Surveillance: OECD Cuts 2021 Global Forecast

that forecast. So, as you know, we're still in the midst of the pandemic, and we're having a second wave with many countries in the northern Hemisphere and as well as you know, having the pursuit of the first wave in some of the countries. So twenty twenty one is still very much affected by what's happening now in the first quarter. Now with the vaccines inside, there is much hope and I think the outlook would be brighter. We

project recovering one. As you know, it will be a little more than four percent that one being off to have said the decision we have in twenty but it's it's a big step towards a brighter future. Um, what will be super important is that policies keep the support on the health on the fiscal side so that we can achieve better recovery once once the vaccine will have

been deployed. Are you concerned about how much damage we do between now and then, Absolutely, we're very concerned, which is why we have this overarching message of keeping up the support if if we keep on, if we double down on health policy packages, because you know, the vaccine is not excuing us right now. We need to go through the winter and the spring and we need to deploy it. And firms have been affected by in some

sectors going out of business in oders, weaker demand. Some people a large young of people have been protected by job with tension schemes, but some of them are falling through the crack. Firms balance sheet may be affected as well. So we are saying with vaccines inside, you know, governments we have vindicated in implementing these huge support to firms and people and they must continue to do so. There will be a time to reflect on the debt, but that won't be one. So what kind of fiscal support

packages are you factoring in here? When you come up with your four point growth projection for So what we what we're working on is assuming that the support to workers through furlow schem or job at tension scheme will be maintained, especially in the sectors which are directly affected by restrictions to mobility. UM, we're also incorporating the support to firms, and you know that a number of countries of easy countries have extended these too, about sometimes as

far as summer twenty twenty one. We also have considered recovery plans which have been issued by a number of countries. UM. What we are saying is, you know, with monetary policy very accommodative and in the FOCE seeable way for the future, the dead services of most city countries is actually lower than what it was in twenty four So there is space for using the fiscals tool in the strategic way

that I've just described throughout twenty twenty one. And until the recovery has been more momentum or unemployment has started decreasing, that is super important. Alternatively, and we have two scenarios in our projections. UM, if there's not enough public health or fiscal support, confidence may folter films failure may be bigger, and we could be in a much much lower recovery with the matches on the side for jobs and for firms, Lawrence.

A lot of people have looked at stock markets globally, looked at their incredible performance of late and said, look at how well the economy is recovering, and yet this dissonance between the economy and markets continues, at least when

we look at the economy in real time. Are you concerned that people's emphasis on stock markets on risky asset prices is a measure of economic health that that actually hampers the recovery because it hampers the effort to get fiscal stimulus into the hands of people who actually need it. I'm not concerned about stock markets doing well, um. I

think they're forward looking. That's saying that the job of people on the on the stock market, they include the better outcome linked with the advances in public health and

also expectation of very strong monitary and fiscal support. What I'm concerned about is in some instances there's a lack of connection between the size of the fiscal stimulus and the effect on the economy, and that's where fiscal public spending are not spent wisely, which is why we're insisting on the need to target the appropriate people, the viable firms.

Some countries do that very well, um as well as all those that are left behind, and also on that's now even more important, you know, invest in the economy of tomorrow, education, digital and energy composition, not size Lawrence. Before we let you go, you mentioned some countries are doing it well. Who's doing it well? You know, there are a number of countries which are doing well, especially

in Asia because they've addressed the virus more quickly. But we're also seeing many countries doing much better than we could have expected in this crisis because they've put in place the necessary support to firms and to employment, and I think they should continue. You know, they are talks of softening the support or withdrawing it. We've seen that in the financial crisis. We should learn the listens it's

not the right time to do this. Whether if we put in place the good policies, if vaccine sound deployed and fiscal support remains, we could be in an upsite scenario with even faster recovery. I hope this is what we hope, So we all hope. So Lawrencepoon, O we c D Chief Economist, law It's always great to catch up. Thank you. The O E c D kind of gets one global growth forecast the four point two from the

five percent forecast they had back in September. Let's bringet t ask you with skybish Capital co ce Io try just help us reflect on the month that was and how we reset for the month to come. Yes, so look, you came into the sponsor's quite a few rotations, right. You came in with markets are pricing in a blue waves and then you did you got estimatebly wave obviously had a Biden victory but certainly not a sentate flipping

at least yet and seats lost in the house. So that cut some of the you know, cyclical names to sell off a bit and tech the rally back. And then of course we had the fantastic news which can be understated enough about how effective these vaccines are and what that means in terms of light at the end

of the tunnel. So you put that all together going in where it had a VIX around forty at the end of October and a lot of risk off price action, and it had an extremely explosive month really across the board for all assets, whether it was credit, cyclicals, value. Really the only names that performed poorly were showing the stay at home names that have done so well for the rest of the for the earlier in the year.

