How Covid Laid Bare America’s Economic and Political Divides

pretty busy Christmas and New Year. You heard they're a frustrated lorry driver caught up in the chaos that hit Britain's ports when France suddenly closed its borders to all UK traffic just days before Christmas. The closures were due to COVID fears, not Brexit, but we're the trade deal between the EU and Britain at that point still not signed.

The frantic scenes on the coast felt like they might be a sneak preview to what would happen when Britain fully left the European Union at the start of this year. Our UK Economy reporter Lizzie Burden wented over before Christmas and has been keeping an eye on what's been happening at the ports since January one. We have her report in a minute, along with the chat with senior UK economist Dan Hanson about the new third national lockdown in the UK and what it will do to the economy.

That's another thing that's happened in the past few days. But first I thought we should pay a call on a corner of America, which this week held the fate of Joe Biden's presidency in its hands, Georgia. Mike Sasso is our US Real Economy reporter based in Atlanta, Georgia. Some of you will remember he's given us a picture of what's happening in his state a few times since

the pandemic began. Mike, thanks for joining us again. I mean, you've been right at the center of the action this week, with those Metropolitan Atlanta votes apparently making quite a big difference to the chances of the two Democrats who seem to have become US sentences this week, giving control of the Senate to President Biden's side. What's the past few days been like for you? Yeah, yeah, it's been a little bit crazy to see Georgia at the center of everything.

There's been a huge effort among canvassers, these are activists and whatnot calling different populations. I didn't get a ton of calls. However, my wife, who is a Latina, she's of Cuban heritage, she was just hit up constantly, almost every day by different groups. I believe the latest estimate or something like five million dollars in commercials spent, which is an ex straordinary amount in just in Georgia's just on these runoff races. I have a little eight year

old daughter. She could she could remember each of the four candidates. She could remember the taglines. Um, there's a candidate, Democratic candidate, Raphael Warnock, who was sort of branded by his opponent as radical quote radical liberal Raphael Warnock. My that is burnished into my daughter's brain at this point. They tried to combat that, all of those relentless attacks on Warnock by having just pictures of him and footage of him with puppies. I thought was a very straightforward

response to that. And you you wrote a piece for us talking about the relative strengths that Georgia has had in coming through the pandemic and perhaps also getting quite a lot of benefit from the from the government. Support there's been sure well. As we talked about several months ago, earlier in the pandemic, Georgia opened relatively early from lockdown. This was I believe we opened in late May, reopened

the economy to some to some criticism. Uh, most businesses in many businesses open here in May and June, which is before many other states around the United States. Uh, there's a lot of theory that that helped Georgia. There has been an unusual and probably good phenomenon around the country of a growth and entrepreneurship, a surprising surge in small startups during this pandemic, and a lot of that got started in Georgia and the South, and it was a little bit slower to get going in some of

the northeastern and western states. And some people attribute that to the reopening of the economy. And and also our unemployment rate in Georgia has generally been better. We're at five point seven percent unemployment, which is a full point less than the national economy, which is at six point seven percent unemployment. So people are doing a relatively better at least job wise, than than there are elsewhere. And I noticed that you had some some of the industries

that the states dependent on have done relatively well. I think carpets doing well and poultry, is that right. I'm more familiar with carpet carpets and that industry, which is kind of up in the northwestern part of the state Dalton, which is where interesting a where President Trump came in campaigned the other day. Um. That's that's benefiting largely from the huge boom in in in housing Atlanta. The Federal Reserves keeping a track and actually helping the lower interest

rates has had a big effect on the housing market. Uh. And that is creating a great, just a boom, particularly in mortgage refinancing. So there's just just people refinancing, just all including my self, I refinanced, almost all of my friends have refinanced a mortgages lately. That's creating a tremendous

have and have not scenario in Georgia. UM. We we took a look at some of the counties around Atlanta, and in a primarily white affluent county on the north side of Atlanta called Forsyth County, you compare that to a primarily black county on the south side of Atlanta called Clayton County. The white affluent county, the rate of refinancing is ten times that of the primarily black county on the south side of Atlanta, despite relatively the same

population in each county. So it tells you, you know, affluent, white collar in particularly white communities are benefiting to much greater extent than blue collar in minority communities. From all of this, well, it's been such a persistent theme, and I would imagine it did feed into some of this much high high turnout among those parts of the population

in this election. If the Democrats have now got control over the Senate, it's a very very narrow control, so they're not gonna be able to do everything they might want to do, but it does look like they will be able to support more fiscal stimulus. That's certainly what investors are now betting on. Do you think that that desire for more fiscal support fed into this election result at all or was it just about other things in

the end. I think, you know, I think we'll have to look at some exit polling, and we're not to tell for sure. I do think it was interesting that the day before the election, this is on Monday, President elect Biden stumped for the two Democratic candidates and did make a very strong point that if Georgians elect the two Democratic candidates, there would be these additional two thousand

dollar stimulus checks sent to Americans. That's a lot of money for you know, particularly some low income and just frankly a lot of people. And could the promise of two thousand dollars stimulus checks have motivated some people? Yeah, absolutely I could. I could see it, so I do think it probably had some some effect. Mike Sasso, thanks so much. I hope you're not you're going to get a relief now from all those ads for a while. Certainly my daughter is happy that the commercials have ended.

