The Federal Reserve last week announced a 50-basis-point cut to its target rate as an emergency response to economic concerns stemming from the coronavirus.
This is the Fed’s first emergency rate cut since 2008 and the fourth cut overall since the start of 2019.
The personal finance website WalletHub projects the rate cut means APRs on new credit card offers will decrease by an average of 8 basis points, as will the APRs on auto loans. Mortgages should decrease by an average of 26 basis points, the site said, and deposit account APRs will decrease by an average of 16 basis points.
WalletHub CEO Odysseas Papadimitriou said the Fed is getting out ahead of the coronavirus.
“It is a good idea for the Federal Reserve to cut its target rate in response to the coronavirus because the risk of the virus turning into a pandemic before an effective treatment becomes available, let alone a vaccine, is very real,” he said. “That is not to be alarmist, but being proactive is the best strategy in insulating the economy. Consumer spending will go down if people stay home because of the coronavirus.”
He said that, in turn, will hit a number of industries particularly hard, including small businesses in the service industry such as bars and restaurants, as well as travel providers, live entertainment venues, movie theaters and more.
“And that could lead to a domino effect, with turmoil in one industry spilling over to another. For example, if a restaurant owner can no longer pay rent, the property owner might not be able to pay its loan, and the bank that made the loan might end up suffering as well.”
Papadimitriou said more could be coming at the federal level.
“A rate cut is better than nothing, but the federal government should be prepared to step in to support distressed industries if things get considerably worse. That obviously should take a backseat to immediate investments in health care capabilities. But if the coronavirus spreads throughout the economy and the fear we’re seeing in markets really manifests itself in hard economic data, that would only compound our problems.”
He said the rate cut should be a wake-up call for businesses to begin preparing coronavirus contingency plans in earnest, if they haven’t already.
“Companies have two major objectives in doing so: minimizing interruptions to business processes and safeguarding human capital. They go hand-in-hand, too. In particular, making adjustments to operate remotely is especially important right now.”
Michigan’s growing immigrant population is a driving force in economic growth, according to a recent study.
A recently released report from New American Economy found Michigan’s Hispanic population grew by twice the national rate, playing a crucial role in stimulating the economy and filling labor shortages in major state industries, such as agriculture.
NAE looked at U.S. Census data from the 2017 American Community Survey, which showed Hispanic Americans earned more than $1 trillion and paid more than $250 billion in taxes in 2017 alone.
Between 2010 and 2017, Michigan saw a 9.5% increase of its Hispanic immigration, compared to 4.4% in the U.S. overall, according to NAE.
Immigrants also continue to fill critical workforce gaps in labor-short industries such as agriculture, construction and health care, according to the report. Hispanic Americans, and particularly Hispanic immigrants, also continue to start and own their own businesses at higher rates than the rest of the population.
Michigan is home to almost 700,000 immigrants overall, 33,383 of which are entrepreneurs, and 167,079 are employed at immigrant-owned firms. Immigrants living in Michigan have a collective $18.4 billion in spending power and contribute $7.1 billion in taxes as of 2018, according to the report.
Additional NAE research also showed an increase in eligible immigrant and Hispanic voters that could tip the scales in key 2020 swing states, including Michigan. NAE saw a change of over 21,000 eligible immigrant voters from 2017 to 2018.
Job cuts announced by U.S.-based employers fell 16.4% from January’s total of 67,735 to 56,660 in February.
Despite widespread concern, the coronavirus has not yet caused companies to cut positions, according to a report released Thursday, March 5, from global outplacement and business and executive coaching firm Challenger, Gray & Christmas.
Last month’s total is 26.3% lower than the 76,835 cuts announced in the same month last year. Through February, employers announced 124,395 job cuts, down 4.2% from the 129,823 cuts announced in the first two months of 2019.
Technology leads all industries in announced job cuts, with 24,087 — 10,218 of which were announced in February. That is 1,041% higher than the 2,111 cuts announced in that sector through February last year.
“The tech sector is undergoing immense change as large companies make cuts to become more efficient. Meanwhile, recent startups are folding or pivoting to more lucrative avenues or cutting back in order to comply with government regulations,” said Andrew Challenger, vice president, Challenger Gray.
Retail announced the second-highest number of cuts, with 8,096, bringing the two-month total to 18,540. This is 55% lower than the 41,201 cuts announced through the same period last year. Bankruptcy claimed 667 jobs in this sector last month, while store closings claimed 6,260.
Companies in the transportation sector have announced the third-highest number of cuts this year with 10,056 — 6,703 of which occurred in February. Challenger tracked 4,768 cuts due to losses of contracts, with 2,694 specifically due to a loss of contract with Amazon.
Media companies announced 1,584 cuts in February, the highest monthly total since 3,365 cuts were announced in March 2019. Of those, 386 were in the news media.
Restructuring claimed 40,581 jobs, while unit and store closings claimed another 38,175 so far this year. Lost contracts accounted for 7,179 cuts this year, while bankruptcy was cited for 4,979 cuts.
“Despite widespread concerns about COVID-19 (coronavirus), it has yet to impact job cut announcements. This may change if the supply side remains dormant, as companies grapple with whether to keep operations open without product. It could also impact retail, hospitality and travel companies, if concerns keep people at home,” Challenger said.
“Companies are already deciding which paths they need to take to keep the virus from spreading within their own offices. This includes limiting business-related travel and telling workers to stay home not only when they are sick, but also, when technology allows, to do their jobs.
“We do not yet know how far-reaching the virus is in the United States. While the majority of cases worldwide have been mild, and many people who contract it may not even require a hospital stay, that is not the case for high-risk populations, and limiting the spread of the virus is in everyone’s best interest.”