So you know, as we look forward, you know clearly we're starting at twenty three times four earnings again, just like we were at the beating in September. Even after this massive rally, equities are only up three and a

half to four the last three months. We all know that games are gonna be much harder to come by, and equity markets are all assets in general, um, but it is unlikely unless we get that double dip, which at least from the data we're looking at, it doesn't look like it's coming just yet, that we have a major dislocation prior to the bid An administration being sworn in and hopefully getting you know, half a trillion dollars or more in fiscal stimulus. What's the data that you're

looking at, Troy. Yeah, So look, I think if you think of the stimulus that's still in the system, there's two and a half trillion dollars more in commercial bank deposit accounts than there was coming into this year. For instance, you can look at the housing market, it's on fire. Mortgage debt service is the lowest it's been over forty years. You look at the over hundred billion dollars in death it's been maid down by the consumer. You look at the fact that wages and salaries have now gone above

where they were coming into the pandemic. Now. Off setting that, of course, is that transfer payments have dropped from from fiscal stimus going down. So look across the board and when you see is that there's an enormous amount of stimulus that has yet to be spent, okay, and that's what's supporting consumption now even as UH enhanced unemployment drops off. At the same time, we have created ten million jobs where recaptured ten million plus jobs since the downturn. So

there is the ability to consume. To your point of manufacturing. You've seen capetx pickup meeting fleet. Obviously, you've seen fiscal spending from the federal government pickup meeting fleet. Trade is not a net contributor, but those three cylinders are hitting strong enough, we think to keep us out of a recession, provided provided right that we do get another round of at least McConnell style stimulus sometimes in February and March if we don't get mcconos billion. Troy, Yeah, And it's

unfortunately to joke ground all these things. Is there's real um you know, paying out there in the lower wage earns. But somewhere between a half a trillion was McConnell style, right and pulse he was two two and a half. You won would think that Biden and McConn work together very well over time. Remember they work together as being er McConnell and Biden that really strug out the administrations deal on two that as love it. Five hundred billion is still two and a half percent of GDP um.

We were about three and a half PERCENTBLE or P GDP at the end of Q three, a remarkable number. Looks like we'll probably be around two percent LE or

P GDP at the end of this year. So two and a half percent GDP is really all we need to get back to the peak level by the end of two two with the latest So let me stress test the confidence just a little bit, Troy, this kind of Vice President Mike Pence, he said, we strongly believe the vaccine distribution process could begin the week of December fourteenth, that was reportedly might pen speaking to governors in the

last twenty four hours. Then we heard from Governor Newsom who had this to say, and I said it at the top of the hour. If these trends continue, we're going to have to take much more dramatic, arguably drastic action. How do you think this market with process, some form of shouter in place order from Governor Newsom, something much more strict than what we've seen already in the next

couple of weeks. Yes, So that would certainly cause a short term pullback, not nothing meaningful, maybe one to right and again it's back to starting level, right think at the starting level markets now vix around twenty right, which has been the post crisis, post m vaccine or sorry, post pandemic crisis low um. We got up to forty at the end of October, collapse back down uh multiples

at three x in more good news looking forward. Then there's been in quite some time in terms of the economy, in terms of what the fact that he needs to do in terms of the vaccine news. If you get a stay at home or like from the state as large as California. That will take a little bit of enthusiasm, and we may not have a strong December like we've had typically in the past, but we don't think it's

enough to really cause a major dislocation. You know, it could get as bad as September October, but but you know, down six six and a half percent, you certainly isn't the end of the world. Um so much again depends upon the sack that the light at the end of the tunnel. It's so much brighter because of the multiple vaccine candidates which will finally get somebody's bombed out sectors like what lodging. Uh, you know, airlines, cruise lines and things that have really been the bottom leg of the

k to come back. Uh sometimes you know q th nature Troy, It's great to catch up as always, you're looking well. Best of the team. T Scottish Capital Code. See I I'm got to see you, sir. I find the conversation about the economy far more interesting. Ethan Harris joins US now Bank of America Securities Head of Global Economic Research. Ethan Greater to catch ups. Talk to me about the difficulty in the months ahead and how much