That's that's for sure. Thanks a lot. We've heard again and again in this pandemic about that unequal impact of the crisis on different people and places. One reporter who's consistently brought that home to us in the US is Sean Donnan. He did it again recently with a magisterial report for Business Week that came out on almost the last day of usure. Now with just a taste of what he uncovered, it's easy to forget, but an economy

is really just a group of people. So if you want to understand the state of the U. S. Economy right now, You could just start by talking to one of those people, like Donna Swangler. Donna is forty two. She has three kids, ages seven to sixteen. She and her husband, Brian live in Ben Salem, Pennsylvania, just north of Philadelphia, and right now, at the start of one they are struggling because of this pandemic, which in really knocked them, like the U. S. Economy, off what had

been a pretty good course. As she made clear when we first spoke in early December, I have three young kids at home, so basically I'm here all day with them, and he worked when he can, and you know, of course, we just do what we have to the chart stay healthy, because if he can't work, then were we will lose everything. In March last year, as the US lockdown in response to the first wave of the pandemic, Donna lost her

job scanning paper records. It was something she had been able to do from home while her youngest child was still getting ready to start school. Until all of us went home and the courts and other offices she worked

for stopped generating that paperwork. She was able to get unemployment benefits, but the hundred dollars a week she was getting ran out in mid December, and though Congress passed a new nine billion dollar rescue over the holidays that extends her benefits, it's still unclear when she will start actually receiving them again. Meanwhile, her husband, Brian, who has a small contracting business doing landscaping, home renovations and the like,

is seeing his work dry up again. As COVID nineteen cases search, the Swanglers exhausted the few savings they had getting through last year, and as Congress was debating a rescue plan over the hollow days, Donna was increasingly nervous about what lay ahead. There's no savings left now, so it all depends on what my husband brings in. And if we can't make rent and food and we're going to start falling behind. And with that, it didn't no vision.

I'm scared. I don't know what's going to happen, because we have nowhere to go. If we leave here like there is, we don't have a family member, we could go crash with them, you know, being the five of us, there's there would be nowhere for us to go, which means right now, the Swanglers like the U. S. Economy or in a month to month scramble to get through. How are you guys gonna get through the winter? Um, we don't know. Just after the new year, Donna and

I exchange texts. The five member family on January five received the six dollar ahead stimulus payment negotiated by Congress over the holidays. The three thousand dollars was welcome, but it went quickly to covering bills the family had left over from December and the rent on their home for January. Donna says, but that is a long way from where Donna expected to be a year ago, which is a point that seems to occasionally get lost in discussions about

the U. S. Economy and the recovery still underway. A year ago, Donna Swangler was getting ready to go back to work full time as a medical office assistant, something she had done before having kids. The idea was to earn more money so that she and her husband could start building up more of an economic cushion. She hasn't abandoned the idea, but like many things in America and Europe right now, those plans are on hold. Not my

RESI mail, you know, updated and everything. Um, so I was really hoping to start doing that, but you know, the beginning of March was when everything so it feels like, I guess the one steps for over two steps back. That's a common story in the US, where things like the shift of virtual schools have hit many people and particularly women hard. A little over fifty seven percent of Americans were working in November, which was the lowest level scene since the lowest that is, if you don't count

even worse months of that came before that. The start of vaccinations means there's promise ahead, of course, but the US is going to spend much of playing catch up, which is one reason that the Biden administration and others have already started talking about the need for another rescue package. That doesn't mean Donna Swangler thinks she's getting back on the path she and her husband were planning on anytime soon, not until the kids are back at school at least.

I don't think it's a possibility of this year because school is so uncertain up to the end of the year. I can't be calling out of work, especially at a job in a local office, you know, for three days in a row because my kids have to be out of school, which means that for much of one Donna Swangler's plan is to hang in there and survive week to week, month to month, hoping that some day before long, she and her family and the rest of the U S economy can put a pandemic behind them and get

back on track. For Bloomberg News, I'm Shanda. There's a famous UK newspaper headline which is supposed to have run in the nineteen fifties, heavy fog in the Channel Continent

cut off. Whether or not it was actually published, it's been used many times over the years to symbolize the UK's somewhat distorted view of Europe, and I thought of it again just before Christmas, when fear of the news strain of COVID nineteen sweeping across England prompted France to block all traffic from the UK for forty eight hours, just days before Britain cut itself off from the main economic arrangements underpinning the European Union. Lizzie Burden, our UK

economy reporter, went to Dover to see the chaos for herself. Confusion, desperation and frustration. Those were the sounds of angry truckers clashing with police at a roundabout near Dover, Britain's busiest poet. There were two arrests outside the disused airfield where drivers were sent for a COVID test, which would be their ticket across the French border into mainland Europe. They had been stuck after a forty eight hour blockade imposed after a new strain of the virus was found in the UK.

