Sector Impacts of Coronavirus (COVID-19)

While individual industries feel the impacts of coronavirus and the subsequent economic impacts very differently, looking at the impact of industry sectors allows us to draw conclusions and see trends across various industries operating in a similar space in the overall economy.
Each economic sector of industries includes a summary developed by our research team and information pertaining to the industries within that sector.

The SBA compiles information on PPP loans and presents them in many different ways. View further breakdowns in the full report by clicking on the image above.

How US Sectors Are Affected

August 23, 2021

Some segments of the management and administrative services sector are benefitting and others are hurting significantly by the fallout from coronavirus. Rising cases of the highly transmissible Delta variant of the coronavirus is starting to show signs of slowing US economic activity, according to The Wall Street Journal. In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise. Vaccine distribution in the US began in December, but by early July the Delta variant – which was first detected in India – was the dominant strain in the US, according to Centers for Disease Control and Prevention (CDC) estimates. The rises in new cases tend to be occurring in regions with low vaccination rates, according to the CDC.

While travel should rebound as more people receive vaccinations, travel-related industries face a lengthy recovery. Worldwide passenger traffic, as measured by revenue passenger kilometers (RPKs), fell nearly 66% in 2020 compared to 2019. International passenger demand was off more than 75%, and domestic demand declined nearly 49%. Traffic in 2021 is expected to reach about 49% of levels seen in 2019, but will be up 26% over 2020. Domestic passenger traffic is projected to recover quicker, returning to 96% of pre-pandemic levels by the second half of 2021. International traffic in 2021 will still be only 34% of that seen in 2019. Airline industry revenue is forecast to reach $458 billion in 2021, only 55% of what it was in 2019 but 23% higher than the low point of 2020. In late July, the IATA said global air travel demand improved slightly in June 2021 but was well below pre-pandemic levels. Total air travel, as measured by RPKs, was down 60.1% in June 2021 compared to June 2019. Domestic air travel was down 22.4%, and international travel was off 80.9%.

In the spring and early summer, domestic US air travel enjoyed a rebound as vaccination rates rose and new cases declined. However, vaccination-fueled optimism in the travel industry has since been tempered by the rapid spread of the Delta variant. On August 16, 2021 the US Transportation Security Administration (TSA) screened 1,980,585 passengers compared to only 773,319 on the same day in 2020. On August 16, 2019 the TSA screened 2,576,965 passengers. In August, Southwest and Frontier Airlines signaled the Delta variant was likely having a negative effect on bookings.

As of mid-August 2021, the US remained closed to foreign travelers. When the US does reopen, nearly all visitors will be required to be fully vaccinated. Amid falling rates of new COVID-19 cases and improved vaccination distribution, the European Union (EU) on May 19 announced it would reopen its borders and admit vaccinated travelers. The EU member states not already open to US tourists opened in mid-June. Most EU countries will require proof of vaccination, a recent negative COVID-19 test, or evidence showing recovery from the disease, according to The Wall Street Journal. Beginning in August, the UK removed its quarantine requirements for fully vaccinated travelers from approved countries, including the US. On August 9, Canada reopened to US travelers who show proof of full vaccination and a negative molecular coronavirus test than has been taken within the previous 72 hours.

Employment services providers may see an uptick in demand as vaccines and an improving economy have contributed to a stronger labor market. As of July 30, 2021, job postings on Indeed were 35.2% higher than they were on February 1, 2020 – Indeed’s pre-pandemic baseline. Many sectors are experiencing a major boom in job postings, including production & manufacturing (+76%), loading & stocking (+74.1%), human resources (+67.3), and cleaning & sanitation (+53.7%). While IT operations & helpdesk, education & instruction, and hospitality & tourism had below-average job posting growth, they were up 18.4%, 18.1%, and 10.5%, respectively. Sectors performing close to the average for all US postings included construction (+46.5%), driving (+38.5%), food preparation & service (+38.3%), and arts & entertainment (+33.8%).

With the exception of the lockdown early in the pandemic, demand for facility support services and janitorial work has remained steady. Cleaning services providers saw continued growth in the second quarter 2021, according to the Home Service Economic Report: Mid-Year Review released in August 2021 by Jobber, a job tracking and customer management software firm. Median revenue for cleaning firms in June 2021 was more than 25% higher than year-earlier levels. New cleaning work scheduled was flat year-over-year in June. However, new contracts saw compounded annual growth of 16% in Q2 2021 compared to the same period in 2019.

With US states reopened, businesses that serve the public may hire additional security personnel to help ensure social distancing practices are observed. Key areas of demand include retail, branch banking, and healthcare. On July 27, the Centers for Disease Control and Prevention (CDC) announced that fully vaccinated people should wear masks indoors in areas with high rates of COVID-19 transmission. The recommendation marked a reversal of CDC guidance on May 13 that said Americans who are fully vaccinated against COVID-19 could stop wearing masks and maintaining social distance in most settings. The updated recommendations are due to heath officials’ concerns that fully vaccinated people could contract and spread the Delta variant. To combat the spread of Delta, some state and local governments have reimposed mask requirements and proof of vaccination for some indoor businesses including restaurants, gyms, and movie theaters. To prevent their employees from having arguments with customers over masks and/or vaccine requirements, businesses may hire additional security staff to enforce their COVID-19-related health and safety policies.

Segments less affected by the pandemic include landscaping services, and pest control services. Providers of lawn care and landscaping – “Green” – services performed well in the second quarter of 2021 according to the Home Service Economic Report: 2020 Review released in August 2021 by Jobber, a job tracking and customer management software firm. Median revenue for Green companies was up nearly 20% in June 2021 compared to the same month in 2020. New work scheduled softened during most of Q2 but improved in June.

The US pest control index increased 11.6% in June compared to the same month in 2020, according to the William Blair/PCO M&A Specialists Pest Index which tracks the monthly performance of nearly 150 privately held US pest control firms. While growth slowed compared to the 15% year-over-year growth seen in May, that performance was partly due to a low baseline as demand fell early in the pandemic. However, June’s growth was well above the long-term historical average trend of 8% or 9%. Growth in June was driven by improvement in the commercial market, which was up 17.7% year-over-year. Demand was also strong in the residential (+8.8%) and termite (+10.9%) segments. The bed bug portion of the index grew 1%. The continued rebound for commercial pest control combined with rising market penetration in the residential segment should lead to continued growth for the remainder of 2021, according to investment banking and wealth management firm William Blair.

During the lockdown, waste management services saw a shift in garbage volume from commercial to residential as people worked from home, sheltered in place and avoided public places like restaurants. As more businesses reopen, levels of residential and commercial waste are gradually rebounding back toward the pre-pandemic balance. Industry insiders suggest waste management companies may be pressured to reduce fees as municipal contracts are renegotiated and renewed. Local governments may look for ways to trim budgets amid reductions in tax revenue. More than 40% of US cities reported a drop in revenues during the pandemic, according to the 2021 State of the Cities report released in June 2021 by the National League of Cities. The third round of stimulus, the $1.9 trillion American Rescue Plan Act – includes $360 billion in aid to state and local governments. Waste management and remediation services revenue rose 2.4% in the first quarter of 2021 compared to the fourth quarter 2020, according to the US Census Bureau. Revenue was up 2% on a year-over-year basis.

Earlier in the pandemic, some industry watchers believed the pandemic would lead to increased demand for collections agencies and repossession services as consumers struggled financially. However, the CARES Act passed in March 2020, the stimulus package passed in December 2020, and the American Rescue Plan Act passed in March 2021 provided some safeguards for consumers in terms of payment forbearance as well as direct payments to consumers and enhanced unemployment benefits. Early in the pandemic, many consumers took financial hardship offers from lenders who allowed paused payments on auto loans. Some lenders worried an extended period of widespread financial hardship could lead to loan defaults. However, most consumers who took advantage of lenders’ financial hardship offers are either keeping up with their payments or have exited such programs. Consumers resuming their loan and other debt payments may signal improved financial stability which could reduce demand for collections.

August 23, 2021

Coronavirus impacts the agriculture sector largely in demand for food, food exports, biofuels, and farm labor. At the onset of the pandemic and the ensuing lockdown, the industry was challenged by school and restaurant closures and limitations on food service (drive-up or delivery). Some economists are worried rising new cases fueled by the Delta variant of the coronavirus could slow US economic growth, according to The Wall Street Journal. Traffic in grocery store, gas stations, restaurants, and retailers dropped off in late July, according to mobility data firm SafeGraph. In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise.  To combat the spread of Delta, some state and local governments have reimposed mask requirements and proof of vaccination for some indoor businesses including restaurants. In March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $28.6 billion in grant funding for restaurants and bars – called the Restaurant Revitalization Fund. Each restaurant location is eligible for up $5 million in grants based on pandemic-related lost revenue. No restaurant group can receive more than $10 million. The aid is limited to independent restaurants and chains with fewer than 20 locations.

Changes in the patterns of grocery buying – fewer shopping visits with larger cartloads – combined with greatly reduced sales to restaurants and schools pressured the supply chain. Changes in food packaging and distribution from commercial and institutional to household consumer created bottlenecks. Outbreaks of COVID-19 caused several large meat processing plants to shut down, and major meat producers warned of shortages. In these cases, livestock were diverted to other plants for processing. Temporary closures at meat packing plants led some livestock producers to cull herds. Critics of industrialized factory farming have called for a flatter farming system with fewer chokepoints where ownership and geographic footprint are more diverse.

A number of pandemic-related factors are expected to curb global meat consumption, including restaurant closures, reduced consumer buying power, and general wariness following COVID-19 outbreaks at meat processing plants. Worldwide per-capita meat consumption is estimated to have dropped nearly 2% in 2020, according to the UN.

Since the onset of the pandemic, agricultural exports have generally improved. However, exports of several US agricultural commodities trended downward in late June. For the week ending August 5, export volumes grew for Rice (+201%), soybeans (+62%), corn (+43%), and wheat (+5%). Pork prices were down 62% from the previous week and beef prices declined 9%.

The US and China signed a trade agreement in January 2020. Starting March 2, 2020, under Phase One of the agreement, Chinese importers of US agricultural products could apply for exemptions to the nation’s tariffs on US goods, which makes US products more affordable. China’s imports of US agricultural products under Phase One were hindered by China’s lockdown early in 2020 but have since roared back to levels that are higher than before the US-China trade war began in 2018 amid China’s early recovery from the COVID-19 outbreak. US agricultural exports to China rose to more than 55 million tons in 2020, accounting for 25% of all farm exports, according to the USDA. The USDA expects US agricultural exports to hit a record $164 billion in 2021. Exports to China will reach a record high of $35 billion amid strong demand for soybeans, corn, tree nuts, wheat, and poultry products. However, Phase One of the China deal is set to expire at the end of 2021, and port congestion worldwide has slowed the movement of goods and driven shipping costs higher.

High US demand for imported goods has created a logjam at the ports of Los Angeles and Long Beach. Earlier in the pandemic a COVID-19 outbreak among port workers made the backlogs worse and the lingering effects are still being felt. Vaccinations have since slowed the spread of COVID-19 on West Coast ports, but the bottleneck has taken time to clear. Gene Seroka, the executive director of the Port of Los Angeles, has said the congestion is likely to remain an issue for at least another six months amid the approaching busy back-to-school and holiday shopping seasons. To ease congestion and get containers back to Asian exporters, containers are often sent back empty to avoid the extra time needed to load them with US goods for export. The practice has made it harder for agricultural exporters to find containers, according to the American Farm Bureau. Agricultural commodities most affected by the congestion at ports in Long Beach, Los Angeles, and Oakland include tree nuts, oranges, prepared tomatoes, hides and skins, meat, wine, and dairy.

In August 2021, a major shipping container terminal at China’s busy Port of Ningbo was closed after a single worker tested positive for COVID-19. All inbound and outbound cargo was ordered redirected to other terminals in China, creating further congestion at those locations, according to FreightWaves. The terminal closure is part of the Chinese government’s strategy for containing the spread of the Delta variant. The closure of the terminal at Ningbo is expected to lengthen lead times and further complicate global supply chains. Ningbo is a key port for Chinese imports of agricultural products.

When the global market is flooded with cheap oil, biofuel becomes a more expensive source of energy and demand declines. On the other hand, lower prices for gas and diesel fuel benefit crop producers by reducing machinery operation costs. US fuel ethanol production declined 12% in 2020 compared to 2019, according to the Energy Information Administration (EIA). Fuel ethanol production is projected to rise 5.5% in 2021 over the prior year. Diesel prices have been creeping upward in 2021. For the week ended August 6, the spot price for ultra-low sulfur diesel was $2.10 per gallon, up from $1.24 the same week a year earlier, according to the EIA.

The agriculture sector has struggled with shortages of farm labor for years, but quarantines and closed borders may exacerbate the problem. Farmworkers have also been disproportionally affected by coronavirus. Many are undocumented and about 10% are in the US on H-2A visas which allow foreign workers – mostly from Mexico – to do seasonal work in the US. Infection rates in many US agricultural counties have been high as workers live in cramped quarters and some lacked PPE.

US net cash farm income is projected to drop by $7.9 billion in 2021 to $128.3 billion, according to a USDA forecast released in February 2021. The forecast suggests net farm incomes rose by $27.3 billion in 2020. Net cash farm income includes cash receipts from farming as well as farm-related income, such as US government payments. Cash receipts for animals and animal products are expected to rise $8.6 billion (5.2%) in 2021, while crop receipts are projected to increase $11.8 billion (5.8%). Direct government payments are forecast to be up more than 107% in 2020 compared to the prior year. Farm supports, which will total $46.5 billion for 2020, increased due to supplemental and ad hock COVID-19 relief payments. Most of the decline in 2021 net cash farm income is expected to be due to lower direct government payments to farmers.

Amid pandemic-related export volatility, farmers relied on various US government stimulus programs – including provisions of the CARES Act and direct aid by the USDA. Payments under the Coronavirus Food Assistance Program (CFAP) totaled more than $23.5 billion for 2020, according to the USDA. The Paycheck Protection Program (PPP) provided nearly $6 billion, according to FAPRI. Farmers also received assistance from Market Facilitation Program (MFP) payments. In late 2020, former President Trump signed a $900 billion stimulus bill that includes $13 billion in agricultural aid. The bill also revived PPP and includes $284 billion in funding for Small Business Administration (SBA) loans. The most recent round of PPP let eligible borrowers get a second draw loan. It also simplified loan forgiveness for loans under $150,000 and makes forgiven loans tax deductible. The PPP was set to wind down on May 31, but the program ran out of money on May 11, 2021 and stopped accepting most new applications, according to The New York Times.

The American Rescue Plan Act includes more than $10 billion for programs aimed at strengthening US agriculture and the food supply chain, according to analysis by the American Farm Bureau Federation. The bill includes $3.6 billion – or 35% of total agriculture appropriations – for pandemic-related food purchase and distribution. About $4 billion – or nearly 40% of the total – will provide debt forgiveness to socially disadvantaged farmers.

The Farmers to Families Food Box Program funded farmers to provide boxes of meats, dairy, and produce to families in need during the pandemic. Citing inefficiencies and high costs, the USDA wound down the Farmers to Families Food Box program at the end of May 2021. It is being replaced by a new USDA food box program that will provide fresh produce through The Emergency Food Assistance Program (TEFAP) and be distributed to those in need by local food banks.

In August 2021, the Biden administration announced the largest permanent expansion of the Supplemental Nutrition Assistance Program (SNAP), or food stamps, in the program’s history, according to The New York Times. Under the expansion, which is set to take effect in October, average benefits will increase 25%. Boosting SNAP benefits may help many people struggling with food insecurity as most of the federal benefit programs aimed to provide relief during the pandemic are either expired or will soon revert back to their pre-pandemic levels. Expansion of SNAP is the result of legislation passed in 2018 that required the Agriculture Department to review basic program assumptions about the nutrition required for a healthy diet.

August 23, 2021

The construction sector has been less affected in the short-term as existing projects progress, potentially at a slower pace due to difficulties in securing materials. The sector is expected to see a slowdown in new projects as businesses assess the coronavirus impact on their revenue and their ability to invest in capital projects.

The shutdown caused a large drop in construction job losses – more than 800,000 construction jobs were shed in April 2020. The construction sector added 11,000 jobs in July 2021. Employment gains were concentrated in residential building construction and nonresidential specialty contractors. Overall, sector employment in July was essentially flat on a year-over-year basis. As of July 30, 2021, construction job postings on Indeed were more than 46% higher than they were on February 1, 2020 – Indeed’s pre-pandemic baseline.

The Federal Reserve has lowered interest rates in efforts to spur investment in construction, real estate, and equipment. Construction firms are reviewing their contracts with customers regarding responsibility for cost overruns and project delays.

The pandemic drove up prices for many types of construction materials including lumber and steel. In July 2021, US producer prices for softwood lumber were nearly 39% higher than they were a year earlier. Iron and steel mill producer prices rose more than 105% during the same period. Prices rose because factories that slowed production earlier in the pandemic still haven’t ramped up to full capacity, partly due to labor shortages. There are still lingering kinks in global supply chains that have slowed the movement of goods. Lumber prices began to moderate in May amid improving supply as wider vaccine distribution caused consumers to get out more and spend less time on home improvement projects. July lumber prices were down about 34% compared to June. Lumber supplies have also been helped by homebuilders slowing production amid shortages of other products, including appliances, doors, and windows. However, despite recent price drops, softwood lumber prices in July were still up 67% compared to pre-pandemic levels, according to NPR.

Demand for some types of construction, such as retail, hospitality, and entertainment venues, has fallen as hard-hit industries take time to recover from lost revenue. Retailers and other businesses that fail or reduce their number of locations could leave a glut of commercial space unoccupied. This could negatively affect demand for new commercial space but will raise demand for commercial renovations as new or expanding businesses enter those spaces. However, some experts believe the trend of teleworking that began during the quarantine will remain and have long-term, negative effects on demand for office and commercial real estate in central-city locations.

The construction industry doesn’t have the luxury of allowing most employees to work from home. However, increased availability of vaccines will help make construction sites safer. On April 19, all Americans over age 16 became eligible to be vaccinated. As of August 18, more than 168 million Americans were fully vaccinated or about 51% of the US population.

Construction firms are eligible to apply for low-interest Economic Injury Disaster Loans (EIDL). In late 2020, former President Trump signed a $900 billion stimulus bill that included $284 billion in fresh funding for the Paycheck Protection Program (PPP) to provide Small Business Administration (SBA) loans. In March, President Biden signed the $1.9 trillion American Rescue Plan Act which included an additional $7.25 billion funding for PPP. The PPP was set to wind down on May 31, but the program ran out of money on May 11, 2021 and stopped accepting most new applications, according to The New York Times. The American Rescue Plan also allocated $15 billion for targeted EIDL advance payments for businesses in low-income communities that have no more than 300 employees and have suffered financial losses of more than 30%. The American Rescue Plan Act also includes $360 billion for state and local governments, with $10 billion specifically for infrastructure projects.

Builder confidence hit a historic low in April 2020 as the epidemic took hold in the US, but then gradually built steam amid strong demand for new single-family homes and low mortgage interest rates. The National Association of Home Builders / Wells Fargo Housing Market Index (HMI) was 30 in April 2020, an all-time low. It then rose every month, hitting new all-time highs in September (83), October (85), and November (90). Any reading above 50 is an indicator of a positive market. The HMI in May 2021 was 83, unchanged from April’s reading, as strong buyer demand offset concerns of rising construction costs, questions about housing affordability, and a lack of lots and inventory. In June 2021 the HMI fell two points to 81, then dropped 1 point to 80 in July. August’s HMI declined 5 points to 75, marking the lowest reading in 13 months. While August’s HMI reading was still indicative of a strong housing market, the drop was a signal that builders are still struggling with high materials costs and supply chain disruptions which have pushed home price beyond the reach of many potential buyers. In mid-July 2021, the NAHB noted that rising lumber prices between mid-April 2020 and the first week of July 2021 were enough to add $30,000 to the price of the average new single-family home.

Construction spending in June 2021 increased 8.2% compared to the same month a year earlier. Residential spending increased 28.8% and nonresidential fell 6.6%. Of all nonresidential construction subsectors, only one saw spending growth in June as sewage and waste disposal spending was up 2.2%. The weakest nonresidential segments were public safety (-37.4%), lodging (-26.6%), and conservation and development (-18.7%).

The construction sector’s comeback since the onset of the pandemic has been fueled mostly by a strong residential market while the nonresidential building and infrastructure segments have been slowed by materials shortages, according to the Associated General Contractors of America (AGC). Some contractors report wait times of a year for steel shipments and several months for roofing materials, according to a June 2021 report by the AGC. The slowdowns have curtailed nonresidential contractors’ ability to begin new jobs and finish existing ones. Contractors also report difficulties attracting workers, and the AGC suggests the upcoming September expiration of federal supplemental unemployment benefits might help the industry meet is labor needs. The problems faced by the construction sector have more to do with materials and labor shortages hobbling contractors’ ability to meet demand rather than a fundamental lack of demand, according to the AGC.

Nonresidential spending could be poised for a turnaround amid positive movement in Washington DC on a new infrastructure bill. In late July 2021, a bipartisan group of senators agreed on the details of an infrastructure bill that includes $550 billion in new spending. The deal includes funding for roads and bridges, public transit, rail, water and power infrastructure, and high-speed internet. Increased federal spending on US infrastructure has been a key part of the Biden administration’s agenda for helping the country recover from the pandemic

August 23, 2021

At the onset of the pandemic, many financial sector insiders anticipated a wave of consumer and business defaults. However, widespread debt defaults never materialized. In the first half of 2020, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, and Wells Fargo set aside a combined $35 billion to brace for the potential of consumer and business loan losses. In the fourth quarter of 2020, five of the banks (Citigroup, JPMorgan Chase, Morgan Stanley, Bank of America, and Wells Fargo) cut their cash reserves set aside for loan losses by a combined $6 billion. In the first quarter of 2021, Citigroup, JPMorgan Chase, Bank of America, and Wells Fargo further trimmed reserves by nearly $13 billion amid stronger commercial and household balance sheets, vaccination successes, and government stimulus. The five biggest banks – Citigroup, JPMorgan Chase, Goldman Sachs, and Morgan Stanley – reported higher first-quarter revenue from equities trading driven by the flood of new retail trading, and investment banking fees. In June, several major banks – including JP Morgan, Citigroup, and Morgan Stanley – warned that their second-quarter 2021 trading revenues would be off compared to the highs seen earlier in the pandemic when markets were awash in Fed stimulus and retail investors flocked to equities markets. However, Morgan Stanley’s equities trading revenue grew in the second quarter, but JP Morgan’s fell 30%. Citigroup’s equities trading revenues of $1.1 billion topped the $879 estimate. JPMorgan Chase, Bank of America, Wells Fargo, Citigroup all beat analysts’ second quarter profit expectations by again trimming cash reserves set aside for loan losses, according to CNBC.

As the economy has improved, lenders are loosening up their lending standards, which may allow consumers to get loans who could not get them earlier in the pandemic, according to The Wall Street Journal. Nearly 30% of banks lowered their underwriting standards in the first quarter of 2021, according to the Federal Reserve. Some banks are reducing their credit-score requirements and offering more generous loan deals.

A second round of stimulus relief was passed in December. The $900 billion COVID-19 Economic Stimulus Relief Act included $600 stimulus checks per person, including children. The package also extends unemployment benefits of up to $300 per week. The bill also reauthorized the Paycheck Protection Program (PPP). The PPP extension includes $284 billion in funding for Small Business Administration (SBA) loans. The most recent round of PPP lets eligible borrowers get a second draw loan. It also simplifies loan forgiveness for loans under $150,000 and makes forgiven loans tax deductible.

In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $1,400 stimulus checks for most Americans. The bill also extends the $300 supplemental unemployment benefit through August 29, 2021. The plan also provides an additional $7.25 billion funding for PPP. It also allocates $15 billion for targeted EIDL advance payments for businesses in low-income communities that have no more than 300 employees and have suffered financial losses of more than 30%. The PPP was set to wind down on May 31, but the program ran out of money on May 11, 2021 and stopped accepting most new applications, according to The New York Times.

Securities brokers, investment advisors and portfolio managers are all riding the stock market waves and dealing with clients’ concerns over volatility, buyers taking the chance on undercut stocks, and increasing concerns about inflation as the economy heats up. Earlier in the pandemic, decreased business and consumer spending on travel, dining out, and entertainment hurt credit card companies’ revenues. However, government stimulus and the huge uptick in consumer ecommerce spending have since improved credit card companies’ fortunes. Finance and insurance sector employment saw steady monthly gains between April 2020 and January 2021, then dipped slightly in February. Sector employment rose in March and again in April, then shed about 8,700 jobs in May and another 1,400 in June. The finance and insurance sector added 4,300 jobs in July.

Consumer lenders – including those providing credit cards, as well as car, student, and personal loans – have fared well during the pandemic, according to The Wall Street Journal. The potential for high rates of default have largely been kept at bay by direct stimulus payments to consumers, and forbearance programs for student loan and mortgage payments. Low interest rates have increased lending competition on price which has drawn more lenders into the subprime space where there is less competition. Industry watchers note that lenders are betting that interest rates will rise and offset any future increase in loan losses that may occur when the effects of stimulus and forbearances run their course.

The Consumer Financial Protection Bureau recommends that lenders not report consumers as delinquent if they seek mortgage relief. Some lenders are reporting late payments to the credit bureaus which the bureaus are using to calculate consumers’ credit ratings. The CARES Act requires some companies that provide federally backed mortgages and student loans to offer payment deferrals. Other lenders have also offered consumers deferrals. In some cases, deferred payments have been erroneously reported as late to credit bureaus, which has hurt consumers’ credit ratings and loan affordability, according to Consumer Reports. Complaints to the Consumer Financial Protection Bureau about credit report errors hit new heights during the pandemic, according to the US Public Interest Research Group, a consumer advocacy organization.

Consumer credit levels rose 10%, up about $37 billion, in June, according to the Federal Reserve. Revolving debt, which is mostly credit card debt, rose 22%. Nonrevolving debt such as student loans and auto lending was up 7.2%. The upward trend in revolving credit in June, which grew at its fastest rate ever, suggests consumers are feeling confident about their finances and employment and have increased their credit card spending. Oxford Economics expects consumer credit growth to continue in the second half of 2021 amid strong consumer demand and easing lending standards. However, an unexpected dip in US retail sales in July could signal that the surge in COVID-19 cases fueled by the Delta strain of the coronavirus could be starting to weigh on the economy. Consumer confidence dropped 13% in early August compared to the prior month, according to the University of Michigan’s consumer sentiment index.

Corporations have taken on more debt during the pandemic – a fact that could create problems down the line in the event of another recession, according to The Wall Street Journal. Raising cash by issuing bonds helped companies in hard-hit industries – including travel and entertainment – to stay afloat. Successful and struggling businesses alike used bonds to refinance long-term debt. To help prop up the economy, the Fed also bought corporate bonds for the first time, which helped boost investor confidence. Some finance industry insiders worry low interest rates enabled weak companies to survive by taking on cheap debt, which can be a long-term drag on economic growth. Others are concerned companies will face trouble in a few years when they have to refinance their pandemic-era bonds, or another recession increases borrowing costs while harming consumer finances. As of August, 2021 sales of “speculative-grade” debt had reached $650 billion, according to S&P Global Ratings. With four months left to go in the year, the rate of borrowing among weaker firms is on pace to surpass all-time borrowing records.

To assist customers who are struggling, some lenders and credit card issuers are waiving late fees, return check fees, and interest charges, allowing skipped payments, reducing interest rates, and extending credit limits. Financial firms are working with customers one-on-one to determine the appropriate relief for their account. Lenders may also extend lines of credit to fundamentally stable customers. The Federal Reserve cut interest rates in March 2020, which spurred a rush on mortgage refinancing and demand for title insurers.

The direct payments to consumers and further extensions of federal unemployment benefits included in the American Rescue Plan Act could reduce demand for short-term payday loans. The new stimulus bill also expands an existing tax credit that will give most families with children a monthly check of $300 per child. Government aid programs aimed at helping Americans weather the COVID-19 pandemic cut poverty nearly in half for 2021 and reduced the proportion of people in poverty to record low levels, according to New York Times reporting of analysis by the Urban Institute. However, the effects of government aid may be short-lived. Many of the programs that helped put the biggest dent in poverty are either expired or are about to return to the size they were prior to the pandemic. Progressives suggest the gains against poverty prove government action can have a rapid effect on alleviating poverty. Conservatives argue pandemic-level spending isn’t sustainable. While the drop in US poverty may have reduced the need for payday loans, demand could return quickly once aid program funding runs out.

To hedge against large payouts, travel insurers generally excluded coronavirus in policies sold after mid-January 2020, deeming it a foreseeable event. However, some travel insurers provided benefits related to medical emergencies and evacuations.

Medical insurers are seeing a mix of activity as some customers seek testing, treatment for coronavirus, and vaccinations. Wellness exams and elective surgeries were cancelled or postponed during the quarantine. As individual states reopened, medical appointments and procedures resumed, but rising cases of the Delta variant have resulted hospital overcrowding which again stifled elective procedures in hard-hit areas, including Texas and Florida. In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise.

Deaths caused by COVID-19 in 2020 drove the life insurance industry’s largest year-over-year rise in direct and net death benefits in 24 years, according to S&P Global Market Intelligence. In 2020, aggregate net benefits across all lines of business (whole life, term life, and universal life) rose more than 15% over 2019, reaching $87.5 billion. The pandemic also contributed to an overall drop in US life expectancy in 2020, which can affect the accuracy of life insurance mortality forecasts. Overall, life expectancy in 2020 fell 1.5 years, according to the Centers for Disease Control and Prevention (CDC). The CDC estimates the overall health effects of COVID-19 caused about 74% of the total 1.5 years of reduction in life expectancy.

Insurers have seen an influx of business customers attempting to make business interruption claims because the coronavirus outbreak and quarantines affected their ability to conduct business. As of late July, 1,980 COVID-19-related insurance lawsuits have been filed in the US, according to a litigation tracker maintained by the University of Pennsylvania Carey Law School. Of cases where courts have ruled, most have been dismissed. The vast majority of business interruption lawsuits will be matters for state rather than federal courts, according to The National Law Review. It is expected to be a lengthy process before any state supreme court issues a binding procedural determination of that state’s view of coronavirus-related business interruption claims. It will take even longer for a majority view to materialize among all state supreme courts.

Life insurers made changes to how they write policies during the pandemic. The inability to obtain medical exams led some life insurers to deny policies to people age 70 or older. Life insurers relied more heavily on data from electronic health records, prescription databases, medical billing claims, and motor vehicle reports when writing policies, since medical exams were not feasible.

Use of online banking increased as consumers avoided public spaces, like banks. Some banks are hiring technology and information security personnel and others are hiring mortgage modification lenders. As retail banking and credit unions reopen, industry experts expect significant changes in policies that define social distancing protocols. In markets with heavy foot traffic that were hard-hit by the epidemic, facilities will likely be retrofitted or remodeled to ensure customers and workers can maintain safe distancing.

The CARES Act allows homeowners with federally backed mortgages, that can claim a hardship, to apply for a six-month forbearance. As of August 10, 1.74 million homeowners remained in active forbearance plans, according to mortgage technology and data firm Black Knight. About 250,000 forbearance plans are up for extension or removal through August. August 10 marked the first time the total population of homeowners in forbearance was below 1.8 million since early in the pandemic. In late July, the Biden administration announced a program aimed at helping homeowners who are in forbearance plans avoid foreclosure, according to The Wall Street Journal. The plan would allow borrowers with loans backed by the Federal Housing Administration to extend the length of their mortgages and secure lower monthly payments. The program could help about 1.5 million borrowers who Black Knight estimates are seriously delinquent – meaning they haven’t made a payment in more than 90 days. Forbearance programs allow borrowers to defer payments for up to 18 months. Those who took advantage of forbearance early in the pandemic are set to exit those plans in September and October. A national ban on foreclosures expired on July 31, 2021.

August 23, 2021

The healthcare sector has faced a myriad of challenges including increased demand for coronavirus tests and speed of lab processing, spikes in demand for beds and ventilation equipment, shifts in handling patient care, shortages of masks and other medical supplies, greater facility sanitation to prevent virus spread, inadequate staffing, and appointment cancellations.

Hope for ending the pandemic intensified in December as two vaccines began being distributed under emergency use authorization (EUA). Both of the vaccines (one developed jointly by Pfizer and Germany-based biotech firm BioNTech, and the other developed by Moderna) proved more than 90% effective in clinical trials, and require two doses to achieve full effectiveness. In late February a third single-shot vaccine developed by Johnson & Johnson’s Janssen Pharmaceutical division received EUA by the USDA and began being distributed. As of August 18, more than 168 million Americans were fully vaccinated or about 51% of the US population, according to the Centers for Disease Control and Prevention (CDC). The CDC initially issued phased guidelines for prioritizing vaccine distribution but on April 19, all Americans over age 16 became eligible to be vaccinated. On May 10, the USDA expanded emergency use authorization for Pfizer’s vaccine to include children ages 12 to 15.

Two other vaccines have completed phase 3 clinical trials – one from Novavax, and another by a partnership between AstraZeneca and Oxford University. Novavax plans to apply for EUA in the US, the UK, and Europe in the third quarter of 2021. However, in August, Novavax announced the US government had paused funding for production of its vaccine pending improvements to the company’s testing and quality control standards, according to The New York Times. Novavax’s production issues have prompted some government officials to question when or if the vaccine will ever be approved for distribution in the US. AstraZeneca is considering skipping EUA in the US and instead switch paths to the lengthier process of full licensing, according to The Wall Street Journal. In late May, the FDA said it may choose not to review and process any new EUA applications for vaccines if the manufacturer wasn’t already engaged in FDA approval discussions. The AstraZeneca vaccine has been approved outside the US and is being widely deployed in Europe, Asia, and Latin America. In extremely rare cases, the Janssen and AstraZeneca vaccines appeared to cause blood clots in some who received the shots. In some cases, the vaccines’ distribution was briefly paused, but health experts suggest the benefits of being vaccinated outweigh the small risk of clots.

Optimism on the rollout of vaccines has been somewhat tempered by the emergence of mutated coronavirus variants than are more contagious than the original virus and may be more resistant to vaccines. Some health experts suggest vaccine administration is in a race against the spread of the new virus variants, especially in developing countries that lack the resources to purchase and efficiently distribute vaccines. The Delta variant – which was first detected in India – has emerged as the dominant strain in many parts of the world, including the US, according to Centers for Disease Control and Prevention (CDC). In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise. The severest spikes tend to be occurring in regions with low vaccination rates, according to the CDC. While, experts believe those who have received two doses of vaccine are well protected from Delta, rising numbers of “breakthrough cases” – where fully vaccinated people become infected – have increased calls for booster shots. In August the CDC published three studies that suggest that vaccine efficacy tended to wane over the summer of 2021 as Delta spread more widely. In response, the Biden administration said that on September 20, boosters would begin to be available for vaccinated adults who have received the Pfizer-BioNTech and Moderna vaccines. Health officials are still evaluating the data to determine if those who have received the Johnson & Johnson vaccine should get boosters. Like with initial vaccine rollouts, once boosters are approved, nursing home residents, healthcare workers, and the elderly will be prioritized. The CDC noted that while vaccine efficacy seems to dwindle over time, protection against illness, hospitalization, and death remain high.

As states have reopened, medical appointments and procedures have resumed. Social distancing measures for office visits include spacing office furniture further apart, mandatory masks, and patients waiting in their cars instead of waiting rooms. Daily new COVID-19 cases began rising rapidly in the fall and winter. In early January 2021, the seven-day average for daily new cases were sometimes as many as 250,000.

The large increase in new cases overwhelmed some hospitals, especially smaller ones in rural communities. Small hospitals typically transfer patients with complicated medical conditions to large hospitals in nearby urban areas but as new cases rose, urban hospitals often didn’t have room, according to the American Hospital Association. Those conditions began to repeat July and August of 2021 as COVID-19 cases fueled by the Delta variant began rising. Some hospital systems in several states – including Florida, Louisiana, Texas, and Mississippi – became increasingly overwhelmed and ICU beds were in short supply. As with the third wave of the pandemic in the winter of 2020-2021, elective surgeries and non-essential healthcare services were being postponed in hard-hit regions.

Health researchers think pooled testing can improve testing efficiency. With pooled testing, tests are done in small batches. If the pooled test comes back negative, everyone in the batch is negative. If the pooled test is positive, unused portions of the original samples are retested individually. Pool testing is thought to be of the most use in areas with low rates of infection where most pooled tests would come back negative, thereby getting quicker results while conserving resources. The efficiency of batch testing makes it a useful tool for reopening schools, universities, and workplaces.

Healthcare providers with senior populations such as nursing homes, assisted living facilities, and continuing care and retirement communities (CCRC) are at high risk of elevated mortality rates due to high concentrations of patients with weakened immune systems and underlying conditions that can be exacerbated by respiratory illnesses like coronavirus. However, older adults who live in crowded settings (including nursing homes and assisted living facilities) were included in Phase 1a of vaccine rollouts. On March 10, the Centers for Medicare and Medicaid Services accompanied by comments from the CDC, released updated guidelines for nursing home visits, allowing guests to visit with residents indoors. However, the guidelines note that outdoor visits are still preferable.

Physicians, nurses, mental healthcare practitioners, home healthcare services, pharmacists, and other healthcare providers are using telehealth to connect with patients at home over video or phone to assess their conditions while limiting their exposure to the public. In some cases, medical equipment at the patient’s home can be accessed remotely to monitor their vitals.

The FDA gave the greenlight for healthcare providers to treat severe coronavirus cases with medicines already on the market that suppress the immune system and prevent it from attacking the respiratory system. Respiratory distress from the lungs filling with fluid and subsequent lack of oxygen to the blood system is the major cause of death in coronavirus patients. The healthcare industry is waiting for medications designed specifically to treat the virus but the development, testing and approval process is lengthy. Stopgap medications include remdesivir and dexamethasone.

In November 2020, a monoclonal antibody treatment developed by Regeneron Pharmaceuticals received emergency use authorization (EUA) from the FDA. GlaxoSmithKline received EUA for its antibody treatment Sotrovimab in May 2021. Monoclonal antibody treatments are lab-made molecules than mimic natural antibodies that target infections, such that caused by the novel coronavirus. The drugs have been effective in helping to reduce hospitalizations when administered soon after infection. Initially approved only for high-risk patients, in May 2021 the FDA broadened its criteria for who is considered high-risk which made about 75% of the adult US population eligible for monoclonal antibody treatment, according to The Wall Street Journal. However, monoclonal antibodies saw only limited use until the Delta variant began driving cases higher. In mid-August, deliveries of Regeneron doses were nine times higher than in the previous month. Regeneron has seen strong demand in states with low vaccination rates and high Delta infections, including Florida, Texas, and Mississippi which have moved quickly to set up antibody-drug infusion centers to help relieve hospital overcrowding. The US government has purchased about 1.5 million doses of the Regeneron treatment and is making it available to patients free of charge. The US government has not yet purchased any of GlaxoSmithKline’s antibody drug Sotrovimab but it is available through normal drug purchasing channels.

In late-December 2020, former President Trump signed a $900 billion COVID-19 stimulus package. The bill included $20 billion for vaccine purchases, $9 billion for vaccine distribution, and $22 billion to help states with COVID-19 testing, contact tracing, and other mitigation efforts. The legislation also contains a measure that will ban “surprise” medical billing. The new law, which would take effect at the beginning of 2022, aims to prevent consumers from receiving unexpected bills for care that’s outside their insurance network. The law requires fair payment rates to be negotiated between providers and insurers by an arbitrator who must take into account local, in-network rates.

In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes several key healthcare provisions. The bill has $123 billion in funding to COVID-19-related policy, including $50 billion for testing and contact tracing, $16 billion for vaccine distribution and supply chain enhancements, and $10 billion for use of the Defense Production Act to distribute medical supplies. The bill also increases subsidies for the Affordable Care Act (ACA) for nearly everyone who buys their own healthcare coverage. The expansion also offers subsidies to individuals with incomes too high to have participated previously. Low-income people who live in states that have not opted to expand Medicaid via the ACA will not qualify for the subsidy increases. From the onset of the pandemic through January 2021, nearly 10 million Americans enrolled in Medicaid, the health coverage program for the poor. The ranks of Medicaid swelled to 80 million – or about a fourth of the US population – as people lost their jobs due to the pandemic.

In general, wealthier nations have had better access to pandemic-related healthcare services – including vaccines – than developing countries. Co-led by the Global Alliance for Vaccines and Immunizations (GAVI), the Coalition for Epidemic Preparedness Innovations (CEPI), and the World Health Organization (WHO), the COVAX initiative was set up to ensure poorer nations have access to vaccines. Nearly 80 wealthy countries have signed on to help fund Covax. Wealthy nations have to pay full price for a vaccine, in part to help subsidize poorer countries that cannot afford to vaccinate their entire populations. However, Covax has struggled to acquire enough doses and as of August was about half a billion doses short of its goal, according to The New York Times. Drug companies have been reluctant to sell directly to COVAX which has made it difficult to secure enough doses. In a bid to help with the problem, the Biden administration bought 500 million doses from Pfizer and Covax began delivering them in August. However, distribution is also a problem due to developing countries’ transportation challenges and the need for storing doses at extremely cold temperatures. Critics worry Covax may be losing the race against the Delta variant, which could lead to further mutations that are resistant to vaccines. Some officials have suggested Covax should work more closely with local humanitarian and regional organizations to quicken the pace of getting shots in arms.

The global healthcare sector is a major target of cybercrime and hacking. Experts expect attempts to increase during the pandemic as healthcare systems are stretched thin. Ransomware attackers have accessed patient medical records and not only gone after healthcare companies but the patients themselves, threatening to expose their private medical data. In the final three months of 2020, as US COVID-19 cases rose dramatically, the healthcare industry suffered more ransomware attacks than any other industry, according to Coveware Inc, a firm that aids victims in negotiating ransoms.

Incidence of depression, anxiety, stress and anger related to social distancing and job losses rose during the pandemic and are driving fears that affected people will commit suicide, homicide, domestic violence, turn to drugs or alcohol or commit crimes. The mental health and substance abuse segment of the healthcare industry is seeing increased demand for services and is offering telehealth options for counseling remotely. Government resources dedicated to fighting opioid addiction have been reallocated during the coronavirus epidemic.

The CARES Act allows hospitals to receive an advance on expected Medicare reimbursements and provides $100 million to reimburse eligible healthcare providers for expenses or lost revenue directly related to COVID-19. Despite the cash infusion, more than 20 US hospitals closed down in 2020, according to Becker’s Hospital Review. Higher costs from the COVID-19 pandemic combined with significant drops in surgeries and outpatient treatments have put a huge strain on hospital finances. US hospitals are expected to lose between $53 billion and $122 billion in revenue in 2021, down between 4% and 10% compared to pre-pandemic levels, according to consulting firm Kaufman Hall for the American Hospital Association.

The effects of the COVID-19 pandemic on the US healthcare system are not yet fully calculated, but they are expected to persist for years, according to analysis by Fitch Ratings. In the early summer it seemed as if the pandemic’s end could be in sight, but rising cases of the more contagious Delta variant hit many hospitals hard, especially in areas of the country with low vaccination rates. The current vaccines protect well against coronavirus, but their effectiveness on possible future mutations is unknown. The current wave of hospitalizations is also leading to patients postponing elective and routine care which is expected to have long-term ramifications for the healthcare system. Patients with long-haul COVID-19 symptoms will also increase long-term utilization of the healthcare system and push costs up. Burnout among hospital staff in hard-hit areas will likely exacerbate labor shortages and put upward pressure on wages, contributing further to hospitals’ rising costs. Large, for-profit hospital systems so far seem to be withstanding the hardships of the pandemic, but smaller systems and hospitals are likely to face significant financial challenges.

August 23, 2021

Coronavirus has affected the information sector in unique ways. Movie theaters are reopened but were closed for months. This cut profit to the bone in an industry with already thin margins. North American box office sales dropped to $2.2 billion in 2020 compared to $11.4 billion in 2019, according to the Motion Picture Association. Major theater chains AMC, Regal Cinemas, and Cinemark began opening some of their locations in August 2020. Then in October, Cineworld – the parent company of Regal Cinemas – closed more than 660 of its theaters in the US and the UK. The company made the decision to close temporarily as studios continued to push back the release dates of blockbuster films and audiences were slow to return. Cineworld began phased reopenings with limited theater capacity in April 2021. The rapid rise in new COVID-19 cases fueled by the highly-transmissible Delta variant is prompting some local governments to reimpose masking mandates and some are implementing vaccine requirements for indoor activities. In early August, New York City announced it would require proof of vaccination for customers and employees in several indoor settings, including movie theaters, dining, gyms, and events. Shortly afterward, San Francisco announced a similar policy.

The rollout of vaccine distribution in December 2020 provided hope that by the second half of 2021 the movie industry might be able to return to some semblance of normalcy. However, the rapid rise of new COVID-19 cases fueled by the Delta variant may further delay the repacking of US theaters. In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise. In a late-July poll by the National Research Group, US moviegoers’ overall comfort with returning to the movies fell to 72% compared to 81% just three weeks earlier.

Some industry watchers had been looking to 2021’s summer blockbuster movie season as a possible bellwether for the fate of post-pandemic moviegoing, according to The Wall Street Journal. After more than a year with few major releases, the summer of 2021 brought a fresh round of new films, many of which had their release dates postponed earlier in the pandemic. Some studios relied on their streaming services during the pandemic. The return of in-person theater attendance early in the summer was seen as a test for film studios’ ability to find the right balance between their streaming service offerings, which were at the forefront during the worst of the pandemic, and keeping moviegoers engaged. The spike in new cases caused Paramount to pull the September 13 release date for the family movie Clifford the Big Red Dog. Industry watchers wonder if it could lead to other fall releases being pushed back.

Early success with vaccine distribution was the key to fully reopening theaters, sporting events, and other forms of in-person entertainment. However, vaccination take-up has slowed significantly and as of August 18, only about 51% of the US population was fully vaccinated, according to the Centers for Disease Control and Prevention (CDC). The CDC initially issued phased guidelines for prioritizing vaccine distribution but on April 19, all Americans over age 16 became eligible to be vaccinated. On May 10, the USDA expanded emergency use authorization for Pfizer’s vaccine to include children ages 12 to 15. On July 27, the Centers for Disease Control and Prevention (CDC) announced that fully vaccinated people should wear masks indoors in areas with high rates of COVID-19 transmission. The recommendation marked a reversal of CDC guidance on May 13 that said Americans who are fully vaccinated against COVID-19 could stop wearing masks and maintaining social distance in most settings. The updated recommendations are due to heath officials’ concerns that fully vaccinated people could contract and spread the Delta variant.

Some production and broadcasting of live events, such as collegiate and professional sports, have resumed. Some news and talk programs have returned to studios with in-person guests and much smaller, socially distanced live studio audiences. As concerns over public crowds subsided, consumers have gradually shown interest in returning to seeing movies, concerts, sporting competitions, and other televised events. However, entertainment and event attendance could begin to erode again if COVID-19 cases continue to climb.

Persistent outbreak conditions in California complicated the state’s efforts to resume entertainment production activities. The Los Angeles movie and TV industry had restarted productions then shut back down in early January as a wave of new cases threatened to overwhelm hospitals. Productions have since resumed. Through the Industry-Wide Labor Management Safety Committee Task Force, various unions that represent television and film production personnel have created a set of guidelines to keep sets as safe as possible. The strategies include daily temperature checks, extensive testing, masks and other PPE for all cast and crew not on camera, and cleaning protocols. As the Delta variant drove a spike in new cases, some Hollywood movie and TV productions were shut down in July, according to The Wall Street Journal. That same month, studios and several major industry unions – including the Directors Guild of America, the Screen Actors Guild, and the Teamsters – agreed to a short-term plan that will require everyone on a production set to be vaccinated. The plan is scheduled to remain in effect through the end of September. Movie and film studios, including those of streaming services, are keen to prevent production stoppages as they work to refill their pipelines after the pandemic slowed the creation of fresh content earlier in the pandemic.

Most professional sports including NASCAR, professional golf, the National Hockey League, and the NFL, the NBA, WNBA, and Major League Baseball had games and events in 2020. Most returned without live spectators. Some NFL games allowed spectators. Major League Baseball’s (MLB) 2021 season opened on April 1. As of July 5, 2021, all 30 MLB teams began allowing 100% capacity at home games.

Subscription programming services such as Hulu, Netflix, and Disney+ gained subscribers at the expense of cable and satellite pay TV services during the worst of the pandemic as people spent more time at home. In 2020, about 6 million pay TV subscribers in North America cut the cord, according to Digital TV Research. However, the rate of cord-cutting is expected to slow in the coming years. Between, 2020 and 2026 pay TV services are expected to lose about 16 million North America subscribers. Satellite will fare the worst with a loss of 7.5 million, followed by digital cable TV which is expected to shed about 5 million. Internet protocol (IPTV) TV subscriptions are to drop by about 3.4 million. Cord cutting continued in the second quarter of 2021 as pay TV firms that together hold 95% of the market shed more than 1.2 million subscribers, according to Leichtman Research Group. The Q2 2021 losses were about 275,000 fewer than were shed during the same period a year earlier. Consumers are cutting the cord on their pay TV services citing high prices compared to streaming alternatives. To stem their losses, pay TV providers have shifted focus to their more lucrative internet offerings.

In the earlier days of the pandemic, news organizations and magazine publishers, large and small, dropped their paywalls to allow non-subscribers to access coronavirus-related coverage. More recently, news publishers have begun reinstating their paywalls as they became savvier about designing offers that attract new subscribers.

With more people working from home, use of virtual private networks (VPN) to access company computer systems has risen significantly. Data centers are experiencing a surge in traffic as more people access data remotely. They are also encouraging customers to use the data center’s in-house technical staff to manage hands-on work with servers and systems. Due to more people working remotely, incidence of phishing emails, ransomware and hacks have risen. Cloud-based services are scaling up defenses. Cloud services are forecast to see greater IT investment as the economy recovers and businesses explore more remote-friendly work platforms for their employees. Global end-user spending on public cloud services is expected to increase more than 18% in 2021, according to Gartner.

As states reopen their economies, libraries will open as well with local officials providing guidelines for proper distancing and other precautions.

Radio and TV stations are keeping listeners and viewers informed on coronavirus updates, reopenings, vaccine distribution, and local resources. Field crews are assessing situations and taking precautions when performing interviews and covering events outside the studio.  As more states have reopened and eased restrictions, local TV and radio news have kept viewers and listeners informed about rapidly changing regulations about reopening schedules, what types of businesses are reopening, mask-wearing requirements, and vaccination information.

The information sector shed 279,000 jobs in April 2020, 85% of which were in the motion picture and sound recording industries, according to the Bureau of Labor Statistics. The sector lost another 39,000 jobs in May 2020, with more than a quarter of the losses coming from the motion picture and sound recording industries. The information sector gained 14,000 jobs in June, led by the addition of more than 13,000 positions in data processing hosting, and related services. The sector grew by another 24,000 positions in July, primarily due to the addition of 17,800 job in the motion picture and sound recording industries. In July 2021, sector employment was down about 6% compared to pre-pandemic levels of February 2020. Much of the information sector proved resilient because employees can work from home or use social distancing in the workplace.

Local and national television programming experienced a jump in viewership as more people were home and tuning in for entertainment and coronavirus updates. However, local advertising spending declined as many independent and small businesses cut back on nonessential expenses, like advertising. National and cable broadcasters experienced drops in advertising spending related to broadcast events, like college and professional sporting competition, although some of that revenue may bounce back as sports broadcasts have resumed. Total TV advertising revenue in 2020 fell nearly 9% to $66 billion, according to media research firm Kantar. National TV ad sales dropped 13.3% to $50 billion. Local TV ad sales were a bright spot, rising 8.3% to $16 billion, driven mostly by record spending for political advertising. US ad spending rose 35.2% in June 2021 compared to the same month a year earlier, according to MediaPost analysis of Standard Media Index data. The June results marked the fourth same-month year-over-year ad spend comparison since the pandemic began. National TV ad spending was strong in June 2021, but was 19% below June 2019 levels. National TV ad spending is projected to rise 5% to $38 billion in 2021 on higher ad pricing, according to media intelligence firm MAGNA.

Sales of books have skyrocketed, especially online, as consumers look for entertainment at home. Book publishers are moving promotions for new books online because traditional promotion in bookstores and libraries, as well as book tours, were canceled.

August 23, 2021

The effects of coronavirus on the leisure and hospitality industry are largely related to travel restrictions and cancellations, and reduced foot traffic due to social distancing. Hotels, airlines, resorts, cruises, restaurants and bars, theaters, amusement parks, convention centers and sports arenas all suffered revenue losses as consumers and businesses avoid travel, events, and conferences.

After the pandemic subsides, the leisure and hospitality sector hopes to see a surge in demand as consumers become more confident about spending time in public and traveling. Amid the lockdown, some companies and venues refunded tickets, waived cancellation fees or issued credits. Hospitality and leisure venues closed to reduce operating costs, reserve cash, and take time to sanitize their properties and equipment.

Aside from airlines and hotels, less travel also hurt airport operations, food service providers, ridesharing, and taxi and limo services. Rising cases of the highly transmissible Delta variant of the coronavirus is starting to show signs of slowing US economic activity, according to The Wall Street Journal. In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise.

In the spring and early summer, domestic US air travel enjoyed a rebound as vaccination rates rose and new cases declined. However, vaccination-fueled optimism in the travel industry has since been tempered by the rapid spread of the Delta variant. On August 16, 2021 the US Transportation Security Administration (TSA) screened 1,980,585 passengers compared to only 773,319 on the same day in 2020. On August 16, 2019 the TSA screened 2,576,965 passengers. In August, Southwest and Frontier Airlines signaled the Delta variant was likely having a negative effect on bookings.

As of mid-August 2021, the US remained closed to foreign travelers. When the US does reopen, nearly all visitors will be required to be fully vaccinated. Amid falling rates of new COVID-19 cases and improved vaccination distribution, the European Union (EU) on May 19 announced it would reopen its borders and admit vaccinated travelers. The EU member states not already open to US tourists opened in mid-June. Most EU countries will require proof of vaccination, a recent negative COVID-19 test, or evidence showing recovery from the disease, according to The Wall Street Journal. Beginning in August, the UK removed its quarantine requirements for fully vaccinated travelers from approved countries, including the US. On August 9, Canada reopened to US travelers who show proof of full vaccination and a negative molecular coronavirus test than has been taken within the previous 72 hours.

On July 27, the Centers for Disease Control and Prevention (CDC) announced that fully vaccinated people should wear masks indoors in areas with high rates of COVID-19 transmission. The recommendation marked a reversal of CDC guidance on May 13 that said Americans who are fully vaccinated against COVID-19 could stop wearing masks and maintaining social distance in most settings. The updated recommendations are due to heath officials’ concerns that fully vaccinated people could contract and spread the Delta variant. To combat the spread of Delta, some state and local governments have reimposed mask requirements and proof of vaccination for some indoor businesses including restaurants, gyms, and movie theaters. Earlier in the pandemic, restaurants and bars took steps to operate as safely as possible, including positioning tables farther apart, hand sanitizing stations, disposable menus, and operating at reduced capacity – in some cases 25%-50%.

In March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $28.6 billion in grant funding for restaurants and bars – called the Restaurant Revitalization Fund. Each restaurant location is eligible for up $5 million in grants based on pandemic-related lost revenue. No restaurant group can receive more than $10 million. The aid is limited to independent restaurants and chains with fewer than 20 locations.

Many workers in the sector are part-time and paid hourly. Restaurant and bar workers in particular rely on tips that can’t materialize when traffic slows or establishments shutter. The leisure and hospitality sector lost more than 7.2 million jobs in April 2020, according to the Bureau of Labor Statistics. Foodservices and drinking places accounted for 70% of the jobs lost. All segments within the sector have since rebounded, but not completely. As a whole, leisure and hospitality employment in July 2021 increased by 380,000 jobs, but was still 10% below pre-pandemic levels seen in February 2020. In the arts, entertainment and recreation segment, July employment was off by 16% compared to February 2020. Accommodation employment was down 17% during the same period, and food services and drinking places employment was off nearly 8%. However, in the first six months of 2021, the leisure and hospitality sector accounted for nearly half of all US jobs growth. As consumers have returned to travel, restaurants, and other leisure activities, businesses have had to increase wages and perks to attract workers, according to The New York Times.

The sector benefited from federal funding and employment tax breaks that helped businesses weather the downturn without laying off workers. A second round of stimulus relief was passed in December. The $900 billion COVID-19 Economic Stimulus Relief Act included reauthorized the Paycheck Protection Program (PPP). The PPP extension included $284 billion in funding for Small Business Administration (SBA) loans. The second round of PPP let eligible borrowers get a second draw loan. It also simplified loan forgiveness for loans under $150,000 and makes forgiven loans tax deductible. The American Rescue Plan Act extended the $300 supplemental unemployment benefit through August 29, 2021. The plan also provided an additional $7.25 billion funding for PPP. The PPP was set to wind down on May 31, but the program ran out of money on May 11, 2021 and stopped accepting most new applications, according to The New York Times. The American Rescue Plan Act also allocates $15 billion for targeted EIDL advance payments for businesses in low-income communities that have no more than 300 employees and have suffered financial losses of more than 30%.

Businesses in the leisure and hospitality sector may run on very thin profit margins and require additional access to capital to maintain operations, pay suppliers, and meet payroll obligations. These firms may also struggle to pay creditors on schedule until revenue returns.

For the week ending August 13, US hotel occupancy was down 8.4% and revenue per room (RevPAR) decreased 3% to $91.45 compared to the comparable week in 2019, according to hotel data firm STR. Softening of key hotel industry metrics in mid-August was consistent with seasonal norms amid back-to-school and reduced leisure travel. However, STR noted that COVID-19 concerns remain a factor for the industry.

In some states, nightclubs have resumed operations. In some cases, clubs reopened with reduced capacity. Even with restrictions lifting, some nightclubs may continue to hold outdoor and rooftop events in regions where the Delta variant is driving infection rates up. Some clubs have built plexiglas enclosures to protect DJs. Some state and local governments may require masks and/or proof of vaccination for admittance to events, especially if held indoors.

August 23, 2021

In May, the Institute for Supply Management’s (ISM) Spring 2021 Semiannual Economic Forecast upgraded its outlook for US manufacturing. The ISM expects manufacturers to record a 7.2% year-over-year net revenue increase in 2021, reversing a 1.3% decrease during pandemic-plagued 2020. All 18 industry sectors tracked by ISM are expected to record increases. An earlier forecast in December projected 2021 revenue growth of 6.9%.

In its December outlook, the Organisation for Economic Co-operation and Development (OECD) projected worldwide GDP would grow by 4.2% in 2021. In March, the OECD upgraded its 2021 global GDP forecast to 5.6% growth amid rapidly accelerating vaccinations and the $1.9 billion US stimulus package. Amid continued vaccination successes in advanced economies, in May the OECD again upgraded its 2021 outlook to 5.8% growth. The OECD also upgraded 2021 US GDP growth from 6.5% to 6.9% (compared to 3.5% growth forecast in December). China’s GDP forecast was upgraded to 8.5% after being downgraded slightly to 7.8% in March from the December estimate of 8%. The OECD noted that countries need to keep up the pace of vaccinations to prevent new coronavirus variants from leading to further outbreaks and economic strain.

The pandemic has exposed the vulnerability of far-flung, complicated global supply chains. Supply chain diversification is expected to lead companies to move some activities out of China. Nearly 85% of procurement professionals at North American manufacturing firms are likely or extremely likely to reshore some of their supply chains, according to a June 2021 report released by Thomas, a provider of supplier and product sourcing services. A strong majority of survey respondents plan to reshore some operations despite some challenges in doing so, including price and speed. Thomas estimates that if manufacturers who say they plan to reshore some operations each bring on just one domestic supplier it could drive nearly $455 billion in economic value.

Even a year and a half after the onset of the pandemic, supply chains worldwide are still being challenged by COVID-19. Strong US demand for imported goods has created a bottleneck at California ports that has dragged on for several months. Earlier in the pandemic a COVID-19 outbreak among port workers made the backlogs worse and the lingering effects are still being felt. In August 2021, a major shipping container terminal at China’s busy Port of Ningbo was closed after a single worker tested positive for COVID-19. All inbound and outbound cargo was ordered redirected to other terminals in China, creating further congestion at those locations, according to FreightWaves. With ports congested on both sides of the Pacific, manufactures are facing longer lead times for imports of key components and other inputs, and may have trouble exporting finished goods and components.

New orders for durable goods rose 0.9% in June 2021 from May, according to the US Census Bureau. New orders rose despite supply chain backlogs and issues with finding enough workers, according to The Wall Street Journal. Some manufacturers are still struggling with a global semiconductor shortage that proved particularly troublesome for automakers. After sharp declines in shipments in April, US shipments of automobiles, and light trucks and SUVs were up 3.7% and 2.1%, respectively in May. Light truck and SUV shipments grew 0.5% in June, but automobile shipments were down 3.7%. According to market research firm Gartner, the semiconductor shortage will linger into the second quarter of 2022.

The Institute for Supply Management’s monthly Purchasing Managers’ Index (PMI) fell 1.1 percentage points to 59.5% in July from the June reading of 60.6%. Any reading above 50% indicates expansion, while anything under 50% indicates contraction. The new orders index registered 64.6%, down from 66% in June. The production index dropped 2.4 points to 58.4% from 60.8%. The backlog of orders increased to 65% from 64.5%. The employment index grew to 52.9% in July from the June reading of 49.9%. Of the 18 manufacturing industries tracked by the ISM, 17 reported growth in July.

Manufacturing employment increased 2.7% in July 2021 compared to the prior month but was down nearly 4% compared to pre-pandemic levels of February 2020, according to the US Bureau of Labor Statistics.

Aug 23, 2021

An oil glut and plummeting global petroleum consumption sent oil prices into a tailspin in April 2020. By the fourth week of April the price of West Texas Intermediate (WTI) crude oil hit $3.32 per barrel. Agreements by OPEC and other major producers to cut production and gradual improvements in demand have since stabilized global oil markets; the WTI crude spot price in the second week of August was $68.33 or 62% higher than the comparable week a year earlier.

Higher oil prices have provided a boost to US shale producers’ bottom lines amid recent cost reductions and flat output. As prices have risen, drillers increased production to take advantage of the recovery. Shale firms are expected to pump any price-related margin improvements into debt reduction or improving investor returns rather than pour it back into production.

Successful vaccine rollouts in many parts of the industrialized world, primarily the US, the UK, and the European Union are expected to boost oil demand through the remainder of 2021. In August 2021, the International Energy Agency (IEA) said it expects global oil demand to reach 96.2 million barrels per day (b/d) in 2021, up 5.3 million b/d compared to 2020. In the spring and early summer, wider vaccination distribution and further drawdowns on mobility restrictions lifted oil demand and OPEC+ responded by boosting production. Then global demand began to wane amid a surge in COVID-19 infections fueled by the Delta variant of the coronavirus. The IEA has downgraded its oil demand outlook for the second half of 2021 due to reinstatement of COVID-19 restrictions, specifically ones in Asia.

The number of oil and gas rigs in operation is down significantly from pre-pandemic level (793 in the first week of March 2020), but has gradually risen since hitting bottom at about 240 rigs in mid-August of 2020. The US rig count as of August 9, 2021 was 500, nine higher than the prior week and up 256 from a year earlier, according to Baker Hughes Rig Count. As oil prices have improved, rig counts have gradually ticked upward, especially in the Permian Basin. Platts Analytics forecasts the rig count will continue to rise, reaching 630 by the end of 2021. Oil prices tumbled in mid-August amid concerns the spread of the Delta variant could hamper oil demand in major economies, specifically China, according to The Wall Street Journal. However, many large E&P firms have budgeted their operations to manage through an oil price as low as $55 per barrel, according to S&P Global Platts.

A spate of oil and gas producer bankruptcies that occurred earlier in the pandemic has since tapered off, according to Houston-based law firm Haynes and Boone. Five oil producing firms filed bankruptcy in Q1 2020, 18 did so in Q2, another 17 filed in Q3, and six filed in Q4. In Q1 2021 eight oil producers filed for bankruptcy, and four did so in Q2 2021, which marked the lowest number of E&P bankruptcies in a Q1-Q2 period since 2015. The aggregate debt of the firms that filed for bankruptcy in Q1 and Q2 – about $1.8 billion – was also the lowest in a Q1-Q2 period since 2015.

Exploration and production (E&P) companies slashed capital expenditures in 2020. Together, 2020 writedowns by BP, Royal Dutch Shell, and Exxon totaled $51.4 billion, according to Bloomberg. In 2021, US E&Ps are expected to further reign in spending, reducing capex by about 8% compared to 2020, according to a recent Raymond James survey of mid-to-large E&P firms. Firms outside the US are expected to increase capex by about 6%. As the pandemic has worn on, energy firms have been under pressure from investors to curtail expenditures in favor of paying dividends to shareholders. Some industry watchers believe that pressure may diminish as long as oil stays in the neighborhood of $60 per barrel. However, some industry watchers are concerned that lack of investment in production could lead to supply constraints and price spikes if consumption rebounds suddenly and producers can’t ramp up production fast enough to meet demand.

Tough oil market conditions brought on by the pandemic led to further industry consolidation, especially in the shale oil segment of the industry, according to The New York Times. In October, Chevron completed its purchase of Nobel Energy Oil. Amid higher oil prices and vaccine rollouts, the first quarter of 2021 was marked by more consolidation as larger shale players used their equity to purchase smaller firms that have quality assets and low debt, according to The Wall Street Journal. The trend continued in the second quarter of 2021 with more than 40 deals valued at about $33 billion, according to energy data analytics firm Enverus. During the pandemic, a larger share of shale production has become concentrated among major, public E&P firms, which has tended to increase investor pressure for financial discipline and less spending on production expansion, according to S&P Global.

Natural gas prices are expected to maintain a slight upward trend in 2021, according to the Energy Information Administration (EIA). Total US natural gas consumption is expected to fall 1% in 2021 compared to the prior year as higher natural gas prices reduce gas use in the power sector.

Changes in demand for quarried products like stone and gravel may be affected by weak nonresidential construction spending. Construction spending in June 2021 increased 8.2% compared to the same month a year earlier. Residential spending increased 28.8% and nonresidential fell 6.6%. Of all nonresidential construction subsectors, only one saw spending growth in June as sewage and waste disposal spending was up 2.2%. The weakest nonresidential segments were public safety (-37.4%), lodging (-26.6%), and conservation and development (-18.7%).

The pandemic has driven up prices for many types of construction materials including steel. In July 2021, US iron and steel mill producer prices rose 105% compared to the same month a year earlier. Prices rose because factories that slowed production earlier in the pandemic still haven’t ramped up to full capacity, partly due to labor shortages. There are still lingering kinks in global supply chains that have slowed the movement of goods. Some industry insiders worry that if higher materials prices persist, it could hinder the anticipated recovery in construction activity in the second half of 2021. If costs are too high, developers may postpone new construction projects until prices come back down. Postponed projects could put downward pressure on mined and quarried construction materials including iron ore and aggregates used in concrete and paving materials.

Total US electricity consumption is projected to rise 2.7% in 2021 after falling 3.9% in 2020 amid reduced demand from the commercial and industrial sectors, according to the EIA. However, industrial and commercial consumption are expected to rebound 5.3% and 2.2%, respectively, in 2021. Colder weather in 2021 is forecast to increase demand for electricity used for residential heating and as consumers continue to spend more time at home. Residential electricity sales are projected to rise 1.5% in 2021.

The coal mining industry, which has struggled for years under environmental regulations and worker health and safety issues, is expected to see a rebound in demand in 2021. Nearly all of the coal mined in the US is used to produce electricity, and in the long-term energy producers are switching to natural gas and renewables that are cheaper and cleaner. However, while full-year coal production in 2020 is estimated to have declined 24% amid reduced demand from electricity producers in the US and in coal export markets, coal production is projected to rise 13% in 2021 as natural gas prices move higher and coal becomes more competitive for the electric power sector. Coal production for the week ended August 14, 2021 was up more than 14% from a year ago.

Sales of minerals used in pharmaceuticals could increase if the nation demands more drugs and components be produced domestically to reduce reliance on foreign suppliers, prevent shortages, and speed products to market. The CARES Act provides billions in funding for the domestic development and manufacture of coronavirus vaccines and treatments. A second stimulus package passed in late-December includes $20 billion for vaccine purchases, $9 billion for vaccine distribution, and $22 billion to help states with COVID-19 testing, contact tracing, and other mitigation efforts. In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $50 billion for testing and contact tracing, and $16 billion for vaccine distribution and supply chain enhancements.

August 23, 2021

The professional services sector could see a change in how it conducts business after the coronavirus pandemic. Firms are handling business in small isolated groups, are allowing employees to work from home, and are staying connected through the use of telecommunications and technology.

For some professional services firms, remote working or working in an office with a small group of people who can social-distance is easy and so business continued with fewer physical disruptions. Other segments of the professional services sector are very hands-on with clients and frequently travel to work at their clients’ sites. Those industries have figured out ways to conduct business and stay connected with colleagues and clients while limiting or halting travel. Employees are calling and video chatting with each other and clients as well as sending documents electronically. Firms are also limiting meeting size.

Law firms are allowing employees to work from home. Courthouses have begun to reopen, depending on the jurisdiction. At the height of the pandemic, civil trials were postponed and criminal trials continued but many courthouses limited visitors. Prisons halted in-person visitations and using video conferencing technology instead. Many states resumed in-person visits in mid-2021 amid increased vaccinations and reduced rates of new COVID-19 infections. The filing of court documents, like wills, was delayed as courthouses operated with smaller staffs.

Legal and consulting work related to business mergers and acquisitions (M&A) is starting to pick up after deals were put on hold earlier in the pandemic. Global M&A activity finished 2020 with more than $3.1 trillion worth of deals, according to Mergermarket. US M&A activity in 2020 reached more than $1.2 trillion, down more than 20% from the nearly $1.6 trillion in deals seen in 2019. However, the value of US deals in Q4 2020 reached $545 billion, an all-time high. The pace of global deals kept up in Q1 2021 with a record $1.3 trillion, marking a rise of 94% compared to Q1 2020, according to financial data firm Refinitiv. Deals continued apace in the second quarter of 2021 as M&A activity in the first six months of 2021 reached $2.8 trillion, according to Refinitiv. The strong activity in the first half of 2021 was primarily due to deals involving private equity buyouts (about 18% of deal value in the first half) and special purpose acquisition companies (or SPACs – about 14% of deal values). Deals targeting US firms in the first half were valued at $1.3 trillion. After overcoming the learning curve of navigating virtual deals, M&A activity has grown amid successful vaccine rollouts, an improving global economic outlook, low financing costs, and record amounts of capital, according to EY.

After the pandemic subsides, legal and consulting services firms could see a more robust increase in demand for private-equity and restructuring services. Consulting firms will see a jump in business as clients look to recover their businesses and understand how their supply chains are affected. It’s also speculated that the legal services industry could experience a rush of M&A activity itself, as well-capitalized firms buy smaller struggling ones, and top employees are hired away.

Biological testing labs are helping government labs process test kits and speed results of coronavirus tests. Commercial and academic labs are also developing new coronavirus tests. Biotechnology firms are helping to develop vaccines and COVID-19 treatments.

Hope for ending the pandemic intensified in December as two vaccines began being distributed under emergency use authorization (EUA). Both of the vaccines (one developed jointly by Pfizer and Germany-based biotech firm BioNTech, and the other developed by Moderna) proved more than 90% effective in clinical trials, and require two doses to achieve full effectiveness. In late February a third, single-shot vaccine developed by Johnson & Johnson’s Janssen Pharmaceutical division received EUA by the USDA and began being distributed. As of August 18, more than 168 million Americans were fully vaccinated or about 51% of the US population, according to the Centers for Disease Control and Prevention (CDC). The CDC initially issued phased guidelines for prioritizing vaccine distribution but on April 19, all Americans over age 16 became eligible to be vaccinated. On May 10, the USDA expanded emergency use authorization for Pfizer’s vaccine to include children ages 12 to 15.

Two other vaccines have completed phase 3 clinical trials – one from Novavax, and another by a partnership between AstraZeneca and Oxford University. Novavax plans to apply for EUA in the US, the UK, and Europe in the third quarter of 2021. However, in August, Novavax announced the US government had paused funding for production of its vaccine pending improvements to the company’s testing and quality control standards, according to The New York Times. Novavax’s production issues have prompted some government officials to question when or if the vaccine will ever be approved for distribution in the US. AstraZeneca is considering skipping EUA in the US and instead switch paths to the lengthier process of full licensing, according to The Wall Street Journal. In late May, the FDA said it may choose not to review and process any new EUA applications for vaccines if the manufacturer wasn’t already engaged in FDA approval discussions. The AstraZeneca vaccine has been approved outside the US and is being widely deployed in Europe, Asia, and Latin America. In extremely rare cases, the Janssen and AstraZeneca vaccines appeared to cause blood clots in some who received the shots. In some cases, the vaccines’ distribution was briefly paused, but health experts suggest the benefits of being vaccinated outweigh the small risk of clots.

Optimism on the rollout of vaccines has been somewhat tempered by the emergence of mutated coronavirus variants than are more contagious than the original virus and may be more resistant to vaccines. Some health experts suggest vaccine administration is in a race against the spread of the new virus variants, especially in developing countries that lack the resources to purchase and efficiently distribute vaccines. The Delta variant – which was first detected in India – has emerged as the dominant strain in many parts of the world, including the US, according to Centers for Disease Control and Prevention (CDC). In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise. The severest spikes tend to be occurring in regions with low vaccination rates, according to the CDC. While, experts believe those who have received two doses of vaccine are well protected from Delta, rising numbers of “breakthrough cases” – where fully vaccinated people become infected – have increased calls for booster shots. In August the CDC published three studies that suggest that vaccine efficacy tended to wane over the summer of 2021 as Delta spread more widely. In response, the Biden administration said that on September 20, boosters would begin to be available for vaccinated adults who have received the Pfizer-BioNTech and Moderna vaccines. Health officials are still evaluating the data to determine if those who have received the Johnson & Johnson vaccine should get boosters. Like with initial vaccine rollouts, once boosters are approved, nursing home residents, healthcare workers, and the elderly will be prioritized. The CDC noted that while vaccine efficacy seems to dwindle over time, protection against illness, hospitalization, and death remain high.

In addition to eight vaccines approved for full use, there are 99 vaccines in clinical trials on humans, and 33 are in the final stages of testing, according to The New York Times. About 75 preclinical vaccines are being investigated using animals. COVID-19 antibody testing is a bright spot for biotech labs.

In recent months, testing capacity has improved. In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $50 billion for testing and contact tracing and $16 billion for vaccine distribution and supply chain enhancements. Health researchers think pooled testing can improve testing further. With pooled testing, tests are done in small batches. If the pooled test comes back negative, everyone in the batch is negative. If the pooled test is positive, unused portions of the original samples are retested individually. Pool testing is thought to be of the most use in areas with low rates of infection where most pooled tests would come back negative, thereby getting quicker results while conserving resources.

In November 2020, a monoclonal antibody treatment developed by Regeneron Pharmaceuticals received emergency use authorization (EUA) from the FDA. GlaxoSmithKline received EUA for its antibody treatment Sotrovimab in May 2021. Monoclonal antibody treatments are lab-made molecules than mimic natural antibodies that target infections, such that caused by the novel coronavirus. The drugs have been effective in helping to reduce hospitalizations when administered soon after infection. Initially approved only for high-risk patients, in May 2021 the FDA broadened its criteria for who is considered high-risk which made about 75% of the adult US population eligible for monoclonal antibody treatment, according to The Wall Street Journal. However, monoclonal antibodies saw only limited use until the Delta variant began driving cases higher. In mid-August deliveries of Regeneron doses were nine times higher than in the previous month. Regeneron has seen strong demand in states with low vaccination rates and high Delta infections, including Florida, Texas, and Mississippi which have moved quickly to set up antibody-drug infusion centers to help relieve hospital overcrowding. The US government has purchased about 1.5 million doses of the Regeneron treatment and is making it available to patients free of charge. The US government has not yet purchased any of GlaxoSmithKline’s antibody drug Sotrovimab but it is available through normal drug purchasing channels.

Consumer-focused professional services firms such as veterinary offices, tax preparers, interior designers and portrait studios are at increased risk due to the high volume of clients encountered daily. Some temporarily closed their doors, others are working remotely and connecting with clients virtually. On a 14-day rolling basis, veterinarians experienced an 8.6% increase in daily revenue per practice the week ended August 8, 2021 compared to the same day a year earlier, according to Vet Success. The number of visits was up 1.9% during the same period.

The IRS has modified tax regulations to ease the burden on the tax preparation industry, businesses, and individuals. CPAs are helping clients navigate the benefits and requirements of receiving funds through the CARES Act, managing their businesses with limited resources, and preparing financial records. The American Rescue Plan Act includes significant tax implications, which could drive demand for accounting services. The new law makes the first $10,200 in employment benefits tax-free in 2020 for those who make less than $150,000. The plan also provides tax credits for COBRA insurance continuation assistance, an increased child tax credit, and changes to the earned income tax credit.  Other provisions include changes to the premium tax credit, the employee retention credit, the child and dependent care credit, and student loans.

Architecture and engineering firms could see a delay in new business as clients assess their ability to build new homes, facilities and developments, as well as invest in machinery to bring newly engineered products to market. The pandemic has driven up prices for many types of construction materials including lumber and steel. Prices are rising because factories that slowed production earlier in the pandemic still haven’t ramped up to full capacity, partly due to labor shortages. There are still lingering kinks in global supply chains that have slowed the movement of goods. As the economy has improved, demand for architectural services has rebounded. The Architectural Billings Index (ABI) grew for the sixth month in a row in July, according to the American Institute of Architects (AIA). The July ABI reading of 54.6 was down slightly from June’s reading of 57.1. Any reading above 50 indicates expansion, while anything under 50 indicates contraction. Architectural firms that used the downturn to invest in staff and technology upgrades will be better positioned than firms that anticipated a slower recovery and took a more conservative approach.

Business for interior design services has slowed as corporate and individual clients temporarily limit outside contact and reassess their spending. A survey by the American Society of Interior Designers in early April 2021 found that 42% of designers felt their businesses had already recovered; about 32% felt it would take 1-6 months to recover. About 45% reported their current projects were delayed; an equal percentage said their projects were on track. Top concerns of interior designers included, product availability, procurement/delivery processes and timelines, and project timelines.

Advertising firms saw significant cuts in advertising and promotion spending in 2020. However, global digital ad spending is expected to rebound in 2021. After falling 2.5% in 2020 due to COVID-19-related pullbacks on marketing and advertising spending, global advertising spending is expected to rise 14% in 2021, reaching a value of $657 billion, according to media intelligence firm MAGNA.

Despite ad dollars bouncing back, marketing budgets are shrinking. In 2021, corporate marketing budgets fell to their lowest level on record, according to the Gartner CMO Spend Survey released in mid-July 2021. Despite chief marketing officers’ (CMOs) confidence that budgets would rebound after the cuts earlier in the pandemic, 2021 marketing budgets fell to 6.4% of company revenues compared to 11% seen in 2020. Among specific industries, travel and hospitality, manufacturing, and technology product firms saw the biggest dips in marketing budgets as a share of revenue, and no industry enjoyed a double-digit share. Consumer goods firms had the biggest marketing budgets at 8.3% of company revenue. Smaller firms (revenue under $500 million) on average had marketing budgets that were 8.6% of revenue, while larger companies’ (revenue of more than $2 billion) marketing budgets were only 5.7% of revenue. Pure-play digital channels accounted for more than 72% of marketing budgets. Gartner surveyed 400 CMOs and other marketing leaders in France, Germany, North America, and the UK between March and May 2021.

The professional and technical services sector lost nearly 540,000 jobs in April. The most affected industries included computer systems design, architectural and engineering services, management and technical consulting, and accounting and bookkeeping. Overall, the sector has since recovered. In July 2021, professional and technical services sector employment was 1% higher than it was in February 2020 prior to the pandemic. All subsectors of the professional and technical services sector saw growth in July, except for advertising and related services, which was flat. Accounting and bookkeeping services, and management and technical consulting services saw the strongest growth in July, with each adding more than 8,000 jobs. Other subsectors with robust job growth in July included scientific research and development services (+5,700 jobs), computer systems design and related services (+5,200), and architectural and engineering services (+4,600).

August 23, 2021

The retail sector has experienced mixed results stemming from the coronavirus outbreak and efforts to contain its spread. Retail sales fell nearly 18% in April 2020, but have since been on a gradual recovery trend. Full-year retail sales finished 2020 up 3.5% over 2019. Non-store retail – which includes ecommerce – led all retail categories with growth of more than 22% in 2020. Other strong categories included building material and garden equipment and supplies dealers (+14%), and food and beverage stores (+11.5%). Several retail industries suffered significant sales declines in 2020, including clothing and accessories stores (-26.4%), department stores (-18.1%), gasoline stations (-15.9%), electronics and appliance stores (-14.6%), and furniture and home furnishings stores (-5.4%). The retail sector continued its growth trajectory in January 2021 with a rise of 5.8%. Most retail subcategories saw sales rise, but some still faced challenges due to the pandemic, including clothing and clothing accessories stores (with a drop of 11.3%), gasoline stations (-8.8%), and food services and drinking places (-15.8%).

However, in the first seven months of 2021 the retail sector saw strong gains as more of the US economy reopened; all major subsectors of the retail sector saw sales rise in the seven four months of 2021. Major increases included clothing and clothing accessories stores (up 70% compared to January through July 2020); sporting goods, hobby, musical instrument, and book stores (+39%); furniture and home furnishings stores (+38.5); electronics and appliance stores (+34.8%); and motor vehicle and parts dealers (+34%). However, year-over-year retail comparisons are skewed higher by the stay-at-home orders and nonessential retail closures that began in March and April 2020. On a month-over-month basis, retail sales in July fell 1.1% on weaker sales of automobiles, clothing, sporting goods, and furniture.

Some economists are worried rising new cases fueled by the Delta variant of the coronavirus could slow US economic growth, according to The Wall Street Journal. Traffic in grocery store, gas stations, restaurants, and retailers dropped off in late July, according to mobility data firm SafeGraph. Consumer confidence dropped 13% in early August compared to the prior month, according to the University of Michigan’s consumer sentiment index. In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise.  On July 27, the Centers for Disease Control and Prevention (CDC) announced that fully vaccinated people should wear masks indoors in areas with high rates of COVID-19 transmission. The recommendation marked a reversal of CDC guidance on May 13 that said Americans who are fully vaccinated against COVID-19 could stop wearing masks and maintaining social distance in most settings. The updated recommendations are due to heath officials’ concerns that fully vaccinated people could contract and spread the Delta variant. To combat the spread of Delta, some state and local governments have reimposed mask requirements and/or proof of vaccination for some indoor businesses.

As a whole, the retail sector lost more than 2 million jobs in April 2020. Among the hardest hit were clothing and clothing accessories stores; motor vehicle and parts dealers; furniture stores; sporting goods, hobby, book, and music stores; and department stores. Most retail segments saw employment gains in May as the overall sector added nearly 370,000 jobs. The sector added nearly 740,000 jobs in June. Nearly 260,000 retail jobs were added in July, and another 250,000 were added in August, and by that month all retail sectors had returned to positive job growth. Retail employment has since seen steady growth. Retail employment in May 2021 rose 4.6% over the prior month and was up 11.4% compared to May 2020. Retail employment in May 2021 was down less than 2% compared to the pre-pandemic level of February 2020. The retail sector added more than 60,000 jobs in June, led by clothing and clothing accessories stores (up nearly 28,000 jobs) and general merchandise stores (+24,000 jobs). Retail employment shrunk by 5,500 jobs in July. Strong job gains at gas stations, clothing stores, and miscellaneous retailers were not enough to offset more than 33,000 jobs lost at building material and garden supply stores. July retail employment was only down less than 2% compared to the pre-pandemic level of February 2020.

The wider reopening of the economy – especially hard-hit sectors including retail and hospitality – are helping to fuel strong job growth which is driving wages higher for many lower-wage positions, according to The Wall Street Journal. As consumers return to stores and restaurants, employers are increasing wages to compete for workers. Average hourly wages in the retail sector in July were up 9.4% compared to pre-pandemic levels seen in February 2020.

Early in the pandemic, grocery and drug stores as well as mass merchandisers like Walmart, Costco and Target struggled to keep products on the shelves as consumers and businesses stockpiled goods in fear of shortages. In most cases supply chains have since stabilized as some grocers reduced hours of operation, and limited quantities that a single shopper can purchase. Stores also controlled traffic in the store to allow for social distancing. Some retailers have allowed customers to purchase in-stock merchandise online, then pick it up curbside. Industry watchers expect curbside pick-up to have a long-term effect on store-based retailer strategy even after the pandemic eases. Curbside offers a hybrid model between ecommerce and traditional retail that satisfies consumers’ desire to visit stores, and shoppers take care of the “last mile” – the delivery step that is most costly for retailers.

The retail workforce is largely comprised of part-time employees that are paid hourly wages. Employees of dealerships and showrooms often earn commissions based on sales value and volume, which has suffered due to low foot traffic earlier in the pandemic. Retailers benefited from federal funding and employment tax relief aimed at preventing permanent business closures and worker layoffs. However, retail employees tend to work in close proximity to consumers and have an elevated risk of exposure to the virus, especially if they are unvaccinated.

More consumers have turned to online shopping to order groceries and pick them up curbside or have them delivered. Analysts suggest the brick-and-mortar retail sector was in a downturn before coronavirus. The trend has likely accelerated, and brick and mortar stores could see greater declines in traffic after the epidemic as shoppers became more comfortable with online shopping during the quarantine. In 2020 the retail sector suffered its worst year for bankruptcies since 2010, according to S&P Global Market Intelligence. Malls and retailers of luxury and nonessential products – such as clothing, jewelry, and furniture – experienced steep declines in store traffic. In 2020 a number of high-profile retailers filed for bankruptcy, including high-end men’s suit retailer Brooks Brothers, Ascena Retail Group (owner of Ann Taylor and Lane Bryant chains), Tailored Brands (owner of Men’s Wearhouse and JoS. A. Banks), J.C. Penny, Neiman Marcos, and Pier 1.

A second round of stimulus relief was passed in December. The $900 billion COVID-19 Economic Stimulus Relief Act included reauthorized the Paycheck Protection Program (PPP). The PPP extension included $284 billion in funding for Small Business Administration (SBA) loans. The December extension of PPP let eligible borrowers get a second draw loan. It also simplified loan forgiveness for loans under $150,000 and made forgiven loans tax deductible. In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which included an additional $7.25 billion in funding for PPP. The PPP was set to wind down on May 31, but the program ran out of money on May 11, 2021 and stopped accepting most new applications, according to The New York Times. The American Rescue Plan also allocates $15 billion for targeted EIDL advance payments for businesses in low-income communities that have no more than 300 employees and have suffered financial losses of more than 30%.

The surge in US imports demand that began in mid-2020 is expected to continue through the remainder of 2021, according to the August 2021 Port Tracker report compiled by the National Retail Federation (NRF) and maritime consultancy Hackett Associates. The report covers 13 major US ports on the West, East, and Gulf coasts. The Port Tracker’s August report showed US ports handled 2.15 million twenty-foot equivalent units (TEUs) in June 2021, down 7.8% over the prior month, but up 33.7 year-over-year. July imports are projected to rise 15.7% year-over-year and August should increase 15.1%. The NRF issued its annual forecast for US retail sales in February, and it expects 2021 retail sales to rise between 6.5% and 8.2% to more than $4.33 trillion as more people receive vaccinations and the economy reopens further. However, retail supply chains are having trouble meeting the high level of consumer demand due to port congestion and high shipping costs.

The American Rescue Plan Act includes several provisions aimed at putting more dollars in Americans’ pockets so they have the spending power to help the economy recover. Specific provisions include $1,400 stimulus checks for most Americans, and an extension of the $300 supplemental unemployment benefit through August 29, 2021. The most recent stimulus bill also expands an existing tax credit that will give most families with children a monthly check of $300 per child. The benefit is set to expire after a year, but the Democrats aim to make it permanent. The new law makes the first $10,200 in employment benefits tax-free in 2020 for those who make less than $150,000. The plan also provides an increased child tax credit, and makes changes to the earned income tax credit.  Other provisions include changes to the premium tax credit, the child and dependent care credit, and student loans.

As more of the economy has opened up and consumers are spending more, prices have begun to creep upward. In July, the consumer price index (CPI) increased a seasonally adjusted 5.3% compared to the same month a year earlier, according to the Bureau of Labor Statistics. The rise followed a 5.4% jump in June which was highest increase in the 12-month rate since August 2008. Experts suggest prices are rising as businesses are having trouble keeping up with the robust growth in demand. Lingering supply chain disruptions and higher shipping costs are also contributing to firms’ higher costs which in many cases are being passed on to consumers. The Federal Reserve has said inflation’s causes are transitory and are related to the economy’s recovery from the pandemic. Economists surveyed by The Wall Street Journal in July estimated that on average, annual inflation, as measured by CPI, will fall to about 4.1% by December.

August 23, 2021

US wholesale sales rose a seasonally adjusted 27.5% in June 2021 compared to the same month in 2020. Durable goods sales rose 24.8% in June on a year-over-year basis while nondurables were up 30.2%. The large year-over-year increase in June 2021 wholesale sales was partially due to nonessential business closures that occurred early in the pandemic. June’s total wholesale sales rose 2% compared to May. Durable goods sales increased 1.2% month-over-month in June and nondurables rose 2.9%. Some economists are worried rising new cases fueled by the Delta variant of the coronavirus could slow US economic growth. Traffic in grocery store, gas stations, restaurants, and retailers dropped off in late July, according to mobility data firm SafeGraph. In early July, the 7-day average for daily new COVID-19 cases was about 13,000. By mid-August, the 7-day average for daily new cases was nearly 140,000. Hospitalizations and deaths were also on the rise.

Wholesale inventories increased 10.5% in value year over year in June 2021. Durable goods inventory values increased 8.9% while the value of non-durable goods inventories increased 13%. The value of wholesale inventories increased 1.1% in June over May. Durable goods inventory values saw a monthly gain of 1.4%; the value of nondurable inventories was up 0.6%.

Warehousing capacity is tight, according to the August Logistics Manager’s Index (LMI) report. The LMI was 74.5% in July, down 0.4 percentage points from the prior month. A reading above 50% indicates logistics expansion while a reading below 50% suggests a contraction. June’s warehousing utilization index fell 5 points to 70.5%, while the warehouse capacity index rose 4 points to 41.1%. With warehousing demand outstripping supply, prices are rising. The warehousing price index rose 2.6 points in July to 88%. Those surveyed for August’s LMI were not optimistic about sufficient warehousing capacity coming online in 2021; they also believed warehousing utilization would continue to grow amid tight capacity. With demand outstripping supply, LMI respondents believe warehousing prices will continue to go up for the remainder of 2021 and beyond. The LMI is compiled monthly by logistics researchers at five universities and the Council of Supply Chain Management Professionals (CSCMP).

Warehouse construction will lead the 3% growth expected in the nonresidential construction sector as e-commerce giants continue to build out their logistics infrastructure, according to the Dodge Data & Analytics 2021 Dodge Construction Outlook. Wholesalers may pay more for storage facilities because the pandemic-driven rise in e-commerce is driving up demand. GlobeSt.com expects demand for storage space to continue rising if firms follow through with plans to rely less on just-in-time logistics planning by increasing inventories. To meet the increase in demand stemming from ecommerce growth, 330 million square feet of US warehouse space will need to come online by 2025, according to a June 2021 report by CBRE.

The popularity of online grocery shopping has accelerated during the coronavirus pandemic, and the category is expected to boost demand for climate-controlled warehousing space, according to Commercial Property Executive. The majority of current online grocery fulfillment takes place in grocery retail locations, which is likely a temporary solution to meet the sudden spike in demand due to the pandemic. As the online grocery segment grows, more fulfillment is expected to move to warehousing locations that are more efficient and cost-effective. The cold storage real estate sector saw sales rise 22% in 2020 compared to the prior year, as the wider industrial real estate market fell 11% and the overall commercial segment declined 29%, according to Real Capital Analytics. Because cold storage facilities are three times as costly to build, such projects, historically, are rarely built on spec. However, the need for last-mile cold-storage fulfillment in large urban centers is attracting speculative warehouse investment, according to The New York Times.

The pandemic fueled a huge spike in warehouse demand as consumers shifted to ecommerce. The tightness of the warehousing space market is also driving up rents. Warehousing “taking rents” – the actual rent agreed upon between the warehouse owner and the tenant – jumped 9.7% in the first five months of 2021 compared to the same period in 2020, according to CBRE. Asking rent, which is the rate landlords were asking, increased 7.1%. Taking rents outpacing asking rents suggests competition for warehouse space is intensifying. Amazon and large retailers are snapping up most of the available warehouse space which is putting a squeeze on smaller retailers looking for space. Many of the smaller players are leaning on third-party logistics (3PL) providers to help them meet their warehousing needs. Industry watchers expect continued ecommerce growth – and demand for warehousing – to remain strong throughout 2021.

The surge in ecommerce during the pandemic has contributed to logjams at US ports, the most serious being in Los Angeles and Long Beach. Port congestion has spilled into inland industrial distribution hubs as import containers stack up faster than logistics providers can ship them via truck and rail. As retailers scramble to stock up ahead of the holiday shopping season, warehouse space near US ports has become tighter and more expensive, according to The Wall Street Journal. Warehouse owners near the ports of LA and Long Beach who once required lease terms of three to five years are requiring leases of up to 10 years, according to DHL Supply Chain.

In its December outlook, the OECD projected worldwide GDP would grow by 4.2% in 2021. In March, the OECD upgraded its 2021 global GDP forecast to 5.6% growth amid rapidly accelerating vaccinations and the $1.9 billion US stimulus package. Amid continued vaccination successes in advanced economies, in May the OECD again upgraded its 2021 outlook to 5.8% growth.  The OECD also upgraded 2021 US GDP growth from 6.5% to 6.9% (compared to 3.5% growth forecast in December). China’s GDP forecast was upgraded to 8.5% after being downgraded slightly to 7.8% in March from the December estimate of 8%. The OECD noted that countries need to keep up the pace of vaccinations to prevent new coronavirus variants from leading to further outbreaks and economic strain.

How Canadian Sectors Are Affected

Sept 7, 2021 – Drought Further Complicates Ag Recovery

  • Canada’s food industry relies on about 60,000 migrant workers. Migrant agricultural workers have been one of Canada’s hardest hit groups. In March 2021, Canada’s federal government announced a tailored solution to help temporary foreign workers (TFWs) travel to Canada and get to their job destinations safely. The plan creates a more streamlined testing and quarantining process upon entry to Canada, includes funding for organizations that aid TFWs affected by COVID-19, and steps up agricultural site inspections to ensure TFW working and living conditions are safe. The pandemic’s effect on migrant workers has led some advocates and industry insiders to call for reforms, including paths to permanent residency status.
  • As of August 9, Canada began allowing vaccinated temporary foreign workers (TFWs) to enter the country without quarantining. Unvaccinated TFWs still need to quarantine for 14 days upon arrival. Canada’s Quarantine Act established guidelines for the quarantining of TFWs and set aside $50 million to help farmers shoulder the added costs of paying TFWs for their time and their lodgings during quarantine. However, in June 2021, the per-worker government benefit payment for quarantining was cut from C$1,500 to C$750. The quarantining benefit program ceased altogether on August 31.
  • Employment in Canada’s agriculture, forestry, and fishing sector has mostly recovered from the initial shock of the pandemic. In July 2021, Canada’s agriculture employment was about 270,000, up about 3.5% compared to pre-pandemic levels of February 2020. Forestry and logging employment was up nearly 13,000 jobs in July 2021 compared to February 2020. Fishing, hunting and trapping employment has returned to typical levels of fluctuation based on seasonal government fisheries regulations. On a monthly basis, agriculture employment rose less than 1% in July 2021 compared to June. Forestry and logging employment increased more than 3%. Fishing, hunting, and trapping employment dropped 26%.
  • The Canada Emergency Response Benefit (CERB) provided payment benefits for seasonal workers, including fishermen and farm hands, who exhausted their Employment Insurance (EI) and couldn’t work due to COVID-19 closures. However, CERB expired in early October 2020. In August 2020, Canada’s federal government created a C$37 billion plan that increases accessibility to EI and provides three new relief benefits which aim to help workers who do not qualify for the EI expansion. The new benefits are the Canada Recovery Caregiving Benefit (for workers who need to stay at home to provide care to another person), the Canada Recovery Sickness Benefit (helps workers who are ill or must isolate due to COVID-19), and the Canada Recovery Benefit (for workers, including self-employed and gig workers, not covered under EI or the two other programs).
  • Despite the pandemic, housing booms in Canada and the US drove up demand for logs used to make lumber, boosting lumber prices higher. Low mortgage interest rates and housing upgrades as people spent more time in their homes contributed to rising housing demand. However, there are signs the market is starting to cool. Canadian residential building construction investments fell 5.8% in June to C$13.8 billion compared to the prior month, according to Statistics Canada. While single-family housing investments declined 7.3% in June, they were still well above pre-pandemic levels. About 65% of Canada’s dimension lumber production is exported to the US for home construction; Canada’s homebuilders account for about 10%, according to Madison’s Lumber Reporter. US single-unit housing starts were down 7% in July 2021 compared to the prior month, but were up 2.5% over July 2020. Canadian producer prices for softwood lumber were 37% higher in July 2021 than they were a year earlier, but prices have come down about 70% from the record highs seen in May. The drop in lumber prices came as log prices in British Columbia went up, squeezing sawmill profit margins. In response to high log prices in British Columbia, large sawmill operators are shifting more of their production to mills in the southern US where operating costs are lower.
  • In April 2021, the Canadian government announced the formation of a $21.8 million aid initiative to assist cattle and hog producers who were affected by slaughterhouse slowdowns and closures due the COVID-19 pandemic. The program will be administered through the AgriRecovery fund, a program that helps farmers weather disasters. Many of Canada’s livestock producers incurred extra costs from keeping animals on their farms longer because of outbreaks in meat processing plants.
  • Canada’s farmers enjoyed higher commodity prices for their harvests as the global economy recovers from the COVID-19 crisis and demand outstripped supply, according to The Canadian Press. Prices have also been pushed higher by drought. Dry conditions in Canada’s agricultural heartland may reduce field crop production by more than 25% for the marketing year that started on August 1, 2021, according to a monthly report by Agriculture and Agri-Food Canada in Late August. The drought and reduced production are driving commodities prices higher, which were already elevated due to disruptions earlier in the pandemic.
  • The Fish Harvester Benefit offers income support of up to 75% of losses for harvesters who lose 25% or more on their income due to the pandemic. The Fish Harvester Grant offered up to $10,000 of non-repayable support to self-employed harvesters. The first application period for the Fish Harvester Benefit opened on August 24, 2020 and closed on October 19, 2020. The second application period opened on August 5, 2021 and closes on October 1, 2021. Only applicants who applied and were eligible for the first Fish Harvester Benefit payment can apply for the second payment. Since its inception in May 2020, the Fish Harvester Benefit has dispersed about $130 million to more than 18,000 fishers in Canada. There is not a second payment for the Fish Harvester Grant.

Sept 7, 2021 – Project Bids Not Keeping Pace With Higher Materials Costs

  • Canadian housing starts fell 3.2% in July 2021 compared to June, according to the Canadian Mortgage and Housing Corporation (CMHC). Housing starts dropped to 272,176 units in July compared to 281,200 the prior month. The value of Canada’s building permits fell 3.9% in July to C$9.9 billion, according to Statistics Canada. Residential permitting was down 3.1% month-over-month, and nonresidential permits were off 5.6%. Within the nonresidential sector commercial permits fell 6.9% to C$1.6 billion, and institutional permits were off 17.1% at C$178 million. The value of industrial building permits increased 17.6% to C$612 million. In late July, the Bank of Canada said its preliminary estimate was that Canada’s GDP grew at an annualized rate of 2.5% between April and June despite Canada’s third wave of COVID-19 infections slowing much of the economy in April and May. However, June’s improvement was led by manufacturing and retail amid Canada’s gradual reopening. Construction and wholesale were more sluggish.
  • Canada’s home sales took off unexpectedly during the summer of 2020 and have remained fairly strong since. With the exception of a small dip in October 2020, Canada’s home sales increased every month between June 2020 and March 2021, according to the Canadian Real Estate Association (CREA). Canada reached new record home sales in July 2020, and set all-time monthly sales records in January, February, and March of 2021. Canada’s home sales moderated in April, falling 11%, then declined 7.4% in May. Home sales fell 8.4% in June, then dropped another 3.5% in July marking the fourth straight month of declines. The CREA note that despite the downward turn in home sales, the market is still strong and that there is still too little housing inventory to meet demand.
  • Nonresidential building construction investment fell 0.4% in June 2021 to C$4.6 billion compared to the prior month, marking the first decline in six months. Investment in the institutional segment rose 1.3% in June to C$1.2 billion, primarily due to growth in Quebec. Industrial investment fell 1.2% to C$825 million as six provinces saw declines in activity. Commercial building investment in June declined 1% to C$2.5 billion led by reduced activity in Ontario.
  • In February 2020, prior to the pandemic, Canada’s construction sector employed about 1.38 million people. In April 2020, as COVID-19 cases rose and lockdowns were imposed, the sector shed more than 252,000 jobs. Then between May and August 2020, the construction sector added more than 330,000 jobs. Construction employment was volatile through the winter of 2020/2021 as Canada’s second wave of COVID-19 infections led to tighter restrictions. Job growth in the sector picked up steam in March 2021 and between then and July had added more than 160,000 jobs. By July, construction sector employment was 7.5% higher than it was in February 2020.
  • Construction firms that have experienced decreases in year-over-year gross revenue may apply for assistance under the Canadian Emergency Wage Subsidy (CEWS). The funds are to be used for payroll and business expenses. Originally set to expire the first week of June 2020, CEWS has been extended several times and is now set to run until October 23, 2021. In early January 2021, Canada’s government made changes to the CEWS program that set the maximum top-up subsidy rate at 75% for companies with a revenue drop of 70% or more. The CEWS program has lower-tiered top-up subsidy rates for companies’ whose revenue declines have been less severe. As of August 22, 2021, the CEWS program had paid more than C$90 billion to more than 450,000 employers.
  • Large construction firms could benefit from the Large Employer Emergency Financing Facility (LEEFF) program. Announced on May 11, 2020 LEEFF aims to keep companies that have been hit hard by the epidemic operating and enable them to retain their workers.
  • The huge spike in Canadian ecommerce sales during the pandemic is expected to drive a warehouse space construction boom, according to real estate brokerage firm CRBE. Over the next five years, an additional 40 million square feet of warehouse space will need to come online to support the continued growth of ecommerce in Canada. As retailers have scrambled to develop logistics hubs, Toronto, Vancouver, and Montreal have become some of the tightest markets in North America for industrial space. Canada’s retail ecommerce sales in in 2020 increased more than 70% over the prior year, according to Statistics Canada.
  • As the pandemic wears on, construction firms continue to deal with snarled supply chains that have slowed the movement of goods globally and driven up prices. Lumber prices have been a particular pain point, and the cost of lumber has come down from highs seen in the spring, Canadian producer prices for softwood lumber were 37% higher in July 2021 than they were a year earlier. Prices have also increased for other key construction inputs, including basic and semi-finished iron and steel products (up 51% in July 2021 compared to a year earlier), basic and semi-finished aluminum products (+37%), wood trusses and engineered wood members (+32%), asphalt (+27.7%), and ready-mix concrete (+3%). Industry insiders suggest that construction bidding prices have not kept pace with the large increases in materials prices which is eroding margins.

Sept 7, 2021 – Canadian Mining Firms Optimistic

  • On average, a Canadian oil sands producer can generate enough cash to operate with a US benchmark West Texas Intermediate (WTI) price of $37.30 a barrel, according to Canadian Imperial Bank of Commerce analyst Jon Morrison. The spot price for WTI crude was $67.59 the week ending August 27, 2021.
  • Less travel and commuting reduced global oil demand. However, production cuts and an uptick in global fuel consumption have helped oil prices recover. Employment in the mining, quarrying, and oil and gas extraction sector has gradually rebounded since the onset of the pandemic. In July 2021, sector employment was 6.3% above levels seen in February 2020 prior to the pandemic. The Canadian Association of Petroleum Producers (CAPP) estimates 2021 capital spending in Canada’s oil and gas industry would rise 13% to $27 billion after notching $24 billion in 2020, the lowest level in more than a decade. Capital expenditures in 2019 were $35 billion. Capital spending in Canada’s oil and gas sector rose 9.3% in the second quarter of 2021 compared to Q1 2021, but was down 31% compared to Q1 2020, according to Statistics Canada. Canadian oil and gas revenues are expected to rise more than 85% in 2021, according to an estimate by the ARC Energy Resource Institute. Oil and gas firms’ cash flow is projected to reach a record $74.6 billion, but the industry is only expected to reinvest about 40% of that sum. Amid slow jobs growth in Alberta, Canada’s energy producers are under increasing pressure from officials to translate some of their cash windfall into hiring. At the same time, investors want producers to focus on controlling spending, shareholder returns, and stock buybacks. Producers suggest investments have to be carefully balanced against commodities market volatility, future energy consumption, and pipeline challenges in bringing petroleum to market.
  • The coronavirus pandemic has worsened the outlook for Canada’s oil sands. Environmentalists have argued against oil sands development and have slowed pipeline efforts to bring the oil to market. These pressures and low prices have prompted several international oil companies to cease their investments. In 2020, France’s Total wrote down the value of its oil sands assets by more than C$9 billion, cancelled its membership in CAPP, and said it considered Canada’s oil sands to be stranded assets, along with other high-cost, high-carbon resources that were to be produced after 2040. Altogether, 2020 write-downs in Canada’s oil sands reached more than C$14 billion. Capital investment in Canada’s oil sands is expected to reach C$7.3 billion in 2021 compared to C$20 billion for conventional oil and natural gas. In April 2021, the New York State Common Retirement Fund divested holdings in seven oil sands firms.
  • On his first day in office, President Joe Biden cancelled TC Energy Corp.’s permit to move oil sands crude into the US through the Keystone XL pipeline, according to Bloomberg. The Keystone XL pipeline was originally blocked by president Obama, but the permit was reinstated by President Trump during his first few days in office. Opponents of the Keystone XL pipeline argue it runs through environmentally sensitive lands and encourages further investment in oil sands, which have a higher carbon footprint than conventional light crude. Supporters of the pipeline say it would bring jobs and economic growth to both sides of the US/Canada border. In June 2021, TC Energy officially pulled the plug on the Keystone XL pipeline. However, the demise of Keystone XL has not slowed the flow of Canadian oil to the US. Canada’s exports to the US slowed early in the pandemic, but have largely recovered, according to the Associated Press. Canada’s oil is making it to the US mostly by rail. In June 2021, US imports of Canadian crude oil and other petroleum products was up 22% compared to the same month a year earlier, according to The US Energy Information Administration.
  • Global oil demand is expected to return to pre-pandemic levels by the second half of 2022, according to the International Energy Agency’s (IEA) August 2021 Oil Market Report. After a record decline of 8.6 million barrels per day (b/d) in 2020, in August 2021, the International Energy Agency (IEA) said it expects global oil demand to reach 96.2 million barrels per day (b/d) in 2021, up 5.3 million b/d compared to 2020. In the spring and early summer, wider vaccination distribution and further drawdowns on mobility restrictions lifted oil demand and OPEC+ responded by boosting production. Then global demand began to wane amid a surge in COVID-19 infections fueled by the Delta variant of the coronavirus. The IEA has downgraded its oil demand outlook for the second half of 2021 due to reinstatement of COVID-19 restrictions, specifically ones in China.
  • Large energy extraction & mining companies could benefit from the Large Employer Emergency Financing Facility (LEEFF) program. Announced on May 11, LEEFF aims to keep companies that have been hit hard by the epidemic operating and enable them to retain their workers. LEEFF comes with stringent environmental and climate change reporting requirements which industry watchers believe most oil and gas companies will be able to meet.
  • In late August 2021, Canadian Natural Resources Ltd. (CNRL) said it would require its oil sands workers in Alberta to undergo mandatory rapid testing if they are not fully immunized or won’t disclose their vaccination status, according to Postmedia. The move followed a rapid rise in new COVID-19 cases in April and May that hit Canada’s oil sands in Alberta hard. Outbreaks at two sites alone led to nearly 3,000 infections. The rapid spread of the more transmissible Delta variant of the coronavirus in Canada unfortunately coincided with the oil sands industry’s seasonal maintenance turnarounds that typically attract tradespeople from all over Canada. In response, Alberta Health Services (AHS) began setting up immunization clinics and rapid testing at remote oil sands sites.
  • About 43% of Canadian mining companies are optimistic about their growth prospects after the pandemic subsides, according to a recent survey by KPMG. The pandemic deflated prices for most commodities, except gold, but most have begun to rebound as the world economy has improved. The mining outlook is brightened by ongoing demand for “green metals” such as lithium, cobalt, and nickel used in electric cars and other green technologies. Canadian mining firms ranked commodity price risks and the global pandemic as the top two concerns faced by the mining industry. Amid increased environmental awareness among investors, 90% of Canadian mining companies said they need a clear environmental, social, and corporate governance (ESG) strategy with measurable benchmarks. More than 40% of Canadian miners said they are eyeing M&A activity as a source of growth.

Sept 7, 2021 – Vaccine Requirement, Passport Policies Gaining Ground

  • Canada’s federal government has allocated more than C$25.6 billion in health and safety spending to help mitigate the impact of coronavirus. The funding is largely devolved to the provinces and territories, and targeted to the health care system. Federal funding distributions include C$2 billion for personal protective equipment (PPE) and C$240 million for virtual healthcare programs for both primary care and mental health. Canada has budgeted more than C$1.1 billion for COVID-19 research and vaccine development, including purchases of COVID-19 vaccine doses abroad. Canada’s vaccine rollout got off to a slow start, but by late July, 56% of Canada’s population was fully vaccinated, surpassing the 49% who are fully vaccinated in the US. Late in 2020, Canada ordered enough vaccines for five times its population, but deliveries in the first quarter were slow. Vaccine rates have since ramped up and as of September 3, about 73% of Canadians had received at least one dose of vaccine. Due to its slow start, some provinces lengthened the time between the two doses. Canada also approved mixing-and-matching between the Pfizer and Moderna vaccines for second doses (although the National Advisory Commission on Immunization suggests interchanging vaccines should only be done in cases of short supplies). Canada’s government is funding Quebec’s Medicago in its effort to develop a plant-based vaccine. Canada has also invested in the Novavax vaccine, but neither the Novavax nor Medicago vaccines are expected to be available soon. In late April, Health Canada updated labeling guidelines for the use of the Janssen (Johnson & Johnson) vaccine to acknowledge the risk of rare post-injection blood clots. Similar to an earlier assessment of the AstraZeneca vaccine, Canada recommends the Janssen vaccine for all Canadians over age 30. However, as of mid-May, several provinces including Ontario, Quebec, Alberta, New Brunswick, Nova Scotia, and Saskatchewan had stopped using the AstraZeneca vaccine for first doses due to blood clotting concerns. The moves were also due to rising availability of the Pfizer and Moderna vaccines and a slowing of new cases.
  • Amid rising infection rates and the emergence of more virulent coronavirus variants, several Canadian provinces reintroduced tighter restrictions in January. In most parts of Canada, restrictions were eased through February. On April 16, Ontario’s premier imposed a stay-at-home order amid the spread of Delta variant and increased hospitalizations. Ontario began step one (of three planned steps) of its reopening on June 11. Each step features gradual easing of restrictions as vaccination rates go up. Step two began on June 30, and Ontario’s third and last step began on July 16. Ontario will remain in step three until 70-80% of those over age 12 have received one dose of vaccine and 25% are fully vaccinated. Alberta lifted most restrictions on July 1. On July 11 Manitoba became the first Canadian province to remove all restrictions, then in early September the province reimposed limits on some gatherings as cases increased. British Columbia eased some restrictions in mid-June, but in early September imposed fresh restrictions on gatherings in northern BC amid a rise in new infections, primarily among the unvaccinated. On August 9 Canada began allowing fully vaccinated US citizens and permanent residents to travel to Canada without quarantining. Canada began welcoming vaccinated travelers from all other countries on September 7. As of July 5, Canadian citizens and residents who are fully vaccinated and test negative at the border do not need to quarantine upon arrival.
  • Despite its high percentage of vaccinated citizens, Canada entered a fourth wave of the pandemic in August 2021 as the Delta variant fueled new cases. In response, the federal government and several provincial governments announced vaccination requirements. On August 13, Canada’s federal government said it would begin requiring air, rail, and cruise ship passengers to show proof of vaccination. The government will also compel 300,000 federal workers to receive vaccines. All airline and railway employees in Canada will also be required to be vaccinated. British Columbia, Manitoba, Ontario, and Quebec are implementing vaccine passport systems. The details vary by province, but vaccines will generally be required in indoor, higher-risk environments where masking at all times is infeasible, such as restaurants and bars, gyms, theaters, concerts, and sporting events. In most cases, vaccines will not be required for more essential activities, including retail and lodging. Several provinces – including Alberta, British Columbia, New Brunswick, Ontario, Quebec, and Saskatchewan – either have implemented or plan to implement vaccine requirements for healthcare workers. In most cases, vaccination isn’t mandatory, but those who opt out would be subject to regular testing.
  • Healthcare costs in Canada were rising prior to the pandemic, but the COVID-19 crisis is driving costs even higher, according to the Conference Board of Canada. Health care costs are projected to rise much faster than growth rate of the Canada Health Transfer – the federal government’s contribution to health care funding in Canada’s provinces. To keep pace with rising costs, Canada’s federal government will have to increase its share of total funding to 35% from the current 22%, according to Quebec Premier François Legault, Chair of the Council of the Federation. The Conference Board of Canada estimates that the added healthcare costs from COVID-19 will be between C$20.1 billion and C$26.9 billion in 2020-21 and between C$15.7 and $21.9 billion in 2021–22.
  • In February 2020, prior to the pandemic, Canada’s healthcare and social assistance sector employed more than 2.5 million people. As COVID-19 cases rose and lockdowns were imposed, the sector shed nearly 240,000 jobs in March and April of 2020. Most of those losses were largely related to closures of medical practitioners’ offices (e.g. physicians, dentists, chiropractors) during the quarantines. Since May 2020, employment in the healthcare and social assistance sector has gradually increased, with big job gains in June and July 2020 (173,900), October 2020 (22,100), March 2021 (39,000), and June and July 2021 (63,900). By July 2021, employment in the healthcare and social assistance sector was 3.5% higher than it was in February 2020.
  • As of August 31, 2021, 40.7 million coronavirus tests had been performed in Canada. Over 1.5 million cases were confirmed and nearly 27,000 deaths were reported.
  • Some health experts hope the lessons learned during the pandemic about the benefits of telehealth will prompt Canada’s healthcare system to make further investments in it. Proponents say expanding telehealth will increase timely access to care, especially in rural areas. Telehealth also allows clinicians to treat patients more efficiently and has the potential to significantly reduce costs for both patients and Canada’s healthcare system. In February, the Canadian Medical Association called out several specific steps to make virtual care a permanent part Canada’s healthcare system. Key steps include specific public funding for virtual care, building out internet connectivity to remote areas to ensure equitable access to virtual care, establishing patient privacy standards, and creating a framework of safety and quality-of-care regulations.
  • A high number of Canada’s deaths from COVID-19 have occurred in nursing homes, which has prompted some healthcare experts and policymakers to call for reforms. While Canada’s healthcare system is publicly funded, long-term care relies on a blend of public and private payment. About 15% of Canada’s total healthcare spending comes out-of-pocket, according to health research nonprofit The Commonwealth Fund. Some suggest the out-of-pocket expenses allow for gaps in quality of care, and contributes to low wages in nursing homes and high turnover.
  • Nearly 40% of Canadians who have been clinically diagnosed with a chronic disease – such as arthritis, cancer, heart disease, diabetes, or obesity – reported they were avoiding the healthcare system during the pandemic, according to a survey released in April 2021 and commissioned by pharmaceutical firm Novo Nordisk Canada. The survey is worrying as delaying care of chronic conditions can result in negative health outcomes. Canadian healthcare experts are urging patients that are concerned about visiting healthcare facilities for treatment to take advantage of telemedicine services which are available is every province.
  • In August, US-based pharmaceutical and biotech firm Moderna said it had reached a deal with the Canadian government to build a vaccine manufacturing facility in Canada to supply the country with mRNA vaccines for respiratory diseases, including COVID-19, according to CNBC. Earlier in the pandemic, Canada had difficulty with its vaccine rollout because it had no domestic vaccine manufacturing capacity and was reliant on imports for vaccine supplies. The Moderna facility will also produce vaccines for seasonal flu, respiratory syncytial virus, and other illnesses pending licensure.

Sept 7, 2021 – Canada Strikes Deal With Moderna For Domestic Vaccine Plant

  • Following two consecutive months of declines, Canada’s manufacturing sales rose 2.1% in June 2021 compared to May. Sales were up 20% from June 2020. Despite ongoing challenges including the semiconductor shortage, motor vehicle manufacturing increased 25.6% in June over May. Other leading pockets of month-over-month manufacturing growth in June included petroleum and coal products (+5.2), aerospace products and parts (+21.7%), Food products (+1.3%), and machinery (+3%). Canada’s manufacturing capacity utilization rose from 77.1% in May to 79.4% in June as higher capacity utilization in transportation equipment, petroleum and coal, plastic and rubber products, and fabricated metal products was enough to offset a decline in chemical manufacturing capacity utilization. The value of unfilled orders rose 1.4% after two straight months of declines. The gains were led by a 14.6% increase in primary metals orders and a 6.9% jump in machinery orders.
  • Canada’s food industry relies on about 60,000 migrant workers. If workers become ill or their movements are restricted, food processers’ supplies could run short and prices may rise. Migrant agricultural workers have been one of Canada’s hardest hit groups. In March 2021, Canada’s federal government announced a tailored solution to help temporary foreign workers (TFWs) travel to Canada and get to their job destinations safely. The plan creates a more streamlined testing and quarantining process upon entry to Canada, includes funding for organizations that aid TFWs affected by COVID-19, and steps up agricultural site inspections to ensure TFW working and living conditions are safe. The pandemic’s effect on migrant workers has led some advocates and industry insiders to call for reforms, including paths to permanent residency status.
  • The Canada Markit manufacturing PMI index rose to 57.2 in July from 56.2 in June. The July PMI marked the 14th straight month of expansion in factory activity and was the fourth-strongest growth in the index’s history. New orders and output grew on robust demand both domestically and from abroad, especially the US and Europe. Job growth moderated amid ongoing difficulties in attracting skilled workers. Severe supply chain constraints and raw materials shortages drove backlogs, lead times, and input costs higher. Manufacturers are optimistic about future demand.
  • Manufacturers that have experienced decreases in year-over-year gross revenue may apply for assistance under the Canadian Emergency Wage Subsidy (CEWS). The funds are to be used for payroll and business expenses. Originally set to expire the first week of June 2020, CEWS has been extended several times and is now set to run until October 23, 2021. In early January 2021, Canada’s government made changes to the CEWS program that set the maximum top-up subsidy rate at 75% for companies with a revenue drop of 70% or more. The CEWS program has lower-tiered top-up subsidy rates for companies’ whose revenue declines have been less severe. As of August 22, 2021, the CEWS program had paid more than C$90 billion to more than 450,000 employers.
  • The manufacturing sector added 26,000 jobs in Ontario and shed 10,800 in Quebec in July. Ontario’s manufacturing employment in July 2021 was up 8.5% compared to year-ago levels; Quebec’s manufacturing employment was down 1.3%. The two provinces represent just over 70% of the nation’s manufacturing jobs.
  • The automotive industry is one of Canada’s largest manufacturing subsectors. Canada’s auto sales fell 11.4% in August 2021 to about 147,000 units compared to August 2020, and were down 19% compared to August 2019, according to estimates compiled by DesRosiers Automotive Consultants. August’s results reflected the challenges posed by inventory shortages on dealer lots. Auto assembly plants have slowed production amid supply chain disruptions due to outbreaks of the Delta variant of the coronavirus in South Asia. US sales in August 2021 declined 17.3% compared to August 2020. The semiconductor shortage is putting a damper on sales in Canada and in the US. Lean inventory conditions in North America are expected to persist at least until October. In early September, DesRosiers Automotive dropped its US 2021 sales forecast from 16.4 million units to 15.9 million.
  • The COVID-19 pandemic has exacerbated an existing labor and skills gap in Canada’s manufacturing sector, according to a Canadian Manufacturers and Exports (CME) survey released in December. About 80% of Canadian manufacturers surveyed reported having a labor and skills shortage. The CME suggest the gaps are likely due to a number of factors including worker health concerns amid the pandemic, disinterest in the sector, childcare obligations, or government economic support for unemployed workers which could be discouraging them to find jobs in manufacturing. More support for women, immigrants, and temporary foreign workers could help close the labor and skills gap, according to the CME. A national childcare program and retraining for people who lost work in other industries could also help.
  • A Canadian Survey on Business Conditions released in late August 2021 tracked top concerns of major industrial sectors as they look forward over the next three months. More than 65% of manufacturers expect higher input costs over the next three months. Nearly 47% reported they likely will have trouble recruiting skilled workers. About 42% said they likely face difficulties in acquiring domestic inputs, products, or supplies. More than 40% cited transportation costs as a possible obstacle over the coming 90 days.
  • Canada’s manufacturing sector has helped lead the country out of the recession brought on by the pandemic, but trade tensions with the US and lack of investment could hinder the recovery’s momentum, according to a recent report by consulting firm RSM Canada. “America first” policies in the US could lead to increased trade frictions with Canada, which may affect demand for US imports of Canadian goods. The report also suggested the pandemic has stifled investment; business spending on machinery, equipment, and nonresidential structures is about 14% below what they were prior to the pandemic. The dip in business investment may slow future economic growth.
  • In August, US-based pharmaceutical and biotech firm Moderna said it had reached a deal with the Canadian government to build a vaccine manufacturing facility in Canada to supply the country with mRNA vaccines for respiratory diseases, including COVID-19, according to CNBC. Earlier in the pandemic, Canada had difficulty with its vaccine rollout because it had no domestic vaccine manufacturing capacity and was reliant on imports for vaccine supplies. The Moderna facility will also produce vaccines for seasonal flu, respiratory syncytial virus, and other illnesses pending licensure.

Sept 7, 2021 – Retailers Worry About Maintaining Inventory

  • Amid rising infection rates and the emergence of more virulent coronavirus variants, several Canadian provinces reintroduced tighter restrictions in January. In most parts of Canada, restrictions were eased through February. On April 16, Ontario’s premier imposed a stay-at-home order amid the spread of Delta variant and increased hospitalizations. Ontario began step one (of three planned steps) of its reopening on June 11. Each step features gradual easing of restrictions as vaccination rates go up. Step two began on June 30, and Ontario’s third and last step began on July 16. Ontario will remain in step three until 70-80% of those over age 12 have received one dose of vaccine and 25% are fully vaccinated. Alberta lifted most restrictions on July 1. On July 11 Manitoba became the first Canadian province to remove all restrictions, then in early September the province reimposed limits on some gatherings as cases increased. British Columbia eased some restrictions in mid-June, but in early September imposed fresh restrictions on gatherings in northern BC amid a rise in new infections, primarily among the unvaccinated. As of September 7, nearly 74% of eligible Canadians had received at least one dose of vaccine and 67% were fully vaccinated.
  • Since hitting its low point in April 2020, employment in Canada’s retail sector has closely followed the rises and drops in coronavirus infections. After shedding more than 500,000 jobs in March and April 2020, retail employment gradually improved and by December 2020 was about 2.2 million, or about 20,000 fewer than before the pandemic. As cases spiked during Canada’s second wave, the retail sector shed 210,000 jobs in January 2021. However, 215,000 retail jobs were added in February and March. The rising spread of the more contagious Delta variant of the coronavirus led to tighter restrictions in some of Canada’s key population centers in April, and retail employment that month fell by more than 66,000 jobs. In May, sector employment dipped slightly then added 86,000 jobs in June. About 1,500 jobs were added in July and by that month retail sector employment was less than 1% below pre-pandemic levels.
  • The automotive industry is one of Canada’s largest retail subsectors. Canada’s auto sales fell 11.4% in August 2021 to about 147,000 units compared to August 2020, and were down 19% compared to August 2019, according to estimates compiled by DesRosiers Automotive Consultants. August’s results reflected the challenges posed by inventory shortages on dealer lots. Auto assembly plants have slowed production amid supply chain disruptions due to outbreaks of the Delta variant of the coronavirus in South Asia. US sales in August 2021 declined 17.3% compared to August 2020. The semiconductor shortage is putting a damper on sales in Canada and in the US. Lean inventory conditions in North America are expected to persist at least until October. In early September, DesRosiers Automotive dropped its US 2021 sales forecast from 16.4 million units to 15.9 million.
  • Canada’s retail sales rose 4.2% in June 2021 compared to the prior month, according to Statistics Canada. As public health restrictions eased in many parts of Canada, retail sales increased in eight out of 11 retail subsectors. June retail growth was led by clothing and clothing accessories stores which saw sales rise 49% after two months of declines. General merchandise stores also benefited from fewer restrictions on nonessential retail and their sales rose 7.4% in June. Motor vehicle and parts dealer sales increased 2.7%. Sales at sporting goods, hobby, book, and music stores grew 27.9%, and furniture and home furnishings stores saw sales rise 23.2% Gasoline station, and health and personal care store sales increased 6% and 1.5%, respectively. The three retail subsectors that experienced declines in June were food and beverage stores (-2.5%); building material and garden equipment and supplies stores (-3.1%), and electronics and appliance stores (-2.5%). On an unadjusted basis, June’s online sales – which don’t include online-only US outlets like Amazon – were up 6.3% year-over-year, and reached $3.6 billion. Statistics Canada’s advance estimate for July retail sales is a rise of 1.7%.
  • Canada’s changing approach to pandemic relief may affect some consumers’ buying power. The Canada Emergency Response Benefit (CERB) expired in early October. In August, Canada’s federal government created a C$37 billion plan that increases accessibility to EI and provides three new relief benefits which aim to help workers who do not qualify for the EI expansion. The new benefits are the Canada Recovery Caregiving Benefit (for workers who need to stay at home to provide care to another person), the Canada Recovery Sickness Benefit (helps workers who are ill or must isolate due to COVID-19), and the Canada Recovery Benefit (for workers, including self-employed and gig workers, not covered under EI or the two other programs).
  • Retailers that have experienced decreases in year-over-year gross revenue may apply for assistance under the Canadian Emergency Wage Subsidy (CEWS). The funds are to be used for payroll and business expenses. Originally set to expire the first week of June 2020, CEWS has been extended several times and is now set to run until October 23, 2021. In early January 2021, Canada’s government made changes to the CEWS program that set the maximum top-up subsidy rate at 75% for companies with a revenue drop of 70% or more. The CEWS program has lower-tiered top-up subsidy rates for companies’ whose revenue declines have been less severe. As of August 22, 2021, the CEWS program had paid more than C$90 billion to more than 450,000 employers.
  • Large retailers could benefit from the Large Employer Emergency Financing Facility (LEEFF) program. Announced on May 11, 2020, LEEFF aims to keep companies that have been hit hard by the epidemic operating and enable them to retain their workers.
  • Retail industry watchers in Canada worry the repeated closures in the sector will worsen its ability to attract and retain top customer-facing talent, an issue that pre-dates the pandemic. After repeated layoffs and furloughs, frustrated retail workers may not want to return after Canada’s economy finally and completely reopens. Workers may also avoid frontline retail work because they fear for their health and safety. Industry experts say the key to winning back top retail talent is through better wages, improved training, and a clear path to career advancement.
  • As the pandemic wears on, retailers face several major challenges, including snarled supply chains that have slowed the movement of goods globally and substantially increased transportation costs. A Canadian Survey on Business Conditions released in late August 2021 tracked top concerns of major industrial sectors as they look forward over the next three months. More than 42% of retailers expect they will experience obstacles to maintaining inventory levels. Nearly 39% are concerned they will face higher input costs over the next 90 days. About 38% expect difficulties in recruiting skilled workers. Nearly 34% are worried about a shortage of their labor forces. More than 33% of retailers said they expect fluctuations in consumer demand.
  • After getting off to a rocky start, Canada’s vaccination campaign has quickly gained steam and by July Canada’s vaccination rate exceeded that of the US. On August 9, Canada began allowing fully vaccinated US citizens and permanent residents to travel to Canada without quarantining. Canada began welcoming vaccinated travelers from all other countries on September 7. Reopening to travelers – especially to US citizens in close-knit, cross-border communities – could provide a boost for Canadian retailers.

Sept 7, 2021 – Supply Chain Issues Among Wholesalers’ Top Concerns

  • Canada’s wholesale sales fell 0.8% in June compared to the prior month to C$71.5 billion, marking the first drop after three consecutive monthly increases, according to Statistics Canada. Food, beverage, and tobacco subsector wholesale sales were down 1.2% on weaker cigarette and tobacco product sales. Wholesale sales of building materials and supplies dropped 5.4% amid falling demand for lumber, millwork, and hardware. Weaker sales of forestry, mining, industrial, and construction machinery drove machinery wholesale down 3.5%. Sales for the motor vehicle and motor vehicle parts and accessories subsector were up 3.1%, marking the first increase since August 2020. Wholesale receipts were up for farm products (+7.8%); personal and household goods (+4.3%); and the miscellaneous subsector (+0.1%), which includes recyclable materials (-1.0%); agricultural supplies (-1.8%); paper, paper products, disposable plastic products (+1.9%), and chemicals (+3.8%).
  • As the pandemic wears on, wholesalers face several major challenges, and many of them involve snarled supply chains that have slowed the movement of goods globally and substantially increased transportation costs. A Canadian Survey on Business Conditions released in late August 2021 tracked top concerns of major industrial sectors as they look forward over the next three months. More than 51% of wholesalers expect higher input costs. About 45% said transportation costs were a likely obstacle. More than 35% reported concern about difficulties with obtaining inputs, products, or supplies imports. More than 32% of wholesalers expect maintaining inventory levels will be a significant obstacle over the coming 90 days. To cope, industry experts suggest wholesalers gain as much visibility into their supply chains as they can by learning about their suppliers’ suppliers, and find alternative sources, if possible, preferably from different countries. Working with a freight forwarder can also help firms locate shipping capacity and secure space for future needs.
  • In February 2020, prior to the pandemic, Canada’s wholesale sector employed about 611,000 people. In April 2020, as COVID-19 cases rose and lockdowns were imposed, the sector shed more than 72,000 jobs. Then between May and August 2020, the wholesale sector added 93,600 jobs. Wholesale employment was volatile through the winter of 2020/2021 as Canada’s second wave of COVID-19 infections led to tighter restrictions. Sector employment has remained fairly stable since shedding about 21,000 jobs in January 2021. As vaccine distribution ramped up and more of the country reopened, the wholesale sector added more than 28,000 jobs in July 2021, and by that month employment in the wholesale sector was 4.8% higher than it was in February 2020.
  • On April 16, Ontario’s premier imposed a stay-at-home order amid the spread of Delta variant and increased hospitalizations. Ontario began step one (of three planned steps) of its reopening on June 11. Each step features gradual easing of restrictions as vaccination rates go up. Step two began on June 30, and Ontario’s third and last step began on July 16. Ontario will remain in step three until 70-80% of those over age 12 have received one dose of vaccine and 25% are fully vaccinated. Alberta lifted most restrictions on July 1. On July 11 Manitoba became the first Canadian province to remove all restrictions, then in early September the province reimposed limits on some gatherings as cases increased. British Columbia eased some restrictions in mid-June, but in early September imposed fresh restrictions on gatherings in northern BC amid a rise in new infections, primarily among the unvaccinated.
  • Large wholesalers could benefit from the Large Employer Emergency Financing Facility (LEEFF) program. Announced on May 11, 2020, LEEFF aims to keep companies that have been hit hard by the epidemic operating and enable them to retain their workers.
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