better you expected to get in the year after. Well, before I start there, I should point out that in this world of remote access, I've got a gutter cleaning crew that just arrived at my house, So it could get interesting here in a minute. Um, we understand, that's fine, you just went through it. At least I'm not showing my legs off though. But anyways, um uh, there's there's

some kind of slow downcoming. I mean, we we know that people have learned to live with the virus, they figure out ways to get around it and continue to do economic activities. But you know, things are we're at almost worse than in the spring in terms of the caseload. Um. The shutdowns we've seen at the local level have been pretty limited, but they're going to be persistent because the number of cases isn't going to go away quickly, given all the holidays coming up and the kind of pandemic

fatigue we have out there. So we're looking for growth to slow to about one percent in the first quarter is kind of the last vestige of this COVID crisis, and then from there, the vaccine story kicks in, the fiscal policy story kicks in, and we're much more optimistic, Ethan. We're looking at the economic day to come through worldwide,

not just in the United States. We've had some soft jobless claims prints over the last couple of weeks, but worldwide, the p m I s have been terrific, particularly in Asia. You expect that as you come off a low base, that diffusion in the cities. You've written about this earlier

this year, Ethan. My question though, is how difficult is it to draw a distinction between an infantry rebuild off the back of an unprecedented shock that is happening on a synchronized basis worldwide right now, and a robust early stage recovery. Can you make that distinction? Ethan? Yeah, I mean I think that that what we're seeing now is what you'd expect for p m I is to be if you're growing at say five UM and that's where we are right now. Um, you know, this isn't a surprise.

It's a little bit strange that took this long for the p m I s to get to this level. I mean, where were they back in the summer when we you know, second quarter US GDP growth was thirt and the p m I s were like at fifty five or something that's way too low. So there's something a little bit strange about the way they they've kind of been lagging behind. But you know, readings in the in the high fifties are you know, a normal, healthy recovery.

I do think they're going to cool off a little bit in the next couple of months, just because there's some real slowing going on, uh in Europe, US and much of the northern hemisphere. But um, you know, I don't you know, I don't feel this is an unusual thing to have numbers like this. Meanwhile, though, we are getting this incredible divergence between the manufacturing side of the economy and the service side of the economy, which has

really led to an increased number of jobless claims. Are you seeing the likelihood increase of a negative print on this Friday's jobs report. Well, we don't expect a negative print, but I mean, the job market is going to be one of the sectors that slows a lot here in

the next few months. Because while you can when you do restrictions and activities, you can certainly continue retail sales, you can have online spending, you can do uh, you know, you find find ways around the restrictions and shop and keep shopping. But what you can't prevent is a very weak holiday hiring season because brick and mortar is the dominant source of jobs, and so some slowing in the

job markets inevitable. Uh. You know, we're still seeing uh, you know, a couple hundred thousand gain in pay rolls. But but you know, we we could get to flat numbers by the time we get into the first quarter. So when people talk about scarring, what numbers do you have to see before you start getting worried about a

double deprocession. Well, I think that if we dropped to the kind of growth numbers we have and there's no fiscal package, then you you worry that you're going to dip into egg of territory before the vaccine kicks in. I mean, when you talk to people about the vaccine, it's important to keep in minds you don't need herd immunity.

You don't need everyone immunized to benefit the economy. You need to have vulnerable populations immunize to the point where everyone feels comfortable that they're taking low risk, that this is something you can live with at the um. And so there's an increased engagement that comes with vaccinating vulnerable people. Uh, and the essential workers. Uh. You don't need to wait

for the herd immunity to help the economy. But yeah, I mean we're gonna we're gonna have a bit of a dead spot here, you know, as we go into the first quarter, and the economy does need um fiscal stimulus. I mean, local governments need help, the small business need to help. Unemployments need help. You know, the benefits keep diminishing, so uh, it's very important they get a deal done.

We do think they will. We think that's the probably the only serious legislation we get in the next two years will be the stimulus package out of the gate, because we really need it. Um, if we get split government, it's gonna be solid gridlock once we get past this initial kind of emergency funding situation. I don't unless it's somehow managed to pull the Georgia. Uh, you know, we're gonna have rock solid gridlock. I think Ethan grit to

catch ups. Always appreciate your inside good fun as always, Ethan Harris that of Banks America Securities. Right now, let's turn to the issue at hand, which is still the pandemic.