Tensions had mounted as thousands of Hawley as you on the M twenty the highway over from where ferries crossed to the French port of Calais. A stroll down the Central Reserve revealed license plate after license plate on vehicles from Poland, Romania, Hungary, almost none from the UK. Behind the wheels were men craving home comforts in time for the holidays, especially clean toilets. I spoke to some of the drivers on December twenty three. We are wading now

more than forty eight dollars. So where did you start and where are you going? Manchester? Yes, but I got to Germany and where are you from from? Shop? Okay? What's in Van? I have biscuits? Is there a roof? Of course, it's food. I came here, O Lord Lord and God, big men. I can't they close the borders the conditions. Have you had food? Yes? On the airport they give yours half water number one bread. But I don't need the poll. I want to go home Christmas,

you understand, and now I can't make it. Don't have Christmas in I don't know it. Do you have children waiting for you? One from a six years old and one is three and they are crying at home? Are you waiting for us? But what can we do? And are you worried about coronavirus? Yes? I know you can no job with that, but we are drug divers. We don't ever gontact with anybody. As testing gathered paste, the

backlog was cleared. A Brexit trade deal, aimed at avoiding exactly this type of chaos at the border was signed on Christmas Eve and by eleven pm on New Year's Eve, when the UK left the European Unions, Single Market and Customs Union, it was eerily quiet at Dover. Yet there are still signs that the double wammy of Brexit and COVID could take their toll on trade. Real time data shows the rate of freight firms reject in contracts to take cargo from France into the UK tripled from the

third quarter. Shane Brennan is the chief executive of the Cold Chain Federation, which represents businesses along the food supply chain in the UK. I asked him whether no queues were good news and what all this means for supermarkets. I don't think we can tell anything from the trade that we've experienced so far. Trade on New Year's Day was sort of ten percent of what it would be

on a normal trading day. Most of the members I've spoken to of the last forty eight hours have not tried to send a vehicle through the border yet, and most of them are looking at sending stuff starting on so Thursday or Friday of this week. Certain times of fresh foot and vegetables do rely on coming into the country just in time, so there could be a situation

where they're in short supply in the coming weeks. There is, however, another dynamic here, which is we're going into a COVID lockdown, so normal trade flows will be distorted by that, and that'll be more an important factor than the actual Brexit distortions in trade volumes and trade for requirements in the coming days and weeks. So it could be that actually the Brexit disruption is masked by that bigger COVID disruption the most Britain's the main question is when things will

get back to normal. It will take us through to the spring before we can have any confidence of what normal now looks like because of the lots of paperwork requirements are going to be trial and error for some weeks yet. And just because they are moving smoothly today does not mean they'll be moving smoothly tomorrow. That's just the reality of it, and we're going to have to

just strap in for the ride. Well, our senior UK economist Dan Hansen is here to take stock of what Brexit and now this very serious intensification of the pandemic means for the UK economy. Dan breaks it first, we did have those real worries going into the new year about not having a deal and having further chaos on the borders. Um, we've we've dodged that bullet, but we still don't really have complete clarity on what a burden is this going to be on businesses going forward? How

is it looking for you? Yeah, it's really difficult to know. I mean, as you say, the avoiding the no deal was was really good news and that was sort of a nice, nice Christmas present for us all. But to be honest, the what we've seen so far at least is that the disruption hasn't hasn't really been there. These big queues at the at Dover and in Calais, they

they haven't come, they haven't come to pass yet. And I mean in terms of the economic impact in the first quarter, it's extremely difficult to calibrate this sort of shock. I mean, one thing we've we've drawn on is what the Bank of England have done. They said back in November that disruption could knock about a percentage point of gross in the first quarter of the year. Now, as I say, given what we see, that sounds like it

might potentially be too much. And disruption, you you would hope if it was going to happen, it would happen in the first quarter and then dissipate as firms got used to the new trading arrangements. But the broader point with Brexit, and I think it's this is where it's really different from COVID, is that it's a slow burn shock.

It's not this big sharp shock that happens as we've as we've seen with COVID and numerous occasions over the past twelve months, it's this slow burn and that drag on from lower trade flows and also from lower migration flows as well, because of the tighter migration regime. We will drag the economy's potential growth rate down. Yes, and I think, I mean it's going to be it's also journalistically going to be a challenge just to keep tabs on those, as you say, really micro changes that will

unfold over time. Bloomberg's obviously been doing a lot of that.

