reserve’s policymaking Federal Open Market Committee met this week and — while sounded upbeat about the economy’s progress to-date — kept its interest rate policy the same and left the asset purchase program in place.

“With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen,” the FOMC statement said.

The officials noted that the sectors most adversely affected by the COVID-19 pandemic have shown improvement but have yet to fully recover. They acknowledged the recent rise in inflation, but dismissed it as “largely reflecting transitory factors.”

As for the labor market, “factors related to the pandemic, such as caregiving needs, ongoing fears of the virus, and unemployment insurance payments, appear to be weighing on employment growth. These factors should wane in coming months, leading to strong gains in employment,” the FOMC predicted.

Speaking during the press conference after the meeting, Fed Chair Jerome Powell said “the Fed’s policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people … We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved.”

The Fed chief said the economic recovery had not made “substantial progress” yet, adding that “we have some ground to cover on the labor market side. I think we’re some way away from having had substantial further progress with max — toward the maximum employment goal. I would want to see some strong job numbers.”

“We’re clearly a ways away from considering raising interest rates. It’s not something that is on our radar screen right now.” — Fed Chair Jerome Powell

IMF: Vaccine Access Splitting Global Recovery

The International Monetary Fund this week published its updated forecasts for the global economy this year and in 2022, downgrading its outlook for emerging market economies.

Its World Economic Outlook now forecasts world economic growth of 6% in 2021 and 4.9% in 2022, unchanged from the April report. However, “prospects for emerging market and developing economies have been marked down for 2021, especially for Emerging Asia. By contrast, the forecast for advanced economies is revised up.”

“These revisions reflect pandemic developments and changes in policy support,” the IMF said, noting that “Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalization of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising COVID death tolls.”

Furthermore, the report warned that the recovery “is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere.”

The IMF said the “immediate priority is to deploy vaccines equitably worldwide,” and that “financially constrained economies also need unimpeded access to international liquidity.”

“Concerted, well-directed policies can make the difference between a future of durable recoveries for all economies or one with widening fault lines — as many struggle with the health crisis while a handful see conditions normalize, albeit with the constant threat of renewed flare-ups,” it said.

And while many are worried about the specter of runaway inflation, the IMF urged central banks to “look through transitory inflation pressures” and avoid removing monetary stimulus and increasing borrowing costs “until there is more clarity on underlying price dynamics.”

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