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Trump administration urges rapid stimulus approval as economy tanks

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Washington (AFP)

Amid growing evidence of the damage already inflicted on the US economy by the coronavirus pandemic, Treasury Secretary Steven Mnuchin is urging Congress to pass a $1 trillion emergency stimulus package immediately.

Many economists now say the United States is already in a deep recession, and the latest economic data show a surge in layoffs and manufacturing shutdowns rippling across the country as the government clamps down on gatherings and calls for strict social distancing to stop the virus from spreading further.

Forecasts now show the world's largest economy will crater, contracting between 12 to 14 percent in the April-June period.

President Donald Trump has pledged to "go big" to support the economy, and his administration has eschewed the traditional Republican aversion to debt and deficits.

"This is an unprecedented situation where, for good reason, the government has instructed major parts of the economy to close down so that we can win this fight against this virus," Treasury Secretary Steven Mnuchin said on Fox Business Network, and "there are impacts on hardworking Americans."

"We have no problem issuing more debt," he said.

With the Federal Reserve having slashed the benchmark lending rate to zero, "I can assure you, we're going to take advantage of lower interest rates," Mnuchin said.

But amid uncertainty over the virus and how soon the government stimulus will be deployed, data has shown surging layoffs especially in the hotel and travel industry, a spike in workers applying for unemployment insurance, a collapse in manufacturing and a freeze falling over the hot housing market.

The Philadelphia Federal Reserve Bank's monthly survey of manufacturing showed activity "fell precipitously this month" with the index plunging from a three-year high of 36.7 to -12.7, its lowest reading since July 2012 and the biggest one month drop on record.

- Already in recession -

"The sector will be in deep recession for the foreseeable future," Ian Shepherdson of Pantheon Macroeconomics warned in an analysis.

But the US economy relies almost entirely on consumers and the service sector, which has been the hardest hit.

For the week ending March 14, the number of people filing for unemployment insurance for the first time jumped 70,000 to 281,000, seasonally adjusted, its highest level since September 2017, according to the Labor Department's weekly report.

The increase was "clearly attributable to impacts from the COVID-19 virus," the department said, noting that "many states reported increased layoffs in service related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry."

The biggest increases were seen in Washington, site of the first US outbreak, Nevada, home to Las Vegas, and California, according to the raw data, without seasonal adjustment.

Congress on Wednesday finally approved a $100 billion package, which the House passed overnight Friday, that provides free coronavirus testing, paid sick leave and expanded unemployment benefits.

But it is unclear when the Republican-controlled Senate will approve the bigger $1 trillion package that will include immediate cash payments and funding for small businesses to keep them afloat and paying their workers.

Mnuchin explained that $500 billion would be used to send $1,000 to each person and $500 per-child in the next three weeks, or $3,000 for a family of four.

"And then six weeks later, if the president still has a national emergency, we'll deliver another $3,000," he said. "I think we're doing everything we can and we're going to get out of this quickly."

Trump, in his now-daily White House briefing, again expressed optimism the damage will be short-lived.

"I believe when this is defeated, this hidden scourge is defeated, I think we're going to go up very rapidly, our economy, and get back to where it was and beyond," Trump said.

Despite massive action by the Federal Reserve and other central banks to provide liquidity to ensure credit remains available for businesses and households as fear drives demand for cash, financial markets have continued to fall, with stocks wiping out all the gains since Trump has been in office.

However, Trump said he did not want federal money to be used by companies to buy back their own stock.

"We don't want to pick winners and losers," Trump said. "We want everyone to benefit."

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