And also I remember there was an extremely good Financial Times piece actually over Christmas just talking about one sector of the wine industry and how if you have extremely valuable wine, you're now going to, in theory, have to open one of the bottles in order to establish exactly the chemical breakdown of the contents to meet the requirements of of going into Europe, which, of course, if you've got a bottle of wine that's worth seventy pounds, you

really don't want to do. So I think it's it's those little things that perhaps we won't as you say, we won't know enough about for quite for quite some time, quite big things have happened. Even since the first of January. We've now gone into this third made national lockdown in the UK in response to what looks like an extremely grave situation that the National Health Service is facing with this uconormous jump in COVID cases. How has that changed

your outlook for the UK economy over the next few months. UM. We think the economy will contracts by four and a half percent in the first quarter UM and that compares to a fall of about one percent in the fourth quarter. And a big reason why we think the contraction will be bigger this quarter than it was at the end of last year was because I should say, the schools have closed, and that's likely to have a greater economic impact, not only through the direct impact on GDP from through

education output. Fewer fewer children in schools will just reduce the education output directly, but also has a labor supply impact, so parents will have to stay at home look after their children, and that obviously impacts the economy as well. If schools haven't been closed, we would have expected a falling output in the first quarter of two percent. We're saying the output will four by four and a half percent.

Obviously there's supposed to be a difference in this lockdown is that it really is supposed to be the last one, because we have in theory and end in sight not so long away, with potentially a large proportion of the vulnerable population vaccinated within a month or two. How dependent is the economy now on that rapid rollout of the vaccines and how much can we really believe the government in the in the promises, in the promises for for how many people will be vaccinated so quickly. I mean

it's entirely dependent. I mean Boris has linked the the ending of the lockdown or the easing of the lockdown to the rollout of the vaccine and the government being successful at getting those two million shots a week in people's arms. So if if that fall short of their they're very high, very very high expectation, then the lockdown is going to last longer, and I think there is a big risk of that. And there are a few

other things as well there. I think the fact that this version of the virus is more transmission transmissible, that creates a risk that the lockdown needs to be tightened further to ensure that the infection rates come down. We have often been thinking about the UK where it ranks. The Prime ministers often talking about us being well beating in there, since we certainly we seem to be word beating in in our ability to develop new strains of

the virus and our ability to catch it. But I did notice that your forecasts was showing the UK UK actually potentially growing faster than many other countries this year, having done worse than other advanced economies last year. You might have thought, with the faster, much faster pace of vaccine rollout than on the continent where it's been quite slow,

that that forecast was looking okay. But given what's happened now, do you think that the UK will still look quite economically weak relative to its partners at the end of this year. Well, it's a story of two corner football phrase, it's a story of two halves. I think you've got You've got this this initial period at the start of this year, and it's not really the half I see. It's probably up to spring into early summer, where it's

going to be very difficult for the economy. But I still don't think that precludes the economy benefiting a lot once the vaccine does come online. Obviously there's a lot of uncertainty about when that that will be the that will happen. But in the second half of the year we've got we've got a pretty strong bounce back and the economy picking up. I mean, if you look at annual growth rates, just to just to say it's that the week starts the year will mean the growth rate

is lowered quite a lot. The annual growth rate looks a lot weaker, but actually that means a lot of it is pushed into twenty two. So if you look at our numbers, you're looking instead of looking at about a six percent growth rate in one, you're now looking at something closer to four percent. But then you shift into twenty two and you've got something closer to seven and a half percent instead of something around five and

a half six percent. Obviously, all of that assumes that there's isn't much scarring from all of this, that the economy can in fact bounce back, that fiscal policy does come in and protecting comes and ensure that unemployment doesn't spike and the firms don't go bankrupt. And of course the big risk is the more of these lockdowns you have, the bigger risk that scarring does occur, and the bankruptcies do occur, and the economy does struggle then to bounce.

But as things stand, we do think the second half of the year will be a lot better than the first. Dan Hanson, thank you so much. I think we'll probably in a few months time, when a lot of that fiscal support is about to evaporate and we are hopefully looking at a rapid recovery. I'm sure we'll come back to check in with you. But thanks again, thank you

very much. Thanks thanks for listening to Stephanomics. We'll be back next week with more on all things economic, and remember you can always find us on the Bloomberg terminal, website, app or wherever you get your podcasts, and you can get more news and analysis from Bloomberg Economics by following at Economics on Twitter. This episode is produced by Magnus Hendrickson, with special thanks to Mike sas, Sean Donnan, Lizzie Burden,

and Dan Hansen. Lucy Meekin is the executive producer of Stephanomics and the head of Bloomberg Podcast is Francesco Levy. M