The post-Covid economy will leave some workers behind

Chairman of the Federal Reserve Jerome Powell warns that the Covid-19 pandemic has changed the economy.

Posted: Nov 13, 2020 6:50 PM
Updated: Nov 13, 2020 6:50 PM

Investors are hungry for a Covid-19 vaccine that can deliver a return to normal. That day may never come.

"We're recovering, but to a different economy," Federal Reserve Chair Jerome Powell said Thursday during a virtual panel discussion hosted by the European Central Bank.

It's clear the pandemic has accelerated the use of technology, remote work and automation, Powell said. This will have lasting effects on how people live and do their jobs.

What comes next: While advances in tech are generally positive for societies over the long term, on a short-term basis, they create disruption.

"Even after the unemployment rate goes down and there's a vaccine, there's going to be a probably substantial group of workers who are going to need support as they're finding their way in the post-pandemic economy," Powell said.

Such anxiety is shared by top business leaders as they look ahead.

"If there is a resurgence of confidence and growth, my concern is how evenly distributed [it is], and who gets left behind," Viswas Raghavan, JPMorgan Chase's chief of the Europe, Middle East and Africa region, told me in a interview this week.

Some of the world's biggest companies have already made changes to their business that will reverberate long after the pandemic is brought under control.

Take Disney, which reported its financial results on Thursday. The entertainment giant, which has had to delay the release of expensive blockbusters and shutter its parks for months on end, swung to a loss of $2.8 billion in its most recent fiscal year. The previous year, it hauled in $10.4 billion in profit.

Disney isn't just sitting on its hands, however. During the pandemic, the company has made big investments in its Disney+ streaming service, which now has nearly 74 million subscribers. Last month, it announced an internal reorganization that moves the service toward the center of its media empire.

"I think you're going to see that we're going to put a lot of wind in the sails of our Disney+ business and heavily invest in it," CEO Bob Chapek told analysts on Thursday.

The need to pump cash into new parts of the business has costs, though. Disney has announced layoffs of tens of thousands of workers this year. Lower-paying roles in the company's parks division have been particularly vulnerable. Disney has indicated it could eventually rehire workers, but has not made any firm commitments.

Powell worries some Americans may be left behind. On Thursday, the central banker said he's particularly concerned about where "relatively low-paid, public-facing workers in the service sector" will find themselves after the crisis.

"Those people are going to struggle to get back to work in their old jobs, or in many cases in new jobs," he said.

Not there yet: While positive vaccine developments are encouraging many people to look ahead to later next year, the near-term is due to bring even more pain. The United States reported more than 153,000 new Covid-19 infections, a record, on Thursday. Chicago has issued a stay-at-home advisory as officials across the country consider fresh restrictions.

Trump bans Americans from investing in some Chinese firms

President Donald Trump may be on his way out the door, but he isn't done ratcheting up tensions with the world's second biggest economy.

On Thursday, the president signed an executive order banning Americans from investing in Chinese firms that the administration says are owned or controlled by China's military.

The order applies to 31 Chinese companies which the US government says "enable the development and modernization" of China's military and "directly threaten" US security.

Smartphone maker Huawei and Hikvision, one of the world's largest manufacturers and suppliers of video surveillance equipment, are among the blacklisted companies. Some of the other companies listed, including China Telecom and China Mobile, trade on the New York Stock Exchange.

What it means: Trump's order prohibits Americans from directly owning shares in the companies or investing in them through funds. Investors will have until November 2021 to divest from the firms.

Investor insight: Shares in Hikvision dropped more than 4% in morning trade in Shenzhen on Friday, before paring back some of those losses to fall 1.5%. Shares in China Telecom plunged nearly 8% Friday, and China Mobile shed 5% in Hong Kong. Huawei is a private firm.

Paul Triolo, head of geotechnology at consultancy Eurasia Group, said in a recent note to clients that Beijing would be "on guard for the Trump administration to take some hard parting shots."

But it's not clear the relationship will improve significantly once Joe Biden takes office in January. Beijing congratulated Biden on his victory Friday.

"The US suppression of China will be inevitable," former Chinese finance minister Lou Jiwei said Friday, per Reuters.

Is it time to invest in bank stocks again?

A historic recession and rock-bottom interest rates have translated to a tough year for bank stocks.

While companies like JPMorgan Chase and Bank of America have made clear they're on solid footing, with plenty of capital on hand to make it through the pandemic, the economic outlook has made it hard for Wall Street to get excited about shares of top lenders.

That may have changed this week with promising news about Pfizer's vaccine, which created a surge in investor confidence. The KBW Bank Index, which tracks the biggest US players, has gained more than 9%. It's on track for its best week since June.

"We advise getting aggressive on banks," Wells Fargo analyst Christopher Harvey told clients Wednesday.

The thinking: A low interest rate environment eats into the money banks make on lending activity. But Harvey predicts that a viable vaccine will unleash a flood of consumer spending, contributing to inflation. That would push central banks to raise interest rates before long.

"This pent-up demand, confidence and ability to spend should not be discounted," Harvey said. Right now, he noted, investing in banks in a contrarian move. In his view, that could pay off.

Up next

DraftKings reports earnings before US markets open. The Producer Price Index, a key measure of US inflation, arrives at 8:30 a.m. ET.

Coming next week: Investor attention will continue to focus on the prospect of a safe and effective Covid-19 vaccine by the end of the year. Moderna has said it will make an announcement on the efficacy of its vaccine candidate by the end of the month.

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Cases: 1671275

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CountyCasesDeaths
Cook63319811182
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Will910281124
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Kane68211868
Winnebago40918559
Madison40014592
St. Clair36230595
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Peoria26845368
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DeKalb12114133
Williamson12027174
Whiteside8265183
Jackson808394
Boone790483
Coles7857122
Ogle754587
Grundy735386
Franklin7317115
Knox7244169
Clinton7113102
Macoupin6927104
Marion6907143
Henry661677
Effingham658099
Jefferson6523143
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Stephenson580992
Woodford575292
Randolph553799
Christian531882
Fulton525875
Monroe5243103
Morgan505299
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Lee478060
Bureau442190
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Perry432375
Fayette429564
Iroquois419977
McDonough373460
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Jersey335153
Crawford331330
Lawrence330833
Douglas326237
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Richland279057
Hancock273035
Cass265330
Clark265240
Pike263358
Clay258254
Edgar256749
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Hamilton133622
Schuyler107010
Brown106410
Pulaski103811
Edwards103418
Stark81228
Gallatin7878
Alexander71712
Scott7136
Henderson69814
Calhoun6902
Hardin59816
Putnam5614
Pope5476
Unassigned1632433
Out of IL70

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Cases: 1000163

Reported Deaths: 16309
CountyCasesDeaths
Marion1347632106
Lake660041156
Allen57441793
Hamilton46100461
St. Joseph44109607
Elkhart35696507
Vanderburgh32087477
Tippecanoe27796257
Johnson24902443
Hendricks23738354
Porter22802362
Madison18614404
Clark18424250
Vigo17347301
Monroe15180197
LaPorte15046250
Delaware14984259
Howard14626287
Kosciusko12217147
Hancock11630175
Bartholomew11505179
Warrick11255189
Floyd11013214
Wayne10897250
Grant9964218
Morgan9404176
Boone8863116
Dubois8227130
Dearborn817093
Henry8139151
Noble7984106
Marshall7838134
Cass7499119
Lawrence7403170
Shelby7138114
Jackson694088
Gibson6533113
Harrison644491
Huntington633999
Knox6273106
DeKalb626397
Montgomery6208109
Miami589797
Putnam575377
Clinton570271
Whitley560455
Steuben554675
Wabash5279101
Jasper524475
Jefferson506996
Ripley495685
Adams476073
Daviess4616113
Scott435869
Greene422096
Wells420987
Clay420260
White415962
Decatur4133101
Fayette404286
Jennings385160
Posey375343
LaGrange353978
Washington353249
Randolph341999
Spencer337342
Fountain332558
Sullivan326752
Starke313369
Owen312070
Fulton306567
Orange291762
Jay280445
Perry264752
Franklin264042
Carroll259132
Rush258832
Vermillion255454
Parke230026
Pike227943
Tipton226659
Blackford190540
Pulaski181855
Crawford158623
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Martin137419
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Union106815
Ohio84112
Unassigned0538