Second Round of $1B+ Rebates to Ohio Businesses from BWC

This report is a summary of third-party economic research and perspectives to foster communication with business and economic development stakeholders during the COVID-19 crisis.

Key Takeaways

• Global: The UN Conference on Trade and Development estimates a 5% drop in world trade in Q3 2020.
• U.S.: The U.S. sees the lowest initial jobless claims week since March.
• Ohio: Cincinnati ranked #9 city in North America for Ease of Doing Business. $1.3 billion in rebates from the state’s Bureau of Workers’ Compensation will be distributed to Ohio businesses.

Global

The United Nations Conference on Trade and Development (UNCTAD) estimates a 5% drop in world trade in Q3 2020 compared with the previous year. However, the drop marks an improvement on the 19% year-over-year plunge that was recorded in Q2 2020. China experienced a 10% increase in exports during the third quarter and India and Korea also recorded export growth. The IMF for the Asia-Pacific region expressed concern for recovery as the region recovers at different speeds. It predicts an additional 0.6% short-term GDP decline (due to falling labor force participation rates and hits to key service sectors) before a larger-than-previously-predicted recovery in 2021. China is expected to post GDP growth of 1.9%, being 1% faster than previously expected. The Italian Treasury received more than €90B of orders for the sale of 30-year bonds from €8B of debt on offer.  The U.S. and Brazil reached an agreement on a limited trade deal.

U.S.

Weekly initial claims for jobless benefits, a proxy for layoffs, fell by 55,000 to a seasonally adjusted 787,000 in the week ended October 17.  The revised claims for the week ended October 3 (767,000) was the lowest since the week of March 14 but still historically high relative to Pre-COVID19 conditions.  American shoppers boosted spending on vehicles, clothing, and other goods in September.  Purchases at stores, restaurants, and online rose 1.9% in September from August.  Oil prices fell following an increase in U.S. gasoline stockpiles, and a surge in COVID-19 cases in North America and Europe. Federal Reserve Governor Brainard called for additional stimulus necessary to address the uneven recovery, with certain groups and sectors experiencing substantial hardship, threatening the overall recovery.

Existing home sales rose to a 14-year high as record-low mortgage rates continue to support demand.  Contract closings increased 9.4% from the prior month, the fastest pace since May 2006.  The booming housing market may be a key source of fuel in the economy amid the pandemic.  Meanwhile, urban apartments are losing value. Manhattan studio apartment rates have fallen 17% from last year, and the number of listings has tripled.  Bay Area studio rents have plunged 31%.  In London, rents may fall up to 5% by the end of the year to their lowest level since 2014.  Roughly 10-14M renter households – home to 23-34M renters – were behind on their rent by a total of roughly $12-$17B as of September 14, 2020.

Business Roundtable CEOs announced corporate actions, public policy recommendations to advance racial equity and justice, increase economic opportunity in America.  76% of American CEOs say they may shrink office space – suggesting challenging future conditions for office real estate.  The U.S. Chamber of Commerce, the National Association of Manufacturers, and others filed a lawsuit against recent regulations that will undermine high skilled immigration into the U.S.  The U.S. Department of Justice sued Google in the most significant antitrust case against an American company in two decades.  OxyContin maker Purdue Pharma reached an $8B settlement with the federal government in which it pleads guilty in a criminal investigation over its role in the opioid epidemic.  Goldman Sachs charged by the Justice Department for violating the Foreign Corrupt Practices Act (FCPA), will pay more than $2.9B as part of a coordinated resolution with criminal and civil authorities in the U.S., the U.K., Singapore, and elsewhere.

Ohio

A second round of rebates totaling $1.3B from the Bureau of Workers’ Compensation will be distributed to Ohio businesses. The refund follows a $1.6B dividend refund in April.  The Ohio Office of Management and Budget reported that September state tax revenues have started to improve.  Cincinnati ranked as the  #9 city in North America for Ease of Doing Business in an Arizona State University study.  Several Dayton-area communities are using federal relief funding to install free Wi-Fi as the need for internet access has greatly increased during the pandemic. The Wright-Patterson Air Force Base is hosting and overseeing the first Air Force “Advanced Manufacturing Olympics,” pitting teams against each other to solve technical challenges.

According to the Federal Reserve Beige Book, economic activity increased at moderate pace for the Federal Reserve Bank of Cleveland’s region.  Far fewer firms noted a decrease in demand.  The improvement was evident across industry breakouts, but there was considerable variation within them.  Spending on interest rate-sensitive goods (such as homes and light vehicles) was particularly robust, while spending in high-contact services segments (such as accommodation and food services) remained weak.  Modest increase in customer demand was accompanied by an uptick in staffing levels. However, hiring was difficult because of limited labor availability, which also exerted more upward pressure on wages.  Supply chain constraints and higher costs of freight and some materials pushed up input prices.  Capital spending remained soft amid persistent uncertainty.

Smart-card manufacturer OMEC Smart Card is considering opening its first North American facility in Strongsville, where it expects to hire 200 people.  Huntington announced a $25M small-business lending program focused on serving minority, women, and veteran-owned businesses.

Resources

• Ohio Department of Health’s COVID-19 Website: coronavirus.ohio.gov
• JobsOhio’s resource portal and information about Open, Secure Supply Chains in Ohio.