It is still twenty and the question is how quickly can we unrull or roll out these vaccinations in order to stop the pandemic and fulfill some of the hopium that we continue to see in markets joining us now Dr Jody Guest Emery University roll In School of Public Health, Department of Epidemiology, Vice Chair and Research Professor, Doctor Guest, let's just start with what the road looks like ahead

to get a critical mass of people vaccinated. Good morning. Well, we certainly UM need a big uptake in the vaccine, which means we really need a lot of trust that the science has been great behind it and that this is a safe and effective vaccine that we want to make sure we get to everyone UM across the globe. Alright. So the reason why I ask this is because a lot of people are saying, well, we've got a vaccine, so you can fast forward to a better time ahead

and price that in. But there is a question of how long it will take and how bad the pandemic could get before then? Can you talk about that process? In other words, that we're heading into the winter season, people are getting complacent, We're seeing virus numbers go to record highs, and we still are a ways away to

that critical mass. Absolutely, so we've got a light at the end of our tunnel, but we are not there yet, and so we need everyone to continue to do what we've been asking, which is stay socially distanced, where their masks um you know, keep their gathering small, which is hard. We have a lot of pandemics fatigue at this point in time, but we are closed. But we must continue to do all of those incredibly important prevention measures to

stay to keep our numbers down. As you said, they are skyrocketing across the United States and across the world at numbers that we've not even seen up until now. So we should get a vaccine first. I mean, guess we're going to have older individuals and perhaps nursing homes and healthcare professionals who next. I think we'll see a

lot of frontline workers. UM, get the offered the vaccine next. Today, actually, the CDC is meeting and having a panel to discuss what the priorities will be and how those vaccines will be rolled out. Once you have a vaccine that has FDA approval, you have to go into a vaccination process of vaccine but itself doesn't work until we get it to people, and so that this vision will start today to really put together a robust plan of how the

vaccines gets rolled out. What do you think is the most effective public relations effort to get people to have confidence in the vaccine to go seek them out, because that has been one of the biggest concerns. Absolutely so, I do believe that the fact that the FDA, which is going to start reviewing their data from Fiser and Maderna coming up um, they will be doing those those data reviews online and anyone could watch them. I think that that is an incredibly important offer for us to

be able to all watch that. Additionally, the CDC review today about who's going to get the vaccine and the order in which they will get it will also be available for anyone to watch. And that transparency is really important because these vaccines have been um studied very quickly, but it does not mean the science has been too quick, and we want to make sure that everyone gets a chance to see that. Dr guess I want to talk

a little bit about morale among nurses among doctors. I've read a number of stories and heard from people that it's exhausting, it's emotionally draining, it's traumatic. They went through the first wave, I know in New York City it was really traumatic for them, and now they're seeing numbers creep up again, and we're seeing that across the nation. How does that factor into what we are seeing now the structure of our health care system and how stretched

it's getting. Well. I think as we think of supply chain that we've talked about a lot with COVID nineteen, where we were concerned about having enough gloves and maths and in hospital bed, one of the things we've not spent enough time talking about is enough employees, enough clinicians to care for all of these patients. People are working so many days in a row without days off, and that's exhausting. And when you see incredibly high death rates,

that is takes an emotional toll that we can't underdescribe. UM, we need to make sure we're caring for them and UM. A lot of clinicians I've talked to are are stressed about the number of patients that they're caring for, but also the lack of attention to the prevention messages that we are consistently putting out there. And so it really isn't as an honor to all of the people who've been working so diligently to care for those who are sick, we need to make sure we continue to wear our masks.

I ask everybody this just because I have a diligence to my children at home who ask every day when is this going to be over? When is this going to be over? Dr. Guests, Well, I wish I knew that. I wish I had a magic ball that would tell us that. Um. What I can say is, um, we are getting one of the best modalities to help us with us with the vaccines coming up, but it does not mean that we will be without our masks the

minute people start getting best vaccinated. We still have a lot of work to do and we need to reach a certain threshold of folks who have been vaccinated before we are going to want to change those additional messages of social distancing, masking and hand washing. Thank you so much, coming good, I hope so from your lips to all of our ears. Dr Jody Guest of Emery University, we really appreciate you being with us. Thanks for listening to

the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio