American culture — economic liberalism, incentives for consumption and entrepreneurship, plus a stable economy — makes the United States a highly sought-after destination for capital investment, launching new businesses, or internationalizing companies.
But in times of crisis brought on by the Covid-19 pandemic, it's natural for business owners to wonder whether this is a good time to invest. And despite the impact of the current crisis — the International Monetary Fund (IMF) forecasts an 8% contraction in the U.S. economy — the American economy is showing signs of recovery, largely in response to government stimulus.
The U.S. Congress approved an emergency relief plan worth $2 trillion at the end of March to reduce the crisis's impact on the most vulnerable businesses and workers in the United States.
At the same time, the Federal Reserve (the Fed), the American central bank, announced a series of measures that also increase the availability of capital in the economy, much like the monetary authorities of European countries.
Experts indicate that improvement in the economy could already be seen in the second half of 2020. The drop in unemployment numbers recorded in May, for example, and a recovery in retail sales and consumer spending, point favorably toward the country's economic recovery. But a full recovery of the economy isn't expected for a few more years.
At least 2.7 million jobs were created in May, which raises consumer confidence levels. And in June, nearly 5 million jobs were created, which boosts confidence among both consumers and investors.
Positive numbers
Other data contributed to optimism in the American market. Non-farm payrolls rose by 4.8 million in June, much better than the expected increase of 2.9 million.
In addition, the unemployment rate fell to 11.1%, versus a forecast estimate of 12.4%. Meanwhile, the number of temporary layoffs fell by 4.8 million in June, after a drop of 2.7 million in May.
But it's not all optimism. Fed Chair Jerome Powell recently stated that the moment needs to be approached with caution. "A full recovery is unlikely until people feel it's safe to return to a wide range of activities," Powell warned.
Powell's more cautious stance comes at a time when some American regions are still recording rising case numbers, which could contribute to new waves of lockdowns.
The hardest-hit markets
A study published by CNBC (the Consumer News and Business Channel), a channel specializing in business news, points out that the crisis is expected to hit some sectors harder than others. Here's what the study found:
physical clothing retail — clothing retail was one of the sectors hit hardest by the financial crisis caused by the novel coronavirus. And although the segment recovered 202,000 jobs in June, that number is still 40% below the same period in 2019. Experts believe that new consumption habits driven by social distancing should make it harder for this sector to resume growth;
mining — the coal mining industry, which employed around 70,000 people at the end of 2014, lost 27% of its workforce by January 2020, before the Covid-19 layoffs. In the first six months of this year, that same industry, which had already been declining, lost another 14% of its workers. In May, the sector had just under 44,000 workers.
on the other hand, the leisure and hospitality segment, which had lost 47% of its entire workforce in April alone, according to data from the U.S. Department of Labor, has shown signs of recovery. In February this year, bars and restaurants employed 12.3 million Americans; in April, that number fell to 6.2 million, and in June, it rose to 9.2 million jobs.
the delivery segment also showed resilience during the crisis. Demand for e-commerce amid the coronavirus drove an increase in the number of people working in the sector. According to the U.S. Department of Labor, in January this industry employed 859,000 people, and by June that number had risen to 904,000.
GDP forecast
Meanwhile, economists are weighing projections for the American economy. The most optimistic forecasts project a V-shaped rebound — that is, a sharp drop in the second quarter, followed by a sharp rise in the third quarter.
The median forecast from economists surveyed in CNBC/Moody's Rapid Update Analytics points to a 34% drop in the second quarter and a below-V gain of 13.5% in the third quarter. For 2020, they expect a 5.6% decline in GDP.
A measured take
While the crisis creates challenges for some sectors, it generates opportunities in others. Investing in a business during a time of crisis can be especially strategic for those who have capital to invest. On the other hand, understanding business risks and studying the market is extremely important so that these opportunities effectively become a profitable business in the medium and long term.
That's why it's essential to count on specialized consulting that can help investors or business owners develop business, identify opportunities, and make investments in a safe, assertive, and structured way — especially with real knowledge of the American market.
Get to know the SIS Intelligence team and see how they can support you in your U.S. investment projects.
